Plan to buy a house in Malaysia? Here are the Step-10 checklist to help you make the best purchase decision.
Step 1: Determine Budget
First thing first, let's start with your budget when you're into a home search. Most financial experts will advice that your monthly instalments should not exceed one-third of your household income.
Let's say if you have combined income (if you have spouse, or having multiple businesses) of RM9,000; the monthly instalment of your home must not be more than RM3,000.
Follow is a great tool to help you work out your financing:
Home Loan Calculator - a simple calculator of your monthly home loan repayments
You have to into consideration your down payment - which equal to 10% of the total cost of the property. Of course, you're welcome to pay more down payment if it's within your means.
You will also want to get your finances in order. Ensure that you are up-to-date on your credit card repayments, other loan repayments such as car loan and PTPTN.
Step 2: Determine Location
Now you have already know how much you could afford, you may begin to source for your preferred location. You may always look into place where you are very familiar with, where you grow up, but you are always have more options and here are the advices for you.
You may survey the place by looking into the accessibility, surrounding infrastructure, and amenities. Survey thoroughly is important, as to ensure you purchase the right home in the right location that fits all your requirements.
You may always refer to the checklist as follow:
Is it near to your working place?
How to travel to your working place?
Is it convenient to travel to your kids' school?
Are commercial elements such as mall, shops etc., sufficient for your essential needs?
Step 3: Property Search
This is the exiting part!
You may come across tons of house listing ads from real estate web portals as well as social media platforms. Make good use of real estate web portals by customise your search according to the location, property type, number of bedrooms, built-up area, etc.
You may always refer to the real estate portal as follow:
Different types of homes in Malaysia
This section will help you to understand well in terms of different types of homes available in the market, before making decisions for your home.
Landed house - In this category, there are terrace house, semi-detached house, bungalow, corner lot, intermediate lot and end lot. Each types have pros and cons, just pick the one which suits you the best.
Townhouse - Townhouse is a multi-storey house on a small footprint to accommodate two or more families living under one roof.
High-rise Building - The most common types are condominium and service apartment. It may looked same, but indeed is different.
Dual Key Condo - This type of property is gaining some popularity in urban areas. It is a typically a condominium that has been divided into two units, but with common entrance or foyer. Each of these areas contains everything that makes up a single house unit such as bedroom and bathroom.
This research doesn't end there. You should also consider the land title type, as this will be affected your house's cost and rights in the long run.
Freehold or Leasehold property - Act56 of the Malaysia National Land Code, 1965 clearly states that all State lands are owned by the State authority, when the State authority lease the State lands to individual for 99 years, it's known as LEASEHOLD title; However, when land is disposed of by the Authority to an individual for an infinite period, it will be a FREEHOLD title.
Master Title, Individual Title, Strata Title
Master Title - Is an ownership document issued during the construction and development stage of a property. It is usually under name of the proprietor and/or the developer.
Individual Title - Is an ownership document issued when you are the sole owner of an entire piece of land. This is usually reserved for landed properties.
Strata Title - Is defined as a development or scheme where the building or land is carved out into different lots or 'parcels'. High rise building such as apartment, condominium, service apartment are typical Strata properties. However, landed in Gated & Guarded communities may also be including in this category, for example Desa Park City.
Bumi Lot, Non-Bump Lot, Malay Reserved Land
Bumi Lot - Can only be purchased and owned by Bumiputeras.
Malay Reserved Land - Also known as "Tanah Rizab Melayu", it can only be owned and held by Malays as stated under the Malay Reservation Enactment 1913.
Last research, an often overlooked factor when buying a new launching in Malaysia is Plot Ratio - which affects the development density or the amount of developments in certain area. Higher plot ratio means there are more units in a development. For buyer's perspective, a lower plot ratio will mean buyer has to pay more for a new property.
Step 4: Engage Real Estate Agents
If you find the entire process tedious, time-consuming, and headache all around, always welcome to engage with Real Estate Agents. These experienced professionals know the markets, know the reputation of developer, know how to navigate the tricky waters of legal paperwork.
Real Estate Agents can be a huge help in directing your efforts, informing you how to get the best deal, and generally being the champion you need.
