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What You Need to Know as a First-Time Home Buyer

Buying a house for the first time is never an easy affair. There are so many things to consider, and a massive amount of long-term financial planning is required – making the whole process a very daunting one from the start.

However, if you’re a first-time home owner, and don’t press that panic button and tap out just yet!

We at Finder understand the struggle and would like to help you make better-informed decisions with the following list of seven must-knows when it comes to buying a house for the first time in Malaysia.

We’ve also assembled examples for each item, using a house with the purchase price of RM600,000 as an example.

With these pieces of information under your belt, you’ll definitely be on your way to becoming ‘Malaysia’s Next Best First-Time Home Owner’, so read away!

Document/FeeWhat is it?
Downpayment
  • Your downpayment or deposit is often the first payment towards home ownership
  • It represents a portion of the purchase price
  • The exact portion, however, depends on your Margin of Financing (MOF) – which is the amount of money that you are allowed to borrow from a bank to finance your purchase

For example, if your house’s purchase price is RM600,000, and the MOF is 90%, you will be required to place a downpayment of RM60,000 and pay off the balance with a loan of RM540,000.

Booking Fee
  • Sometimes, property developers will require you to pay 2% or 3% of the purchase price upfront as a booking fee.
  • The specific portion and amount of the booking fee – along with the time in which the remainder of the deposit or downpayment must be paid and a loan must be approved – should be indicated clearly in the Sale and Purchase Agreement (SPA) for the house that you are buying

In our example, with a margin of 2%, the booking fee would be RM12,000. If 3%, your booking fee will be RM18,000.

Sale and Purchase Agreement (SPA) Legal Fee
  • The Sale and Purchase Agreement (SPA) is the governing contract which officially documents the purchase of a house
  • It is compiled by a lawyer who is appointed by either you or the developer
  • Compiling it will warrant the payment of a legal fee; one which is usually paid by the buyer of a house

The legal fee is derived from percentages of the purchase price of a house. Based on current tiered rates for SPA legal fees, you would be looking at a payment of RM5,800 for a house that is valued at RM600,000.

Loan Agreement Legal Fee
  • A fee must be paid to a lawyer who will draw out the loan agreement between the buyer and lender
  • Current tiered rates for loan agreement legal fees are the same as those for the SPA legal fees, which are given above

For a house priced at RM600,000 that is purchased with a loan and not solely in cash terms, a total of RM5,800 must be paid for the loan agreement legal fees.

Memorandum of Transfer (MOT)
  • The Stamp Duty of Transfer or Memorandum of Transfer (MOT) is the price that has to be paid by a buyer to be recognised as the rightful owner of a property in the eyes of the law
  • Also known as the fee that is paid to transfer the ownership of a property from the developer or seller to the buyer
  • The MOT is determined based on tiered rates set by Malaysia’s Valuation and Property Services Department, starting from 1% of the first RM100,000 of a property’s purchase price

For a house that is valued at RM600,000, the MOT will be RM12,000.

There you go! Five potential fees or charges that you should pay attention to when buying a house for the first-time.

Each has a large effect on the amount of money you will have to pay for your dream home, so do be sure to account for them when undertaking the planning of your finances for your big purchase.

Let’s not forget that you should consider the following too when considering your first property.

Location

The location of your desired house can make a huge difference in the valuation or the purchase price of that house. Houses in cities, for example, are far more expensive than those in rural or less-developed areas.

Houses which are nearer to large array of features and infrastructures – like public transport hubs and malls – will also be more costly. For instance, according to Brickz, a landed house in Subang Jaya’s popular SS15 costs around RM900,000 while one in USJ 12 costs RM610,000.

Facilities

Buying a house in a housing estate that has a lot of facilities will be far more expensive than that of a simple and basic residence in a low-cost housing area.

The sam applies to apartments and condominiums. Serviced apartments will be far more expensive than bare and basic ones, as they come equipped with access to a wider range of facilities and services, and are often fully furnished.

Final Word

Ultimately, you should always remember to purchase properties that you can actually afford. Houses require maintenance too, and this maintenance will become more expensive as time passes. This is why you should budget adequately at all times – instead of exhausting all your funds from the get-go in pursuit of a luxurious and lavish home!

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