Loan Information
What is DSR?
DSR: Here’s How To Calculate Your Debt Service Ratio In Malaysia!
We all know applying for a loan isn’t the most straightforward thing. Everything from your credit history to your job type (sorry, freelancers) is taken into account.And above all, loan officers can be very strict when it comes to scrutinizing these factors. One of the first things your bank will look at it is your Debt Service Ratio (DSR).
If you’ve tried applying for a car or home loan, you probably have a rough idea of what it is, or at the very least, that it plays a major role in whether your loan is approved or not.
But do you know how DSR actually works?
What Is Debt Service Ratio (DSR)?
The DSR meaning can be put simply as “a method used by banks to calculate whether or not you can afford the loan you’re applying for”.
In terms of a home loan, this formula essentially helps the bank estimate how much you can afford to fork out for your monthly instalments.
Based off your monthly net income and the total fixed debt you have to pay each month for your student and car loans etc, banks can see for themselves if the property you’re trying to obtain is within your financial limits.
From there, they can decide whether or not you’re applicable for the loan you’re trying to apply for.
Tip: Banks want to see if you’re able to repay your home loan, and if it seems like you’ll have a tough time scraping by just to pay them back, it’s highly likely they’re not going to approve your loan.
Your DSR is then compared against the bank’s maximum allowable DSR limit, and if your DSR doesn’t exceed the limit, Ta-da! You’re one step closer to receiving the home loan you applied for.
Now, one thing to keep in mind: Every bank has their own distinct requirements depending on the individual. So while some banks may accept a DSR of as high as 80%, others may only allow 50%.
The DSR limit also varies according to each individual and their respective levels of net income. Some high net-worth individuals are even allowed a DSR of 100%! So as you can see, it’s all quite relative.
And that’s not all, aside from different DSR limits, calculation methods also vary from bank to bank. So don’t be surprised if your DSR at Bank A might add up to just 40% (hurrah!), but at Bank B, it works out to be 70%!
How Do You Calculate DSR?
In general, the formula used to calculate an individual’s DSR is the net income (after tax and EPF deduction etc) divided by the total monthly commitments including the home loan you’re applying for.
From there, simply multiply the figure by 100 to receive your final DSR in percentage (%). Don’t get confused just yet! Here’s an example of what the formula looks like.
So, what exactly defines a commitment? In the context of your DSR, it means all bank and non-bank debt.
Bank debt includes your car loan, credit card bills, and personal loans. Non-bank debt on the other hand, consists of monthly repayments such as PTPTN.
Basically, all the monthly obligations and fixed expenses that make payday much less exciting.
As for income, remember that banks will look at your net income only after the deduction of all statutory deductions like zakat, EPF, SOCSO, and taxes.
To give you a better picture, say your net income is RM6,000 a month. Your total monthly commitments adds up to RM2,500 and you’re trying to apply for a loan with a monthly repayment of RM1,200.
RM2,500 + RM1,200 = RM3,700, now divide that figure by RM6,000 and you’ll end up with 0.617. Multiply that by 100 and your DSR works out to be 61.7% which is slightly high.
So, it’s safe to say that you just might have trouble getting approved for your loan. Still confused? Here’s a complete DSR calculation for you:
Total Monthly Net Income:
| Gross Income (Basic salary + Fixed allowance) | RM7,000 |
| EPF Deduction | RM550 |
| SOCSO Deduction | RM50 |
| Tax Deduction | RM400 |
| Monthly Net Income | RM6,000 |
Total Monthly Commitments:
| Personal Loan | RM1,200 |
| Car Loan | RM800 |
| PTPTN Loan | RM200 |
| Credit Card | RM300 |
| Total Monthly Commitments | RM2,500 |
DSR (without new housing loan): (RM2,500/RM6,000) x 100% = 41.7%
With new housing loan repayment of RM1,200:
DSR (with new housing loan): (RM3,700/RM6,000) x 100% = 61.7%
Where Can I Find Records Of My Monthly Commitments?
