IMoney Home Buying Guide

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Buying your first home?

In a perfect world, choosing your dream house would be as simple as picking a fresh ripe apple among shrivelled rotten ones; it'd be a clear simple decision. No chance of that happening in the real world, however.

Home ownership brings with it a slew of responsibilities and its own fair share of headaches. So, before proceeding any further, take some time to consider if your lifestyle and nances make home buying a smart move.

Buying your rst house regardless of new or pre-owned, requires lots of research; surveying the neighbourhood, doing background checks on the property developer, asking friends and family with prior home-buying experience, and approaching a trustworthy agent. Whatever you do, the ultimate goal is to be well-informed before committing to a long-term debt.

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In most cases it's better to buy instead of rent, and buy as soon as you can afford to do so. However, there are a few things you need to consider before you take the plunge to become a homeowner.

By buying a home, you may be paying as much monthly as a renter, when you factor in other expenses such as taxes, insurance, maintenance, and mortgage interest, which renters don't pay.

The real benet from buying is that you freeze your monthly payment for a maximum period of 35 years, and then you stop paying it altogether. And of course, the house is yours.

Can you commit to settle down in one place for at least a few years? If you move around a lot, it may not be a good idea to buy a home as the cost of buying and selling a home (i.e. lock-in penalty and RPGT) within a short period of time may cause you to lose money.

Have you saved up enough for the down payment and other fees and charges? You may need up to 20% of the price of the home you intend to buy.

Do you have a clean credit report? This will determine whether or not you get nancing for your home.

Are you ready?

1. Know if you are ready


Before you start the actual hunt for a property, you should take a good hard look at your nances.

So, how much can you afford to pay every month for the next 30 to 35 years.?

To determine an affordable price point consider this:your monthly income, cash you have available now, and how much you can borrow.

To gauge the maximum property price you can afford, it is always best to ensure that the total monthly instalments of all your outstanding loans, and your prospective home loan do not exceed 60% to 70% of your net income. Net income refers to your income after deducting income tax and EPF contributions.

Loan tenure on the other hand is tied to the age of the borrower. A borrower aged 30 and below is likely to be eligible for a maximum loan tenure of 35 years (the longest possible). For borrowers above the age of 30, most banks will require them to repay their home loans in full before they hit the age of 65 or 70 years old.

a. A typical down payment

b. Housing loan eligibility

2. Know how much you can afford

2% 8%

10%Total Down Payment

Example: RM45,000 for a property price of RM450,000

To be paid to property agent to draft an Offer to Purchase agreement

Example: RM450,000 x 2% = RM9,000

To be paid upon signing the Sales and Purchase Agreement (SPA).Represents the remaining down payment to be paid to property developer or seller.Not to be confused for legal fees to draft SPA.

Example: RM450,000 x 8% = RM36,000

Remaining paymentBooking fee


Here is an example of a borrower whose loan application is likely to be approved by banks:

From the calculation above, the monthly instalment and other debt commitments do not exceed 65% of monthly net income. Hence, with a net monthly salary of RM3,500, this borrower is most likely eligible for a property priced at RM300,000.

For ease of calculation, use iMoney.mys home loan calculator to calculate the monthly instalment of a property.

AgeMonthly net incomeMonthly car loan instalmentMonthly personal loan instalmentsProperty priceMargin of financeLoan amountHome loan interest rateMonthly instalmentTotal debt commitment a monthDebt commitment % of income

30RM3,500RM600RM200

RM300,00090%RM270,000 4.45%RM1,360/monthRM1,360 + (RM600 + RM200) = RM2,160 RM2,160/RM3,500 (monthly net income) x 100 = 62%


Withdrawing EPF for down payment

Property buyers are usually required to deposit 10% of the property asking price as down payment. If you do not have enough cash saved up, you can opt to withdraw from your Employees Provident Fund (EPF).

Your EPF is divided into two account at 7:3 ratio -- with the rst account (70%) kept entirely for your retirement. The second account (30%) can be used for property purchase, education, medical expenses and more.

