Buyer's Guide : Part II

Looking for property to BUY? Where to BUY? How do I do it? 


I am no expert but having been in the real estate industry as a Senior Real Estate negotiator for 4+ years now, I do have some tips to share on real estate. There will be a series on Landlord guide, Tenant guide, and now buyer's guide or relevant information on real estate in Malaysia. Follow me on my blog if you want to know more. Feel free to leave your comments if you need me to respond to your queries. I'll try my level best to answer your queries.


(Note : All contents shared are my personal observations and experiences,  without prejudice to my rights).

A few days ago, Rocker57 and I were looking at some properties to invest. This set me to thinking that I should digress into Buyer's guide and let Tenant's guide take a back seat as I believe my readers are all in the investing or buying stage instead of renting. I've already churned out Buyer's Guide Part One, this is Part II

So here you go :

Check list before you buy: (Part II)

Considerations and questions you need to ask yourself :

• HOW MUCH CAN I AFFORD TO PAY? It depends on your income & financial obligations eg, car loan, credit cards or personal loan & other housing loan(s).

  Effective January 2012, the Malaysian Government has set guidelines that loan approvals should be based on net annual income and not gross annual income as previously stated. General rule of thumb is not to exceed 1/3 net annual income on your financial obligations.

• FINANCING? Find out how much financing you are eligible for. Is this your first property? If it is your first two property, then you can/maybe eligible to get between 90-95% loan. Subject to the approval from the respective financial institution you are seeking the loan from. It depends very much on your net annual income & total financial obligations.

  Is it your 3rd property?

  If it is your 3rd property under financing, then maybe you are only eligible for 70% or lesser loan-to-value financing. Meaning, if your 3rd financed property is worth RM1,000,000 then you are only allowed to loan up to RM700,000 or maybe even lesser if you have surpassed 1/3 of your net annual income on repayments.

  How do you know if this is your 3rd financed property?

  Example, if you have 3 properties and only 1 is still being financed, then this new investment is considered your 2nd property and therefore eligible for up to 90% loan. However, do be mindful that percentage of loan eligibility is always subjected to the approval from individual financier, be it bank, finance or Malaysia Building Society Berhad (MBSB) a public listed banking and credit intermediation. So, please please don't quote me ya on how much loan you are entitled to. Thanks :)  

• WHICH BANK TO CHOOSE FROM? The current Base Lending Rate or BLR in short is 6.6%. However, financiers generally give a rebate of minus 2 - 2.5% from BLR. The rebate period varies from bank to bank. Some maybe for entire loan duration while others are revised upwards/downwards after a couple of years. Yet others have various other perks / schemes to attract you to bank with them. So, it is best to seek out a few financiers for the best rates before making your decision.
  Also, be alert of other 'must have' imposed by these financiers. Some insist on you having to purchase MRTA (read more below), yet others impose a strict 5 year lock-in period. The latter meaning, you cannot make full settlement within the first 5 years, failing which a 3% penalty on loan value will be imposed. Example, if your loan is RM200,000 and you have paid RM40,000 to-date and intend to settle the balance of RM160,000 in your 4th year of loan repayment. If there is a 5 year lock-in period, then you are subjected to a 3% penalty of RM200,000 = RM6,000 + RM160,000 to off-set your loan.
• REPAYMENT TERMS? How long do you intend to borrow? 10 years or more? Simple principle to follow : the longer the term you borrow, the higher the amount you will end up paying. At the end of the duration, your property value may be more than double the actual cost of your loan including the possibility of doubling the property's initial purchase price! So, it is best to place lump sum repayments whenever feasible periodically so that your interest repayment is lesser. Over a long period, you'll be amazed how much in interest repayment you have saved.
• MORTGAGE REDUCING TERM INSURANCE (MRTA)? This is an insurance policy that works on a reduction protection term tied to your loan amount and term of repayment. Example : if your loan is RM500,000 and duration of repayment is 35 years, then it is advisable to take up a loan for the same. That way, should anything untoward happens to the person paying the housing loan, the insurance will cover the rest of the cost of repayment. Some financiers may insist that you take up MRTA while others may not be so rigid. Where possible, do not add the MRTA premium into your loan amount, it eventually adds up and would cost you a 'bomb' compared to buying it one-off. But do remember that MRTA can be costly depending on the amount, age of proposer & duration of protection. So, think it out thoroughly before 'jumping the gun'.
• DOCUMENTS NEEDED FOR BANK LOAN? Broadly, these are the few documents your financier will require from you prior to loan approval. Again it depends on the financier : copy of Identity card, 3-6 months last drawn salary slips, letter of appointment, latest Employee Provident Fund (EPF) print out and some may even request for Fixed Deposits (FD) slips to show proof of your financial status as mentioned by you. Yet, others will need a copy of your tenancy agreement as proof of revenue. So, have them all ready when you approach any financier for loan approval, lest you have to run around trying to sort out what they need.
• OFFER LETTER FROM BANK? It is best to get the offer letter from the bank before committing to purchase the said property. That way, you are assured of a financier. This is to avoid any disappointments later on. Alternatively, if you have a regular banker, it is also good to find out what's your loan eligibility as a benchmark for yourself to know what kind of property you are able to get with the estimated loan amount given.
• BANK DISBURSEMENT? In general, the standard Sales & Purchase agreement (SPA) in Malaysia states a 3+1 month time frame for purchaser to get his/her bank to release all monies outstanding. Do note that the additional 1 month extension is subjected to a 8% penalty interest charged on all balance outstanding. Hence, it is wise to monitor and track your loan disbursement so as not to incur additional cost. 

There's more where this info sharing came from. So join me in my next blog on Part 3 of Buyer's guide. If you had missed Buyer's guide Part One, here's the link :  http://superbiker48.blogspot.com/2012/08/buyers-guide-part-one.html

If you have any 'burning' questions to ask regarding the above, feel free to drop me a comment and I'll try my level best to respond to your question. And if you find my blog informative, please share it! After all, sharing IS caring. Till you "catch" me on my next blog....LIVE LIFE FULL & stay happy always!!

HAPPY BUYING / INVESTING!! Cheeeers!!!