Your monthly commitments would be mostly made up of loans, PTPTN and credit card repayments, among others.
So, an easy way of keeping track of all these records are via CCRIS, where all your monthly commitments and study loans are traceable and easily accessible.
If you’re looking for another alternative closer to home or for your convenience, you can create your own financial spreadsheet, or use one of the many financial apps downloadable on your smart device.
Monthly bank statements would help too!
What Affects My DSR?
Whether it’s good or bad, your DSR can be affected by several factors.
For instance, if you don’t have a stable monthly income, it may have a disadvantageous effect on your loan repayment.
This signals prospective banks that even if they give you a loan, you have a medium to high chance of not repaying it. Too many monthly payments or loans contribute to that as well.
Your employment status matters too, as banks will take into account your job industry (e.g. the civil sector) and period of employment to determine if it’s a steady occupation.
A sketchy credit history and bank account can also make or break your DSR, so be smart with your financials and credit.
How Can I Improve My DSR?
As mentioned, your DSR should be no more than 30 – 40%. And though many banks might still consider your loan application even with a DSR of 70%, it’s better to play safe and prevent a history of too many loan rejections. Improving your DSR starts with:
- Either reducing your debt or increasing your net income. So start rushing to pay off big-ticket debts!
- You can also consider consolidating your debt for unsecured loans (not tied to any collateral) like PTPTN and credit card bills. This is an easier way to manage all your debt and might actually even help you save on interest.
Whether you choose to start a small business on the side, get into freelancing, or ask for a pay raise, make sure the income received is legitimate by maintaining proper financial records and contributing to your EPF regularly. (Yes, you can self-contribute to your own EPF!)
But your DSR isn’t the only thing that will make or break your loan application. Your credit score will too!
And if you don’t have any credit history at all? Well, don’t get your hopes up too high just yet. This is because in the eyes of the bank, a person with zero credit history also means zero credibility.
There’s Another Factor You Need To Consider – Affordability!
The DSR only calculates your total debt against your net income and indicates whether you are eligible for the home loan you’re applying for.
Now, what many fail to understand is that eligibility and affordability are two completely different things.
This is because your monthly commitments are not the only expenses you have to fork out. What about the other non-fixed expenses such as basic necessities like food and utilities?
Furthermore, when buying a property, there are a whole host of other miscellaneous fees which can add up to become quite a hefty number.
Among them include the fee for transfer of ownership title, SPA legal fees, SPA stamp duty and the heftiest of them all – the down payment!
The down payment is typically 10% of the property’s value if it’s your first or second property, and 30% if it’s your third. Here’s what to expect when making your first down payment.
The costs involved in buying a property are far bigger than the eye can see at first glance, and the last thing you’d want is for your carefully thought-out finances to be ruined by a sudden big-ticket fee you didn’t know about.
A wise rule to follow would be to keep all housing-related costs below 25% of your monthly gross income.
My Loan Application Was Rejected. What Do I Do?
Don’t let one rejection get you down, as there are many ways you can avoid that from happening again in the future.
If your loan was rejected because of your DSR, you can improve by cutting down on current debts, plus consolidating your loans and bills together.
However, if your DSR is in the green and you’re still rejected, it could be because of the bank you’ve applied with.
Every bank has their own guideline for the maximum allowable DSR they can accept hence, the approval or rejection lies within the bank’s policies.
With that, now you can research and talk to banks on whether or not your DSR will be accepted by them based on their guidelines.
Approach as many banks as possible to get a better understanding and comparison.
And sometimes, it’s the little things like submitting wrong/outdated documents, accidentally filling out the application form incorrectly, or even attaching a blurry copy of your ID that’ll cause your loans to be rejected.
Make sure to double-check and triple-check your documents, or ask a trusted person to look through your documents thoroughly before sending them out.
Now You Know How To Breeze Through Getting A Home Loan!
Now that you’ve armed yourself with some knowledge on the meaning of DSR in Malaysia and how the banks perceive you as a borrower based on it, here are a few key takeaways for you.
