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First home buyer’s financial guide to choosing your first house | #LetsTalkMoney | BigPay | Malaysia

Updated: Mar 31



Are you a first-time homebuyer thinking about finally landing your first house?


Well, with plenty of benefits and fee exemptions in play from now until 31 May 2021 (and probably beyond!) with a current market slowdown, it's probably the best time in over a decade to secure your first home.


But buying your first property is often easier talked about than done! After all, buying your first home might be one of the most significant decisions that'll affect the next 30 years of your life!


But fear not - here's a guide on how to go about preparing, researching and analysing your options for first home buyers.


Let’s see what it financially takes to finally get a place you can call your own!


Step 1: Be rock-solid about the purpose of your first home purchase.


This might sound incredibly simplistic, but it will fundamentally change the way you approach buying your first house.


Be clear about the answer to this question: why are you buying a house?


You'll be surprised at how significantly your answer will affect your decision.


Here are some common answers, and why they matter so much.

I'm buying a house because I'm getting married and starting a family soon.

Implications:

Quiet, peaceful and secure family-centric suburban locations that are suitable for young children. The goal? A haven for family life.


I'm buying a house because I want to generate side income.

Implications: Urban, well-connected locations with plenty of retail, amenities and public transportation within walking distance. The goal? High rental yield.


Once you've figured out why you want to buy your first home, you'll have a much easier and focused time searching for the perfect property that matches your financial expectations!


Step 2: Be realistic about the costs and get your savings ready


Before taking the leap and signing the agreement for your first house, you should always be financially prepared to take on this responsibility for the next 20 - 35 years!


In Malaysia, you would typically require 10% of the price of the property in cash. While this would definitely pose the biggest challenge to most first-time homeowners, there's actually much more to the finances behind a property purchase than this!


You should be aware of the miscellaneous costs that come with home-ownership. There is the stamp duty for transferring ownership title – also known as the memorandum of transfer (MOT) – that is calculated as 1% for the first RM100,000; 2% on the next RM400,000; and 3% on the remaining amount.


There is also the Sales & Purchase Agreement (SPA) legal fees, which is 1% for the first RM500,000; 0.8% on the next RM500,000, and between 0.5% – 0.7% for the subsequent amount.


Additionally, you'll need to prepare cash for SPA stamping fees of about RM100, the SPA legal disbursement fee, loan agreement legal fees, stamp duty for loan agreement, loan facility agreement legal disbursement fee, and not to mention, government tax on legal agreements.


For high rise condominiums or gated/guarded communities, there is also the service charge or maintenance fee as well as the sinking fund that owners need to pay.


All said and done, a RM500,000 property will need approximately RM75,000 in cash, not including the renovation and move-in costs! Hence, be sure to get ample savings ready!

Step 3: Assess your financial standing before signing the final deal


Owning a home is one of the most expensive and significant investment you'll ever commit to in your lifetime.


While it's always prudent to think about your future plans, career goals or personal preferences, we always encourage you to think of the financial implications of owning your own property.

In fact, without proper planning, servicing a long-term loan is one the highest causes of financial stress and becomes a mental burden to many!


Therefore, it pays off to achieve a sense of financial stability before making the final decision since there's no turning back!


This can include the likes of:


  • Paying off most of your bad debt

  • Building an emergency fund of 6 months expenses in case you lose your job

  • Have ample side income opportunities to boost savings

  • Update your retirement plan to include your property expenses


Now, once you’re financially prepared, go ahead and make your awesome dream of owning your first house come true!


Of course, being financially savvy isn't just limited to making the right decisions about your first property. It's also about knowing how to budget right, avoid the pitfalls of bad debt or even mastering the core money skills that will set you for life!


If you're interested to learn more about all things financial wellbeing and how-tos, leave a comment below and we'll get right back to you!

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