Buying Property guide

Buying Property


Purposes Of Buying A House:

1) For own usage: Having an own home is a dream for everybody.
2) For investment purposes: The purchase of a property may be for investment purposes where you get returns from rental or a higher price from resale.


Types Of Houses:

1) Landed house: This kind of property is suited for bigger families as it provides more room. A landed house also has open spaces for those who enjoy gardening or pets, and also allows room for renovations and extensions.

2) Condominium: Condominiums are becoming more popular in big cities like Kuala Lumpur, Penang and Johor Bahru. Normally they are built near city centers and attract younger Malaysians with smaller families. Condominiums normally provide 24-hours security, sports facilities, laundry services, grocery stores and food courts. A certain amount of maintenance fee will be charged for these facilities.


The Way to Buy a House:

1) Buy a piece of land: A piece of land can be purchased to build a house according to unique preferences.

2) Buy a new house from a developer: This is an easier buy as there is no need for renovations and touch-up costs.

3) Buy a completed house: You can choose a house to match your personal needs and the existing neighborhood can be identified. You also don't have to worry about the risk of project abandonment.

Shopping For A House:
1) Location: This is the most important aspect when you shop for a house. A shorter distance from home to your office will save you valuable time. Living away from the city is a good idea if one prefers a peaceful and serene surrounding and basically it will cost you less.
2) Price: Before buying a house, you should plan out and assess your budget and financial capability to avoid failure in making the mortgage payments. The following are the most important things to look out for:

- Downpayment: 10 to 20 percent of the house
- Monthly repayment: 33 percent of your monthly income.
- Other costs: Lawyer fees, government duties, transfer of ownership, renovation/repairs, maintenance fees for condo living, etc.

3) Neighbourhood: Always look for a surrounding that you feel most comfortable and convenient to live in. Find out about the available shopping places, schools, clinics, cafeterias and others. However, illegal activities such as rubbish dumping, illegal workshops and squatters may somehow devalue your property.

Do not rush into making a decision. Buying a house is not like buying groceries. Think carefully whether it is the one you are looking for. A cheaper house does not mean it's a better deal. Check the condition of the house and if possible talk to your potential neighbours to gather more information

Getting a Loan

Where from? There are a few sources of funds to choose from:
◦Commercial banks
◦Finance companies
◦Government loans
◦Employees housing loans
◦Building Societies and Cooperations
Normally, home buyers get their loans from commercial banks. Commercial banks offer several types of loans:

◦Loan facility
◦Overdraft facility
◦Loan and overdraft facility
◦Endowment mortgage
◦Mortgage from Islamic banks
Features of commercial banks loans: Mortgage amount: Basically banks offer up to 80% loan of the purchase price. Repayment period: Maximum 25 years.
Interest rate: Normally 10%-13% depending on the Base Lending Rate
Criteria for Loan Approval:

◦Income
◦Age ? minimum 18 years old
◦Employment Purpose of Mortgage


Legal Issues

Legal issues are complex procedures of paper work signing. Of course you have to understand every aspect before you put down your signature. There are a few things you should keep in mind:

◦You should make your payment to developers through your own solicitor or lawful owner as he/she will protect your interests.
◦You must read and fully understand the terms and conditions stated in the Sale and Purchase Agreement. Consult your solicitor if you want to amend anything before you sign the Sale and Purchase Agreement.
◦Your solicitor should be fully responsible for the purchase of your house, and do not share the same solicitor with the seller, as a conflict of interest may occur.
Things that your solicitor should get:

◦Photocopies of purchaser's and seller's addresses, telephone numbers, and etc for identification.
◦Original copy of Sale and Purchase Agreement.
◦Deed of Assignment.
◦Search on the master title of the house to assure that the seller is the rightful owner.
Lawyer Fees: Effective from January 1, 1992, legal fees are standardized by the Solicitors' Remuneration Order 1991. There are two types of calculation for legal fees:

First Schedule (Sale and Transfer): Lawyer fees are determined by value of the house in the Sale and Purchase Agreement.

House Value Buyer Seller
1 st RM100,000.00 1% of House's Value (Minimum RM200.00) 1% of House's Value (Minimum RM200.00)
Next RM4.9 million 0.5% of House Value 0.5% of House Value
Thereafter 0.25% of House Value 0.25% of House Value


Fourth Schedule (Charges, Debentures and Security Loan Documents)
Lawyer fees are determined by the loan amount for the above documentation.

Loan Amount Legal Fees to buyer
1 st RM100,000.00 1% of the Loan Amount (Minimum RM200 per transaction)
Next RM4.9 million 0.5% of Loan Amount
Thereafter 0.25% of Loan Amount
** Fees subject to 5% government tax.

Stamp Duty
There are two types of Stamp Duties:
1) Stamp Duty on Loan Amount

Loan Amount Stamp Duty
RM 50,000 RM 250
RM 100,000 RM 500
RM 150,000 RM 750
RM 200,000 RM 1,000
RM 250,000 RM 1,250
RM 300,000 RM 1,500

2) Progressive Present Stamp Duty on Transfer of House Title

House Value Stamp Duty Payable
1 st RM100,000 1%
Next RM400,000 2%
Next RM1.5 million 3%
Thereafter 4%


Tax for Sales of Property Buyers and selle rs have to file their forms under the Real Property Gains Tax Act to avoid penalty. The Seller has to pay tax for profit on disposal of property under the Real Property Gains Tax Act. Rate varies according to the number of years you hold the property.
Number of year Tax rate
Within 1-2 years >30%
3 years 20%
4 years 15%
5 years 5%
Thereafter None


Insurance

Insurance will protect your investment and also your family's welfare from unpredictable disasters. In the case of property under financing, it is mandatory to insure your house through a financing bank. A House/Fire Insurance will protect you and your family from natural disasters like fire, flood, lightning, earthquake, etc or man-made disasters such as riots, explosion, theft, aircraft accident, etc. A Mortgage Life Assurance is designed for those who are entitled to a housing loan. Your outstanding loan balance will be cleared by the insurance company if anything happens to you (death or disablement).



Before Moving

Things to do before moving:
1) Inform others of your new address and telephone number:

◦Relatives
◦Friends
◦Employer
◦Bank
◦Doctor
◦Other service providers like cellular phone, magazine.
2) Terminate the utilities services:

◦Telephone
◦Electricity
◦Water
◦Newspaper
3) Date of Moving

◦Check with the local weather forecast to avoid thunderstorms
◦Consult your Fengshui master if you practice geomancy
4) Planning (two weeks before moving)

◦Make an appointment with the moving company.
◦Inform in advance those who will help you move.
◦Start to collect boxes for storage
◦Reduce your food supply.
◦Discard unwanted items.
◦Arrange to transport your pets/fishes safely