- Try to maintain your DSR within the 30-40% range. For individuals, the lower your DSR, the better.
- Find out what the bank’s maximum allowable DSR limit is before applying. You’ll save yourself (and the bank!) a lot of time and money.
- Your DSR isn’t the only thing the banks will look at. Keeping a good credit score is just as important as well.
- Debt isn’t necessarily the devil. Banks are just as wary of individuals with zero liabilities. You can get started by applying for a credit card but do ensure you make prompt payments!
What is MOT?
Memorandum Of Transfer (MOT) And 4 Important Documents In Malaysia
When it comes to buying that dream home, there are more than a few documents you need to remember.
These legal documents are the official checkpoints on your property purchase journey, and one of the most important you’ll encounter is the Memorandum of Transfer (MOT) or Deed of Assignment (DOA).
The MOT/DOA is the clap-your-hands-and-laugh-in-delight part of purchasing a property. Sure, you’ve got your fancy Sale and Purchase Agreement (SPA) with all the terms and conditions laid out.
That’s important too, don’t get us wrong. But it’s when the Memorandum of Transfer comes into play that things really get ownership-level exciting.
What Is MOT And DOA?
In Malaysia, a Memorandum of Transfer (MOT) is a document that the buyer signs to transfer ownership from the seller to the buyer.
Signing the MOT means that the Land Title will be transferred from the developer or previous proprietors’ name to yours. Hence, it’s not issued if the property in question doesn’t have its Land Title yet.
In cases where the property to be bought had not received its relevant Land Title, a Deed of Assignment (DOA) form is used to transfer ownership of property, and a further document recording the Developers Consent will also be required.
What Are The Steps In Transfer of Ownership?
Transferring ownership of something as important (and valuable!) as a property requires some crucial legal steps.
So once you’ve identified a realistic piece of real estate which you can afford and it shows good potential for capital gains yield, it’s time to start the legal process.
Here are the 5 key steps in the legal process of buying a house, and the documents that go along with them.
1) Home Loan And Lawyer Up
Searching for the right home loan is the first step towards owning a property, unless you’ve got reallyyy deep pockets, of course! It’s also the perfect point to contract a legal professional to help with the process.
It’s not compulsory for you to hire said professional, but with all the many legal documents to come, it’s probably a pretty good idea to get all the help you can!
2) Letter Of Offer (LO)
You’re at the start of the purchasing process, and you’re keen to put your name down for a property.
The Letter of Offer is a document which sets out your initial desire to purchase, and a seller’s willingness to sell.
It notes things such as the agreed selling price, relevant furnishings, and the date by which the SPA should be signed.
3) Sale And Purchase Agreement (SPA)
This is it, the legal document we’ve all been waiting for. The SPA is a comprehensive agreement setting out the terms and conditions of a purchase.
This important document sets out conditions such as the date of transfer, conditions of purchase, items included in the sale, as well as other relevant terms.
4) Facility Agreement
It’s time for the Facility Agreement! Don’t worry, this isn’t about setting out your access to the swimming pool and gymnasium.
This is the legal document to officially confirm the home loan agreement that you have signed with your bank.
5) Memorandum Of Transfer / Deed of Assignment
It’s the big one now! Here’s your chance to sign your Memorandum of Transfer (MOT), or the less excitingly titled ‘Form 14A’. MOT in Malaysia is the document which legally confirms the actual transfer of ownership.
It’s the legal equivalent of handing you the keys to the front door and saying the property is yours.
In cases where the property to be bought had not received its relevant Land Title, a Deed of Assignment (DOA) form is used to transfer ownership of property, and a further document recording the Developers Consent will also be required.
Why Is Having A Lawyer Important When Buying Property?
We mentioned the value of getting a lawyer to help you through this process, and now hopefully you’ve got a good idea of ‘why’.
The lawyer is essentially your champion in ensuring you get the right deal, and that everything is done properly and honestly.
They’re trained to draft up and check through complex legal documents (like the SPA) to ensure that the terms and conditions are fair and balanced.
