If you are buying a house for the
first time, the whole process of signing the Sale and Purchase
agreement, dealing with solicitors, legal fees and stamp duty can be
confusing. Here is a guide to some of the costs involved in buying a
home.
How Much Can You Afford?
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A good rule to follow is, your monthly loan
instalments and current commitments (example: car loan, personal
loan) should not exceed one-third of your monthly salary. |
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Use our loan calculator to estimate how much you
can borrow, how much you will have to pay, and for how many years. |
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Don't be tempted to over-commit yourself
financially. You will have emergencies or if interest rates rise,
you may have problems making payments. |
Fixed or Conventional Rates
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A fixed interest rate home loan promises fixed
instalments throughout the loan tenure. It offers stability against
fluctuating financing costs and ease of planning your monthly
financial commitments. |
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A conventional loan with variable interest rates
may suit those who want to take advantage of features such as
overdraft facilities and so on. |
Down Payment
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You generally have to pay a booking or earnest
fee of 2%-3% of the purchase price. This is non-refundable. |
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The bank usually finances up to 90% of the price
of the property. You must have at least 10% in cash for the down
payment. |
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Don't forget that you can withdraw a limited
amount from your EPF (Account 2) for your down payment. |
Sale and Purchase Agreement
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Upon signing the Sales and Purchase agreement,
you pay another 7%-8% of the purchase price, bringing the total down
payment to 10% of the purchase price. |
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After that, you usually have 3 + 1 month (i.e. 3
months to pay up the balance or secure financing and a 1-month
extension which is subject to 10% per annum interest on the balance
due). |
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If you are buying a property under
construction...
The developer generally appoints a lawyer to draw up the Sale and
Purchase agreement. The bank will deal with the developer to make
progressive payments on your behalf. |
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If you are buying a completed property...
You need to engage a lawyer to advise and act on your behalf when
signing the Sale and Purchase Agreement and making payments, until
the transaction is completed. |
Insurance
| You have to purchase Mortgage
Reducing Term Assurance or MRTA, which ensures your home will be
paid for in full should anything happen to you. |
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The one-off premium payment is generally
computed on the age of the borrower(s), loan amount, tenure and
interest rate. |
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It can be paid in cash up front or included in
your loan to minimise the initial cash outlay required. |
Fire/House Owners Insurance policy is compulsory to protect
your property against damage. Should a mishap occur, your insurance
payments may be used to minimise losses. |
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The premium is payable annually. |
Stamp duty and legal fees
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Be prepared to pay stamp duties and legal fees
for your Sale and Purchase Agreement and Loan Agreement. |
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For a limited period, most banks are
offering to absorb all legal fees including stamp duty
pertaining to the Loan Agreement for financing purchase of
completed properties. The Bank is also offering to absorb all
legal fees except stamp duty pertaining to the Loan Agreement
for financing purchase of properties under construction. |
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Monthly instalments
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Ensure you pay on time to avoid late payment
charges. |
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If you miss several payments, you risk losing
your home. |
Finally, when you get the keys to your home you will have to pay...
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Monthly service charges (if you own an
apartment) |
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Deposits for utilities -- TNB, JBA, Indah Water
and telephone |
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Assessment (twice a year) |
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Quit rent (annually) |
Now you're ready to take the big leap and become the proud owner of your
very own home!
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