This is only allowed for the member's (or his/her spouse's) rst home, and for second home if the rst house is sold or disposed off ownership, but can be made once every year.

The withdrawal is mainly for(i) Individual purchase; or(i) Joint purchase with immediate family members (parents, spouse, siblings or children) or other individual with no relationship; or (iii) To assist your spouse to reduce/redeem their housing loan balance.


You can withdraw from EPF to purchase your first home if you are:

(i) A Malaysian Citizen; or (ii) A Malaysian Citizen who has made Leaving the Country Withdrawal before 1 August 1995 and has opted to re-contribute to the EPF; or(iii) A Non-Malaysian Citizen who: has become an EPF member before 1 August 1998; or has obtained a Permanent Resident status (PR), you have not reached 55 years of age at the time the EPF receives your application; and you have at least RM500.00 of savings in Account 2.

Documents you need are as below:

1. KWSP 9C (AHL) (D5) Withdrawal Form 2. Personal Identication Card which can be a MyKad, Military Identication Card or a Permanent Resident Identication Card (MyPR). Others include Police Identication Card and Verication Letter from Employer stating that the Police number and Identication Card number refer to the same person (if without MyKad) 3. Your passport, if you are a non-Malaysian citizen and have become an EPF member before 1 August 1998.


c. Other upfront costs

Other than the down payment, there are other costs that must be borne by the buyer upfront and depending on the price of the property you intend to buy, these additional fees and charges can set you back up to an additional RM20,000 or more.

Do you have the money for down payment ready and have decided on the right price point? Fantastic! What about the money to cover additional costs that must be paid up front?

Here is a list of other costs involved:

Legal fees to draft a Sales and Purchase Agreement (SPA) Stamp duty on SPA Lawyers professional fee Bank processing fee for loan facility Stamp duty and disbursement fee for loan facility Mortgage life insurance premium Government tax Transfer of ownership title fee


The old adage when it comes to property buying, "Location! Location! Location!" still rings true today. The rst step in your hunt for the perfect home is to gure out what city or neighborhood you want to live in.

This will signicantly affect property prices. At the current market conditions, if you can afford a RM400,000 property, you may be able to get a two-bedroom condominium in Petaling Jaya or a double-storey terrace house in Puchong.

Once you have shortlisted a few locations, here are some questions you should ask yourself:

Are there signs of economic vitality: a mixture of young families and older couples, low unemployment and good incomes?

If you have school-age children or are planning to have child(ren) in the future, is there a good school nearby?

If the property you are eyeing is under a strata title, check the rate for maintenance fees and sinking fund. Will you be comfortable paying this amount every month on top of your loan repayment?

How is the trafc entering and exiting the residential area? Always opt for residential areas with more than one entrance and exit to avoid bad congestion during peak hours.

Is the location strategic? Check if there are access roads or highways nearby for easy access.

If it is a condominium or apartment, how many parking bays are provided per unit? Will it be enough? If you do not drive, is public transportation service available in the area?

3. Know the right home for you


There are two types of Sales and Purchase Agreements (SPA). Standard templates under the Housing Development (Control & Licensing) Rules 1989 are compulsory for incomplete properties sold by licensed housing developers registered with the Ministry of Housing and Local Authority.

For completed properties sold by housing developers, they can be sold using SPAs that are not based on the above templates. Housing developers can also apply for the use of their own SPAs due to exceptional circumstances if approved by the said Ministry.

Laymen may not be able to understand or identify different and new clauses added into this type of SPA. Hence, buyers would benet from using a lawyer when buying from a housing developer.

The non-standard SPA is also used for properties sold in the secondary market. This type of SPA need not follow any specic templates. Again, the expertise of a lawyer is needed to ensure the SPA protects you as the buyer, and not just the seller.

Signing the Sales and Purchase Agreement


There are various types of loan that you should be aware of. Here are three types:

Basic Term Loan

A Basic Term Loan has a xed repayment schedule, where the monthly instalment you pay is the same throughout your entire loan period.

A Term Loan usually does not allow you to reduce your loan interest with advance payment. Any additional payment you make is treated as pre-payment for future instalments, and does not affect the total interest for the loan.