That means making sure you’re not signing up to some crazy deal where it turns out you’re only allowed to use the front door of your property every third Tuesday.
Of course, in reality, that kind of extreme example is unlikely to happen, but there are all sorts of complicated legal jargon that are important to cross-check.
A legal professional is also experienced in navigating processes to:
- Ensure everything runs smoothly
- Making sure things like documents are stamped
- Legal requirements are fulfilled within the right time frame
- All sorts of other little miscellaneous things you’d never know to check
That also involves searching Land Office registrations to ensure the property you’re actually buying, really does belong to the person selling it.
There’s so much to remember that it’s easy to slip up, thus having someone in-the-know would greatly expedite everything!
What Does Stamp Duty Have To Do With The Memorandum Of Transfer And Deed of Assignment?
When acquiring a property, you can expect plenty of legal documents, plus stamp duty tax on each document to top it off.
The MOT and DOA is no different, and in fact is one of the heftiest when it comes to stamp duty costs. MOT and DOA stamp duty varies between 1% and 4% of the property sale price. Scroll down to check out the detailed tiers.
What Are The Costs Associated With Each Stage of Buying A Property?
Alongside the major payments of purchasing the property itself, there are actually a number of financial requirements and transactions linked to the various legal steps noted above:
1) Loan Agreement
As if the financial burden of a loan wasn’t “exciting” enough, you also have to pay the legal fees for it!
| Loan Amount | Legal Fees Charge |
| First RM500,000 | 1% (minimum RM500) |
| Subsequent RM500,000 | 0.8% |
| Subsequent RM2 million | 0.7% |
| Subsequent RM2 million | 0.6% |
Subsequent RM2.5 million Excess of RM7.5 million | 0.5% Negotiable on the excess (but shall not exceed 0.5% of such excess) |
2) Letter Of Offer
This is usually the point where an earnest deposit comes into play. That’s 2% of the total value of the property, and counts towards the overall 10% down payment.
The earnest deposit is usually non-refundable.
3) SPA
Signing the SPA is when the big money payments begin. At this point, the full 10% down payment will be required. Any earnest deposit already paid will count towards this total.
This will also require payment of the SPA’s legal fees.
| House Price | Legal Fees Charge |
| First RM500,000 Subsequent RM500,000 | 1% (minimum RM500) 0.8% |
| Subsequent RM2 million | 0.7% |
| Subsequent RM2 million | 0.6% |
Subsequent RM2.5 million Excess of RM7.5 million
| 0.5% Negotiable on the excess (but shall not exceed 0.5% of such excess) |
As for the stamp duty, the cost is RM10 per copy of SPA and normally you will need 4 copies, which works out to RM40 in total.
4) Instrument of Transfer: MOT / DOA
It makes sense that the Instrument of Transfer document, i.e. MOT or DOA is also the part where the largest stamp duty is owed!
The stamp duty for MOT and DOA is payable upon transferring the deeds to your name.
So, if you’re buying a new property that’s yet to be built or under construction, the stamp duty will comes later. If it’s a completed new or sub-sale property, the stamp duty will comes much quicker.
These are the stamp duty charges that will be due.
| House Price | Stamp Duty Charge |
| First RM100,000 | 1% |
| RM100,001 – RM500,000 | 2% |
| RM500,001-RM1,000,000 | 3% |
| RM1,000,001+ | 4% |
Tip: First time homeowners currently benefit from various government exemptions, which you can find out more about on our stamp duty guide.
Stamp Duty and Legal Costs For Purchase Of Property
Now, let’s put that into perspective shall we?
Here’s an example of how much it will cost you in stamp duties and legal fees when purchasing a home. To illustrate, let’s say you’re purchasing a house at RM800,000 with a loan of RM700,000.
