Found a suitable house? Excited to save money with the rebates and promotions? Think again! Most of us think we have our home purchases all sorted out until the moment arises.
To prevent these extremely unwanted financial surprises, we have listed down a bunch of other costs for you to prepare for besides your down payment:
Credit: know your meme
1. Stamp Duty Fees
This tax is applied to property documents (Sale and Purchase Agreements, SPA & Memorandum of Transfer, MOT) which are calculated based on the purchase price. You will also need to pay the stamp duty on your loan agreement based on a flat rate of 0.5% of the total loan.
The new government has introduced special exemptions for first-time homebuyers, including a stamp duty waiver for the purchase of new launch properties priced between RM300,000 and RM1 million, in the first half of 2019.
We highly recommend that you check if you are eligible for a waiver. Do note that this waiver is not automatic and that you have to apply for this waiver.
2. Legal Fees
Unless you studied law, chances are you will need to hire a lawyer to prepare the loan agreement between you and the bank. The legal fees for the preparation of the SPA are calculated as a percentage of the purchase price, varying from 0.25% up to 1% depending on the value of the homes.
3. Real Property Gains Tax (RPGT)
An option most homeowners don’t prepare for is the possibility of selling their house in the future. You might opt for this because you need to migrate, make a profit or even just move to a better home.
Whatever the reason. selling or transferring your home will incur real property gains tax (RPGT) if you are profiting from the transaction. Malaysian individuals who sell off their property in the sixth (and subsequent) years of ownership will now have to pay a 5% RPGT (no charges were applied before).
Meanwhile, those who dispose of their home after less than 3 years will be charged 30% RPGT; 20% in year 4 and 15% in year 5. Buyers should also be informed that there are also special RPGT exemptions for certain scenarios; Doing your homework on RPGT could help you sell your property at the right time and save you a lot of money.
4. Agent Fees
Although obvious, sometimes buyers are not aware that engaging a property or real estate agent will incur fees on top of your house purchase cost. The rates may vary for different agents but the maximum fee chargeable on services provided by agents is normally 3%.
Given the current market, you may also source for brokers and agents that may charge less than on a case-to-case basis. We recommend that you firmly negotiate and confirm the agent fees before you allow them to represent you in any property transactions or negotiations whatsoever. This will ensure you have a fixed number to calculate the exact allocation for this fee.
5. Valuation Fees
Unless you just won the lottery, it is very rare for a home buyer to buy their house in cash. This means that you will end up going to the bank for a housing loan to fund your purchase.
Financial institutions will usually require a valuation of the property before approving the loan, and most banks will charge a fee for these evaluations. The valuation fee is calculated as a percentage of the purchase price.
The first RM100,000 is charged at 0.25% and the next residue up to RM2 million is charged at 0.2%. Having these figures in mind will also reduce any blind spots for your budget.
This is a standard requirement by the banks as part of the housing loan package to protect the value of the property. This insurance is called Mortgage Reducing Term Assurance (MRTA).
The costs MRTA are dependent on the age of the borrower and total mortgage (estimated at 3% to 5%) on the property. The older you are, the higher the MRTA.
Alternatively, you can also consider taking up Mortgage Level Term Assurance (MLTA), which offers repayment of your outstanding home loan. Homeowners will also receive a guaranteed cash value back at the end of the scheme.
After purchasing, it is only normal to wish to change the windows, upgrade the fence or even remodel the living room, etc. In other words, your renovation costs could easily add up to your total costs, depending on whether the renovations involved are major or minor.
The mistake most homeowners make is thinking that they can figure out the renovation finances later. We disagree – these plans should be budgeted for and inculcated in your overall budget as early as possible. For starters, limit the renovation budget to just 10% of the home value.
Wish to get access to properties on the market matching your financial situation? Get access to the most comprehensive real estate directory of the year! Visit https://www.hihomes.my/ to access over 11,000 units of property valued over 4.2 Billion and find your dream home!