Semi-flexi Loan

This type of loan enables borrowers to make advance payment to lower their home loan interest amounts.

The loan instalment is automatically deducted from the current account every month and transfered to the home loan account. By depositing additional sums of money into the said current account, youll also be able to offset your principle loan amount and reduce the interest amounts on your home loan.

This is suitable for borrowers who may be able to make more repayment every now and then.

Full-flexi Loan

Similar to a Semi-flexi Loan, a Full-flexi Loan allows borrowers to make additional payments to reduce the principal amount and ultimately save money on the total interest payments of the loan.Typically, banks provide a Current Account that links to the home loan.

However, a Full-flexi Loan makes it even easier to withdraw the additional payment anytime they want without any formal request or additonal charges. A Full-flexi Loan is suitable for borrowers who have fluctuating income as it allows them to make additional repayment as and when they have the extra cash.

Securing nancing for your home can be a daunting process. If you are buying a property from a developer, chances are you will have to apply for a home loan from the property developers panel bank.

The usual maximum margin of nance you can obtain is up to 90% of the purchase price of the house you intend to buy.

a. Types of home loan

4. Know how to get a loan


The best loan offered by banks vary depending on loan amount and loan tenure. A quick way to compare and identify the best rates available is to use an online mortgage calculator available at iMoney.my.

The Base Lending Rate (BLR) is a base interest rate determined by Bank Negara Malaysia (BNM) that banks refer to internally in deciding the interest rate to charge for loans given. Currently, the BLR is at 6.85% (as of July 2014).

However, this will be changed to Base Rate on January 2, 2015, as announced by Bank Negara Malaysia. This new framework will allow individual banks to determine the new base interest rate based on certain factors.

The decision on the type of home loan to choose ultimately depends on ones preference but Semi or Full-flexi loans are generally preferred for its flexibility and savings potential by those with spare cash and a flexible income. Fixed rate home loans on the other hand give you the certainty that your home loan repayments will always remain the same every month.

Upon signing the loan agreement, you will be required to pay a stamp duty on the loan amount. Like the legal fee to draw up the SPA, the stamp duty on the loan amount is regulated by law and usually represents 0.5% on the nal approved loan amount (which could be lower than the loan amount you initially requested).

The main features of each type of loan and the best rates available are compared below:

b. Loan agreement

Basic Term Home Loan Semi-Flexi Home Loan Full-Flexi Home Loan

Repayment scheduleFixed everymonth

Additional payment on top of normal monthly instalment allowed

Additional payment on top of normalmonthly instalment allowed

Linked Current Account Optional Optional Compulsory

Additional payment Treated as pre- payment for future installmentsAutomatically reducesprincipal amount

Automatically reducesprincipal amount

Withdrawal of additional payment from linked Current Account

No Yes subject to request and banks approval Yes. No request required


http://www.imoney.myUpon the execution of the loan agreement with the nancial institution you have chosen, the loan ofcer may ask you to take out a mortgage life insurance.

Providing a home for your dependent is a good thing, but if the home loan is not settled in full, it can turn into a burden for your loved ones in the event of death or total permanent disability (TPD).

There are two types of mortgage life insurance that home buyers in Malaysia can take up.

c. MRTA vs MLTA

Protection Protection, saving, and cash value

Sum insured reduce in according to loan tenure

Sum insured remains the same on a xed level sum assured basis.

No Yes

Bank Anyone nominated by policy holder

Usually nanced into home loan Self-nanced

One-time lump sum paymentPeriodic (monthly, quarterly, semi-annually, or annually)

Low High

No. It has a reducing cash value, which drops to nil at the end of the loan tenure.

Yes. It has a guaranteed xed cash value throughout the loan tenure.

Insurer will remit any outstanding loan amount to the bank and beneciary will receive the home.

Insurer will remit any outstanding loan amount to the bank and beneciary will receive the home plus cash.

Mortgage Reducing Term Assurance (MRTA)

Mortgage Level Term Assurance (MLTA)


After signing the loan agreement, your bank will remit the remaining purchase price (i.e. 90% of the property price) in full to the seller/agent (if buying completed property) or in stages to the property developer (if buying a property still under construction).