Example of Total Stamp Duty Calculation | ||
Stamp Duty for Loan Agreement Legal Fees for Loan Agreement | A fixed rate of 0.5% on the loan amount 1% on first RM500,000 of loan amount 0.8% on subsequent RM200,000 | = RM3,500 = RM5,000 = RM1,600 |
Stamp Duty for SPA Legal Fees for SPA | RM10 for each copy x 4 copies 1% on first RM500,000 0.8% on subsequent RM300,000 | = RM40 = RM5,000 = RM2,400 |
| Stamp Duty for MOT / DOA | 1% on first RM100,000 2% on subsequent RM400,000 3% on subsequent RM300,000 | = RM1,000 = RM8,000 = RM9,000 |
Total Stamp Duty and Legal Costs Involved | RM35,540 | |
Stamp Duty Exemptions In 2020/2021
Ouch, that’s a lot of money for stamp duty alone… good news though! If you’re a first-time homebuyer or buying a property under the Home Ownership Campaign (HOC), there are stamp duty exemptions in place to help you shave off some of the costs.
1) Stamp Duty Exemptions for First-Time Homebuyers
Under Budget 2021, full stamp duty exemption will be given on both the Instrument of Transfer (MOT/DOA) and loan agreement.
The eligibility criteria include:
- For first-time homebuyers only
- Property worth not more than RM500,000
- This exemption is for the Sale and Purchase Agreement completed between January 2021 to 31 December 2025
If your property is priced at RM500,000 (which is the maximum price tag to be eligible for this exemption), that’s about RM11,250 in savings!
2) Stamp Duty Exemptions under the Home Ownership Campaign (HOC) 2020/2021
*HOC has ended on 31 December 2021
That’s right, if you didn’t already know, the HOC is back for 2020/2021. Find out all about it here.
Under the Short-Term Economic Recovery Plan (PENJANA) announced on 5 June 2020, two stamp duty exemptions were introduced.
Full Stamp Duty Exemption on MOT and Loan Agreement
- For residential homes priced between RM300,000 to RM2.5 million
- Subject to a minimum 10% discount by the developer
- Exemption on MOT is limited to the first RM1 million of the property price.
Full Stamp Duty Exemption on Loan Agreement
- Applicable for loan agreements effective for Sale and Purchase Agreements (SPA) signed between 1 June 2020 to 31 December 2021.
How About Closing Costs When Buying A Property?
The fees don’t stop there, there are closing costs too. Closing costs are the necessary fees to be paid by the buyer during the final steps of the property transaction. In Malaysia, these are mostly paid by the buyer.
Stamp duties aside, some closing costs that you may incur are:
1) Real Property Gains Tax (RPGT)
RPGT is a tax imposed on gains derived from disposal of real property. In simplest terms, it’s a tax on your net profit when you sell a property. If you’re the seller, this cost may be applicable to you.
RPGT is taxed on a tiered basis between 5% – 30% depending on various factors such as how long you’ve owned the property for before selling it off. Just as with stamp duty however, there are RPGT exemptions too!
2) Legal fees
Legal fees are the fees charged by the lawyer to draft the Letter of Offer as well as the Sale and Purchase Agreement (SPA) as well as other legal matters associated with the sale. In Malaysia, the legal fees are typically split between seller and buyer and are charged on a tiered basis.
The valuation fee is paid to a bank-appointed valuation expert to estimate how much money the property is likely to be worth. This fee typically costs about 0.3% of the final property value.
If you’ve enlisted the help of an agent to assist you in the sale or purchase of a property, it will typically cost you a commission fee. This fee is stipulated by the agent, but regulated at a maximum of 3% of the property’s sale price.
Your mortgage insurance will either come in the form of Mortgage Level Term Assurance (MLTA) or Mortgage Reducing Term Assurance (MRTA), with the MRTA generally ten times more affordable than the MLTA.
6) Home renovation and refurbishments
Aside from the costs associated with the legal documents involved, let’s not forget about the renovation costs! Before closing the deal, you’d want to settle any pressing renovations such as leaks or tiling.
What Does A Transfer Of Love In Property Mean?
A transfer of love is (maybe) the sweetest-sounding property transaction you’ll ever hear of. What it relates to, is use of an MOT to transfer property between family members.
