Thursday, 17 November 2011

Tips for new home owners - Part 1 : Before Securing the house :)

Alhamdulillah, at the age of 28, I finally get to own a house –on my own, without a husband or family’s financial assistance (except for the 2% deposit that my dad paid upfront, and I’ve paid it back to him shortly after).

Not having financial assistance when buying a new house can be stressful, but there are a LOT of other stressful things that you will encounter BEFORE AND AFTER SECURING YOUR HOUSE and BEFORE AND AFTER MOVING IN…

I’m just writing to give some tips (useful ones, I hope!) from my own experience, to future home owners out there :)


1-      Finding your dream house can be difficult. Establish whether you’re buying a property to keep or as investment. Criteria that should be considered are:

·         Price range – usually, the right amount of mortgage that is suitable is 1/3 of your salary, so use that as a rough guide

·         Location, location, location – consider whether it is a safe neighbourhood, crime statistics, amenities available, distance to your workplace and accessibility to major roads and location desirability.

·         Type of property – this is totally based on preference. Some may prefer landed property- semi D, linked, single/double storey, condominiums, studio apartments, penthouse etc for various reasons. Consider whether you will be living alone, with family, kids etc.

·         Security-whether it is a security patrolled, gated community

·         If buying for investment, consider whether the area is near public transportation, college or universities, or office areas.

·         New development, purchasing from an owner (new or second hand) – there are pro and cons of buying straight from developer, and buying from owner. You may get certain discounts from developer, however, the house may not be readily available, and you may need to serve interest on mortgage during construction. As for buying a second hand house – consider renovation costs, refurbishment costs and maintenance.
2-      Once you have established these criteria, start looking! You can try the property websites, newspapers; register your name to an agent – giving your criteria (he will then come back to you on any offers or development matching your needs) or go to trading websites such as for cheaper deals.

      Take your time, as this will be your largest investment ever

3-      When you have shortlisted the houses that you fancy, do a visit! Whether it is the actual house or show house;

·         check the built up, how many rooms and bathrooms available,
·         airflow of the space,
·         what other special features of the house that they offer – solar panel for centralized heating , auto gate etc
·         finishing of the house (the quality of flooring, toilets, washbasins, doors+windows)
·         plaster ceiling
·         whether  any freebies, (home appliance ) hehe
·         risk of pests

4-      Find financing – to ease your job, find a BANKER! A banker will help you to shop for the cheapest financing options available. Otherwise, shop for your own loan …things to look out for:

·         Interest rate – get the cheapest! Interest is usually tied to the BLR (Basic Lending Rate) –which fluctuates based on Bank Negara. The lower interest rate you get , the better!

·         Find a bank that can give you the maximum percentage of loan – as per the 2011 Budget, for houses  below 400k, you can apply for Skim Rumah Pertama, which you will be entitled for 100% financing . Otherwise, for first houses, banks will be able to offer you between 80 – 95% financing

·         Make sure you have been working for a solid 6 month before buying a house without guarantor. Consider this if you want to switch jobs

·         Having a good credit record definitely helps in loan application, so make sure you are a good paymaster of your current commitment; car loan, credit card, personal loan etc

·         Having previous credit record is a good thing; such as credit card- coz bank can check whether you are a good paymaster, and that you can manage your money well.

·         If possible, get a home financing before your car loan! As your mortgage will be your highest chunk of commitment, the likelihood of you to get a good deal is when you have a low commitment position.

·         Having a credit card debt will not affect your credit rating, so long that you always meet your monthly minimum payment.

·         Having other investments or savings helps! Like saving in Tabung Haji, ASB, Gold will help

·         For new development units, find Islamic financing which means that you don’t have to serve interest /only serve minimal fees during the construction period

5-      Find sources to finance your 5-10% deposit – if you are buying a new property, usually this is the percentage that will be required upfront from you.  There are several options for you to tackle this problem:

·         From your own savings
·         Borrow from family – you can payback your family by withdrawing from your EPF account 2, if you don’t have enough savings.
·         If you don’t have money now, but anticipating a big bonus or dividend – opt for personal loan (but this may cost you interest, depending on the timing and duration).

6-      Anticipate LEGAL and STAMPING FEES! Some developer support these fees for you, some don’t…so be prepared. Stamping fees is about 2% from your house value as per the Sale & Purchase (S&P) agreement. Legal fees are imposed both for your (S&P) and loan agreement.

7-      Be patient! The duration between when you pay your deposit to when you can sign the S&P can be quite long – depending on how fast your lawyer<---> developer communication.

8-      Consider tax impact – this is for investment purchase. As selling short may cost you Real Property gains tax, make sure you have proper advice on this.

9-      Get the right type of insurance –engage a good insurance agent to advice you on the right insurance for you to take. The terms MRTA and MLTA may cross your path, however  your insurance agent should be able to help you to minimize your risks and costs. MRTA will require a lump sum payment, and MLTA requires you to pay monthly premiums.

      Basically, this insurance is required by the bank as a life insurance in the case that, when you die, your family would not need to suffer your debt, and the bank recovers its capital.
Well as I'm typing this, I realised its getting quite long, so I'll be doing it in parts...
Hope these are useful tips for you out there !


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