The nal step before taking possession of the keys and the house is to have the title (evidence of ownership) transferred to your name. Doing so will once again require the involvement of your lawyer. You are also required to pay a stamp duty fee equivalent to a percentage of your house value as follows:

Once the title has been successfully transferred to your name, you'll be a proud owner of a house. Congratulations!

First RM100,000: 1% stamp duty Next RM400,000: 2% stamp duty Excess of RM500,000: 3% stamp duty

d. Final payment

e. Transfer of title


RPGT increased from 15% to 30% for properties disposed within the rst three years which is likely to affect investors sentiment and could cause a drop in interest in the secondary or sub-sale market.

This spells good news for rst-time home buyers as the property prices will escalate at a slower pace, making them more affordable.

a. Real Property Gains Tax (RPGT)

5. Know the property market in Malaysia


Developer Interest Bearing Scheme (DIBS) is a scheme commonly offered by developers of newly launched properties still under construction to entice home buyers. Under DIBS, the property developer will bear the home loan interest incurred by you throughout the period of property construction.

While DIBS benets home buyers by freeing up cash that would otherwise be used to service the home loan interest for investments, it has been reported that property developers have been marking up property prices by 5% to 15% in order to cover the interest absorbed by them during property construction.

As per the announcements doing the tabling of Budget 2014, property developers are no longer allowed to offer DIBS. Similarly, nancial institutions are prohibited from providing nal funding for projects with DIBS.

The abolishment of DIBS is expected to curb speculation and inflated pricing but will also affect the way a home buyer will plan his or her nances to be able to afford a home.

b. Developer Interest Bearing Scheme (DIBS)


With DIBS Before Without DIBS Now

You take up a loan to buy a property You pay an initial payment

(usually 10% of the property price)

You start paying loan interest from here on

Construction of property

Property completedYou only start paying loan interest from here on

The developer bears the loaninsterest during this stage

You pay an initial payment(usually 10% of the property price)


In a bid to ensure public housing and affordable homes are accessible to low and middle-income rst-time home buyers, the state of Penang has enforced new housing regulations on February 1, 2014.

Under this new housing regulation, buyers will have to be qualied as a listed buyer by the state housing department if buying the following pre-owned properties:

Low cost home (bought for RM42,000 or less by seller) Low-medium cost home (bought for RM72,500 or less by seller)Affordable home on mainland (bought for RM250,000 or less by seller) Affordable home on the island (bought for RM400,000 or less by seller)

Additionally, the new regulation stipulates that foreigners are only allowed to purchase a property with a minimum price of RM1 million or RM2 million for a landed property on the island.

On top of the existing RPGT for disposal of properties within the stipulated timeframes, disposal of properties in Penang within the rst three years will be charged a 2% levy for citizens and 3% for non-citizens.

c. New housing regulations in Penang


New property regulations in Penang

3% Levy

Below RM400,000Banned from selling withinve years

Public Housing RM72,500 or less

Banned from selling within 10 years

2% Levy

All properties sold within 3 years

Below RM250,000Banned from selling within ve years

Minimum property prices

Strata title : > RM1 milIndividual title : > RM2 mil

Except for properties for industrial use,or if it promotes employment, education and human talent.

Citizen Non-Citizen


If you nd yourself struggling to save up the 10% down payment plus the additional charges to purchase your rst home, you can consider opting for My First Home Scheme (MFHS).

Introduced in 2011, this scheme aims to help young adults buy their rst home by allowing them to obtain 100% nancing from banks and enjoy a 50% stamp duty exemption (exemption valid till December 31, 2014). To qualify, the borrower must meet all the following personal and property criteria:

Personal criteria: First-time home buyer Malaysian citizen aged 35 and below Gross income of RM5,000 or less per month (single borrowers); combined gross income of less than RM10,000 per month (joint borrowers) Existing repayment obligations do not exceed 60% of net monthly income or maximum limit imposed by the lending bank, whichever is lower.