That means situations like husband to wife or parent to child. In these cases, the stamp duty for the MOT is waived either fully or partially.
You receive 100% exemption in the case of wife to husband and vice versa, and 50% exemption in the case of parent to child or vice versa.
Important things for getting loan
Applying For A Housing Loan In Malaysia: 6 Important Things To Know!
Not everyone is able to fully finance their first home out of their own pocket.
In most situations, the majority of us will turn to housing loans to acquire our first property. For first-timers, applying for a housing loan can be quite an intimidating process.
In this article, we’ll cover what are the key things to look out for when you’re applying for a housing loan in Malaysia. Let’s start from the basics!
1) What’s An Interest Rate?
This is the first thing you’ll want to consider.
An interest rate determines how much the bank charges you for the use of its money. It’s based on a percentage of the loan amount you borrow, which is also known as the principal.
Naturally, you’ll want the lowest possible interest rate – a small difference in percentage can mean thousands of Ringgit saved when you’re working with a large loan amount.
So, do take some time to compare various loan packages from different banks and go for the one that offers you the best rates.
There’s also a second question you’ll want to ask yourself: Should you go for a loan package with a fixed interest rate, or the one with a variable interest rate?
1(a) Fixed Interest Rate
Fixed interest rate, as the name suggests, is an interest rate that doesn’t change throughout the duration of your loan.
If your interest rate is 4.2% per annum, then that’s the rate you’ll pay for the rest of the loan period.
1(b) Variable Interest Rate
Variable interest rate, on the other hand, is based on something known as the Base Lending Rate (BLR), which is regulated by Bank Negara Malaysia (BNM).
For example, if the current BLR is 6.5% per annum, the bank might offer you 2.2% per annum.
This means your housing loan is charged at an interest of 4.3% (6.5% – 2.2%). So, you’ll pay more interest if the BLR goes up, and less when it goes down!
BLR varies across all financial institutions in Malaysia. Click here for the latest BLR effective as of 6 August 2020.
While there’s no surefire way to determine which type of interest rate is better, variable interest loans tend to have lower rates compared to fixed interest loans.
However, fixed rate loans are more advisable if you don’t want to deal with the uncertainty of changing interest rates.
Since the monthly instalment amounts won’t change under a fixed rate, long-term financial planning is easier when it comes to servicing your housing loan.
Are you trying to figure out your monthly housing loan payments now? It’s much easier with our home loan calculators!
2) The Type Of Loan You’re Getting
Banks in Malaysia offer different housing loan packages, but they generally fall into three categories: term, semi-flexi, and flexi loan.
2(a) Term loan
A term loan is a type of loan that has a fixed repayment schedule. With this kind of loan, the amount you pay per monthly instalment is the same for the duration of the loan.
In most circumstances, this type of loan doesn’t allow you to reduce your loan interest with advance payments. Additional payments are treated as pre-payments for future instalments.
You may write to the bank to make a special request, but the bank will grant it at their discretion and there’s no way to guarantee it’ll work.
If you make additional payments without having made prior arrangements with the bank, the money will simply sit in the account, and you won’t be able to withdraw them.
It neither earns you interest as a deposit, nor does it help you save on loan interest.
2(b) Semi-Flexi loan
Under a semi-flexi loan, any extra amount you pay on top of your monthly instalments is automatically used to lower the principal, which lowers the amount of interest charged.
Unlike a basic term loan, you don’t need to make special arrangements with your bank.
You can also withdraw the additional amount you’ve paid, but the bank will charge a processing fee. Some banks may also require you to write in, before allowing you to make a withdrawal.
2(c) Flexi loan
Under a flexi loan, your housing loan account will be linked to a current account. The instalment amount is automatically deducted every month from the current account.
Any extra funds placed in the current account is used to lower the principal loan amount, which in turn, lowers the interest payable. You can also withdraw the extra funds whenever you like!
Most banks will collect monthly fees for the maintenance of the current account. These fees are usually between RM5 to RM10. However, not every bank will offer a flexi-loan option.