Step 5: Secure Financing
Generally, you're going to secure your loan before making an offer and closing deal. There are many banks out there offering different home loan products. One of the most important aspects of home loan is the interest rate - this could either be fixed or floating rate.
How to qualify for a home loan
Calculate your Debt Service Ratio (DSR)
Bank will measure your repayment capabilities by calculating the Debt Service Ratio (DSR), such as follow:
DSR = (Total commitment / Nett Income) x 100
Ideally, your DSR should not more than 70%
Check your CCRIS and CTOS report
Your Central Credit Reference Information System (CCRIS) will display all of your total credits, interest charges, and other outstanding charges for all loans that you have with any banks in Malaysia - everything from personal loans, credit card, car loan and even PTPTN.
Credit Tip Of System (CTOS) collates information for summons and bankruptcy on individual and companies from various sources found in the public domain. Banks will examine information of CTOS and decide whether you are the right borrower for them. It's important to keep track of your CTOS report to ensure there's no incriminating information that would negate your chances of securing a loan.
Preparation of income documents
On top of CCRIS and CTOS report, you are required to prepare the following documents to prove your income source - these are the basic ones:
Pay slips / Payment vouchers
Bank statement
EPF statement
Form B/BE
Income tax payment receipt
Tenancy agreement
Step 6: Make An Offer And Close Deal
After you have decided on which property to buy, and of course with a secured loan, you will need to prepare a Letter of Intention to Buy (LOI). This is a document that you give the the property seller stating your intention to purchase the property.
The LOI usually combined with an earnest deposit, which is an upfront payment of 2% of the total cost of property and counts towards your overall 10% down payment. If for whatever reason, the sale falls through and you wish to claim reimbursement on your earnest deposit, you can include this as one of the conditions in the document.
The seller, or Real Estate Agent will prepare a Letter of Offer (LOA), if they agree to the terms in LOI. LOA is an official document which includes a lot of binding legal language that protects both buyer and seller. The LOA will contain the following details:-
Names of seller(s) and buyer(s)
Property address
Agreed-upon price
Deposit amount
Any items included in the sale
The LOA will also stipulate the date before which SPA must be signed, usually, it is within 14 days.
Step 7: Employ Lawyer
After LOA has been signed by both parties, your lawyer will prepare the Sales And Purchase Agreement (SPA) and get both parties to sign them accordingly. You will required to pay the remaining 7-8% of your down payment, as well as legal fees and stamp duty fees.
Step 8: Sign SPA, Loan Agreement & Others
The SPA is an incredibly important legal document which sets out the full terms and conditions of your purchase.
If you are buying property via financing from banks, you will be signing Loan Agreement at this point. This is a legal document which sets out the terms and conditions of your home loan.
This is also where your'll sign your Memorandum of Transfer (MOT). This is the legal document which transfer ownership in the case of properties with either a Strata Title or an Individual Title.
If you're buying stratified property as part of a larger development, it might be the case that you'll sign a Deed of Assignment (DOA) instead, which conveys ownership of property which is still under a Master Title.
Step 9: Pay Fees And Other Costs
On top of 10% down payment of property cost, you'll need to pay the following costs:-
SPA legal fees, stamp duty and disbursement fees
Loan agreement legal fees, stamp duty and disbursement fees
MOT stamp duty and disbursement fees
Here's another handy tool for you to calculate the overall legal fees and stamp duty fees
Step 10: Receive The Vacant Possession
Finally! This is the part where you are the official new owner of the house!
The Notice of Vacant Possession must be completed within 3 months of signing of SPA for a Freehold Title property; if it's Leasehold Title property, at least 3 months is required to apply consent to transfer ownership from the State Authority, hence it will be taking at least 6 months of signing of SPA - this is for sub-sales transaction.
For a new development, the Notice of Vacant Possession must be completed within 36 months of signing SPA for a Strata Title property, and within 24 months for an Individual Title property.
Once your lawyer has completed all necessary paperwork, you can collect the keys from seller. At this point, make sure you have paid the remaining 90% of property cost, and your home loan kicks in.
After which, you can makeover your house, pack your stuff and plan for a housewarming party!