Property criteria: Minimum property value of RM100,000 and maximum property value of RM400,000. Residential properties bought for owner occupation only. Remaining lease of 60 years and above for leasehold properties.

In addition to the above criteria there are also nancing requirements that must be adhered to under MFHS:

Maximum loan tenure of up to 40 years or until the age of 65, whichever is earlier. Amortising facilities only, where the principal of the loan is paid down over the life of the loan according to an amortization schedule. Repayment of monthly instalments via salary deduction or standing instruction. Insurance/Takaful is compulsory.

d. My First Home Scheme (MFHS)


Appraisal Getting a property appraisal is a standard procedure in a home loan application process. Banks will approve a home loan based on the appraisal value of the property they want to buy.

Base Lending Rate (BLR) According to ofcial denition, BLR is a minimum interest rate calculated by banking institutions based on a formula which takes into account the respective institutions cost of acquiring funds and other administrative charges. In short, BLR is the base interest rate that banks refer to internally, before they decide how much to charge for your loan.

Central Credit Reference Information System(CCRIS) In Malaysia, Bank Negara Malaysia (BNM) maintains CCRIS, a computerised database of credit reports which contains credit scores. CCRIS receives credit updates from various nancial institutions and generates individual credit reports, which are made available to nancial institutions, individuals and even companies upon request. Find out how this can affect your loan application.

Debt Service Ratio (DSR) DSR is calculated, as per all your monthly debt repayment obligations divided by your monthly take-home income. Bank Negara recommends that Malaysians do not exceed a Debt Service Ratio (DSR) of 60% (but some banks may allow up to 70%).

Exit penalty A penalty of 2% to 5% of the original loan amount incurred for full settlement of the home loan within the lock-in period.

Guarantor A party who agrees to be responsible for the payment of a borrowers debts should that borrower default/fail to repay their loan. Guarantors are legally obligated to bear the debt of the borrower in the event he or she defaults on the loan.

Homeowner insurance A form of propertyinsurance that reimburses the policy holder in the event of damage to the home and its contents. Homeowners insurance also provides liability coverage against accidents that happen in and around the insured home or on the property.

Individual/Strata title An individual title is given to land holders of landed property, such as terrace houses, bungalows and semi-detached houses. However, landed property with shared facilities such as condominiums, flats, apartments and townhouses are usually initially held under a master title, before strata titles are drawn up and distributed to its owners

6. Know your terms


Loan principal The loan principal refers to the amount you actually borrow, not taking into account the interest. At the beginning of your loan repayment, interest accounts for a higher percentage of your monthly repayment. As the loan repayment progresses you pay less interest and more goes toward the principle.

Loan tenure This means period or number of years it will take to repay your home loan in full.

Lock-in period A period of time usually between three to ve years in which an exit penalty will be imposed on the borrower for full settlement of the loan. Find out why you should pay attention to lock-in period.

Margin of finance The margin of nance refers to the loan amount borrowed based on a percentage of the propertys value. For example, the typical margin of nance approved by banks is 90%, thus requiring borrowers to rst pay a down payment of at least 10% of the propertys value.

Refinancing Home loan renancing is the act of taking up a new home loan offering better terms to fully pay off an existing home loan. This is usually done when the value of the home has appreciated, and after the lock-in and RPGT periods have ended.

Stamp duty Stamp duty is a tax on loan documentations that requires a stamp to be purchased and attached to the documents. Stamp duty must be paid before the documents are legalised.

Sinking fund To be used for major replacements of parts of common property. The fund should not be confused with service charges meant for the general maintenance and management of the common property and for the other services the developer has agreed to provide.


14 steps to your first homeCheck your readiness

Check your housing affordability

Apply for home loanSign loan agreement upon approval of loan

Transfer of title

Pay the booking fee (2% of down payment)

Negotiate for the best priceCheck how much upfront cash you need

Balance disbursement by bank to seller

Sign Sale & Purchase Agreement (SPA)

Pay the balance of your down payment

Compare and choose the best home loan

Choose the right location and property

Buy mortgage life insurance


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