3) Lock-in Period
A lock-in period is the period of time during which you’ll incur a penalty fee IF you pay off the loan in full, which may happen when there’s a sudden need for either of the following:
- Full settlement
- Refinancing
- Selling your property
The objective behind such restriction is for banks to obtain a certain minimum return on the advance payment that covers the amount of loan and administration expenses.
In general, this period ranges from 2 to 5 years, and the penalty is 2% to 5% of the loan amount.
A lock-in period is usually counted starting from the day that the bank issues the first payment to the property developer.
For example, let’s say you’ve decided to pay a full settlement for a RM400,000 housing loan within its lock-in period of 5 years, with an exit penalty fee of 3%. You’ll be forced to bear a penalty of:
RM400,000 x 3% = RM12,000
Now, you may be wondering, “How would this affect me? I couldn’t pay off the entire loan during that time anyway.”
Suppose a situation arises where you want to sell off the property you took out the loan for, or you want to refinance your home because you’ve found a better interest rate elsewhere.
If either of these happened during the lock-in period, you’ll have to pay for the penalty. With that in mind, you’d want to keep an eye out for housing loan packages that have shorter lock-in periods.
Do check for the interest rates too – if the lock-in period is short but the interest rate is really high, you’ll probably want to give that package a pass – more so if your loan tenure is long.
4) Your Margin Of Finance
A Margin of Finance (MOF) is the amount of money that a bank allows you to borrow for your loan, which in turn, decides how much cash you need to pay upfront for the property.
It’s usually expressed as a percentage of the total cost of your property.
For example, you want to buy a property worth RM750,000, and the bank offers to cover 90% of your purchase price. So, the amount of loan you’ll get is:
(90% x 750,000) = RM675,000
Your MOF is assessed based on the following factors:
- The type of property you’re purchasing
- The location of that property
- Your age
- Your income
If you’re a first-time homebuyer in Malaysia, you’re usually able to obtain a loan that’s up to 90% of the property purchase price.
Back to the example above, let’s say the bank grants you a loan at 90% of the purchase price which is equal to RM675,000.
This means you’ll need a minimum of RM75,000 in cash to pay for the down payment, which is the remaining 10% of the purchase price.
In Malaysia, the minimum down payment for a property is 10% of the transaction price.
5) Legal Fees And Stamp Duty Charges
When you take out a housing loan in Malaysia, there will be legal fees and stamp duty charges you’ll need to account for. These fees and charges include:
- Legal fees for the loan agreement: 1% for first RM500,000 of the loan, 0.8% for the next RM500,000, and 0.5% – 0.7% for subsequent amounts.
- Stamp duty for the loan agreement: 0.5% of the loan amount.
- Legal disbursement fee for the Facilities Agreement (FA): Typically a few hundred Ringgit.
The bank’s processing fee for the loan: RM50 to RM200
For an average housing loan, all legal fees and stamp duties can add up to a few thousand Ringgit!
If this sounds a little too much to afford, try looking for housing loan packages where the bank will absorb some, or all of the fees and charges.
There’s a catch, though – they’ll usually do it in return for a higher interest rate on your loan.
6) The Bank You’re Getting A Loan From
Last but not least – you’re going to be dealing with the bank quite regularly for the duration of your loan, which can easily be up to 20 or 30 years.
It only makes sense to choose a bank you’re comfortable working with. Consider the following factors when choosing a bank:
- Do you already have an existing savings or current account with the bank? If you do, it makes money transferring easier.
- Does the bank have a good reputation?
- Is the bank’s overall service satisfactory?
- Do you consider the bank reliable and trustworthy?
- Is there a branch of this bank located near your home or office?
- Does the bank have good online banking facilities?
- Does the bank offer any additional value-added services to make things easier for you?
This list isn’t exhaustive, but should give you an idea of what to consider!
Hopefully, this article did provide some useful insights and considerations before you sign on the dotted line for your housing loan.
Before you start looking into a loan, you should also think about whether you’re financially ready for your first property!