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Let’s imagine you’re buying a RM350,000 home and see what your upfront costs might look like.

1. The down payment (the upfront payment to get that property)

The down payment is usually 10% of the property’s price for your first property and second property, but it can be higher if your outstanding debts are more than 60% of your net income and if the banks don’t think you’re ‘creditworthy’. The remaining 90%  of the cost is paid for through your home loan.

 (So, for this example, you’ll need to prepare RM35,000)    

2. Stamp Duty for the Sales and Purchase Agreement (S&P)

Stamp duty, between 1-3% depending on the price of the property, is a government tax to cover the cost of processing documentation related to the sale.

Currently, the stamp duty is waived for agreements signed between 2019 and 2020 for first-home purchases within RM300,000. The waiver also applies to the first RM300,000 for first-home purchases between RM300,001-RM500,000 that have the agreements signed between the beginning of 1/7/19 and 31/12/20.

(For this example, you’ll want to prepare RM1,000)

Source: The Malaysian Bar, The Edge
(Calculation example: For a RM350,000 home: (2%*50,000) = RM1,000)

3. Legal Fees for the S&P

This fee is 1% or less of the purchase price depending on the price of the property.
(For this, you’ll want to prepare: RM3,500)
 

Source: The Malaysian Bar

4. Bank fees for the loan agreement

Shop around for the lowest bank fees!

The bank fees are made up of:

• • Bank administration fee can be up to RM200

• • Stamp duty (for the loan agreement): 0.5% of the loan amount

• • Currently, the stamp duty is waived for agreements signed between 2019 and 2020 for first-home purchases within RM300,000

• • The waiver also applies to the first RM300,000 for first-home purchases between RM300,001-RM500,000 that have the agreements signed between the 1/7/19 and 31/12/20

• • Legal fees for the loan agreement: 1% on first RM500,000 and 0.8% on the next RM500,000 of the loan.
    

• • Valuation Fees: The bank will select a property valuation firm to ensure the loan amount is calculated using the proper price of the property
    • This is 0.25% on first RM100,000 and 0.20% thereafter, subject to a minimum fee of RM400 per property
    • There will be disbursement fees (see below) and tax on top of the valuation fees.

• • Disbursement fee (This is imposed by the respective State Land Office and Insolvency Department to cover registration, land searches and bankruptcy)
    • This fee varies by state and may range from RM200-RM1500

5. Mortgage (Loan) Insurance: This type of insurance covers your loan payments in the event that you can’t pay due to death, total and permanent disability, and, depending on the insurer, terminal illness. As for all insurance products, you should always be aware of the list of exclusions.

Think about whether you’ll need mortgage insurance. You’ll need it if your family won’t be able to make the loan repayments without you. However, you may not need it if you have life insurance, and the payout is enough to cover all your loan repayments and expenses for your family.

The cost of the mortgage insurance is usually estimated at 3-5% of the loan amount, and typically it’ll be included as part of the loan package (but check the fine print to be sure!)

Note:

You can request for the bank to consider including the legal fees for the loan, valuation fees and mortgage insurance into your loan package. This is only possible if the combination of these additional amounts doesn’t exceed 5% of the initial loan amount.

This may be convenient, but you’ll be paying more in interest over the course of your loan. It may be better to consider a home with a lower price and reduce your upfront costs instead. This will help ensure your finances are not overstretched.

6. Extra expenses

Renovation costs:  Depending on the house you buy, you may need to make some repairs. Remember to factor this into your costs!