8 Questions to Ask before Your First Home Purchase

Recently, my partner and I just bought our first house 🏠, a landed property in Johor Bahru!

I still vividly remembered when I first entered the sales gallery without knowing anything. The only question that I was interested was the unit price HAHA. And I didn’t even know whether the price was considered low or high if compared to the market 😂 I was so lost but still wanted to put up an act that I knew everything about property in front of the salesperson LOLOL.

To avoid you guys making the same mistakes, I decided to list down questions that I would enquire when dealing with agent or sales representative from developer. The list below is just for your reference since everyone has different preferences and priorities.

However, there is one SUPER important thing you should know before your house hunting journey. You should determine your budget to avoid overspending!

How to calculate your affordability?

Purchaser’s ability to pay is an important criterion to look at when budgeting your finance for property purchase. One of the rules I referred to is the 3-3-5 rule, by property blogger Property Soul.

Yes, you need to fulfill all the 3-3-5 criteria below!

· You should have 30% of your capital ready before your property purchase

· Your monthly repayment should not exceed 1/3 of your monthly income

· Property price should not exceed your annual income by 5x

For example, if your annual income is RM72,000, the maximum house price you can afford is RM360,000. Next, you have to save at least RM108,000 before buying the house and your maximum monthly repayment is RM2,000. For couples, you may add up both annual incomes and compute accordingly.

Personally, I think that the rule is restricted and conservative. However, it serves as a guideline to work out our budget so we can make more savvy financial decision.

Other than above, below is how I work out my housing budget by tracking how much I earn, spending in a month and savings for future use.

1. My income

- Always take into consideration on income fluctuation if your income is not fixed or commission-based

2. My expenses

- Other than daily expenses such as groceries, food and transport, also to consider large upcoming expenses such as renovation, wedding and travel expenses (I normally allocate these large expenses into my sinking fund)

- Include additional expenses for owning a house, i.e. monthly loan instalments, utility bills, quit rent and assessment etc.

3. My savings

- Savings for 6-month emergency funds (include daily expense and monthly instalments)

- Savings for retirements

After cautious planning, I was shocked that I might not have spare money for stock investment for 2 years due to savings allocated for sinking fund - renovation cost. Therefore, it is important to understand that if more money is spent on your home, the less money you will have for investments.

Property research

Property type and size

Are you looking for a terrace house, semi-detached or bungalow? Do you prefer to buy a brand-new unit before completion or a resale unit that is older but cheaper?

Other than deciding on property type, you should also consider the property size. Normally there are various sizes such as 20’ x 70’, 22’ x 70’ or 40’ x 80’ etc. Initially, I have no idea on how to visualize or differentiate these property sizes. With MCO, it gets even more difficult to visit a physical showhouse.

Luckily, with virtual property viewing at respective developer website, we are able to enjoy their 360 degree 3D virtual tour. For resale unit, you can always request the agents/sellers to send you a video of the resale house before arranging any potential meetup.

For example, you can click the virtual tour button below to have a clear view of the showhouse.

Property price

Next, you should perform pricing survey through property websites such as iproperty or propertyguru. Through this research you are able to obtain a rough idea on the market price of property in your preferred area. It provides valuable input for you to negotiate a reasonable price with the sellers/agents in the future.

As I previously was seeking for new landed property, I will share more on relevant questions to ask the developers’ sales representatives.

1. Selling price and down payment amount

Buyers are required to pay a minimum 10% down payment when purchasing a property. The down payment must be paid once the SPA is confirmed.

However, for my case, as I was eligible for HOC (see point 5a below), I was not required to pay the 10% down payment. Why?

For example:

Selling price of the property : RM600,000

(-) HOC 10% discount : RM60,000

Net selling price : RM540,000

Loan amount (90% of selling price) : RM540,000 (90% x RM600,000)

Since the 10% down payment was waived by HOC discount, overall net selling price is equivalent to the loan approved amount (90% of selling price). In another word, the bank loan offered covers the total net property cost.

2. Individual title or strata title

Now comes the tricky part. I always thought that all landed properties are individual title until one of the agents mentioned that their landed properties are all under strata title… I was like HUHHH Isn’t strata title only applicable for condo/apartment??

So, what is the difference between individual and strata landed property? For strata landed property, you are restricted to some rules when it comes to housing renovations. Monthly maintenance costs are also higher compared to individual landed. For more information about strata title, please read carefully here. There are pros and cons that you will need to understand before pursuing your individual or strata title.

3. Gated & guarded? How much is the monthly maintenance fee?

If it is gated and guarded, then we should proceed to enquire on the monthly maintenance fee which usually covers both security and landscaping costs for the Taman. Normally the fee is based on built-up area of your house.

4. Availability of house unit and which direction is the property facing?

If you are interested on a particular property, agents or sales rep will usually inform that house units are almost fully booked. Do not panic and fall into their trap to purchase directly without further consideration. Some units could be booked but not confirmed since loan approval is still in progress. There are plenty cases whereby buyers’ loans were rejected and subsequently units are released again to other potential buyers.

If you are particular on fengshui or other personal consideration, you perhaps should check on the direction whereby the property is facing. For myself, I requested for the entire Taman’s layout to determine whether the house is facing any lamp pole as it is believed that this could result in ill-health and potential litigations in future (from fengshui aspect).

5. Incentives

Below are some of the government incentives on property purchase which may be applicable to you. You can always confirm with the agent/sales rep on whether you are eligible for these incentives.

a) Home Ownership Campaign (HOC) is a government initiative to support homebuyers and stimulate property buying. HOC is only applied to new properties registered under the campaign from specific developers.

The campaign has previously ended on 31st May 2021. However, it has been extended by Ministry of Finance to 31st Dec 2021.

So, what are the benefits?

- Full stamp duty exemption on Instrument of Transfer for any residential property up to RM1 million

- Partial stamp duty exemption on Instrument of Transfer for property worth RM1 million to RM2.5 million

- Instruments on securing loans exemption

- Minimum 10% discount on property price ⭐⭐⭐

Read more about HOC here.

For my case, I was able to save up to around RM40,000 with the benefits provided by HOC.

b) Budget 2021 Stamp Duty Exemption for your first home

Full stamp duty exemption will be given to both instrument of transfer and loan agreement for the purchase of a first home (must worth below RM500,000). This exemption is only applicable for Sale & Purchase Agreement completed between 1st Jan 2021 to 31st Dec 2025.

Assuming your property price is RM500,000, below is the calculation for the amount that you could save:

Stamp duty for instrument of transfer + Stamp duty on loan agreement

= (First RM100,000 x 1%) + (Next RM400,000 x 2%)] + 0.5% of loan amount, assuming 90% of property price (RM450,000)

= (RM1,000 + RM8,000) + (0.5% x RM450,000)

= RM9,000 + RM2,250

= RM11,250

c) My First Home Scheme, launched in 2011, allows eligible applicants to obtain loan financing up to 110% of the property price. Below is the full list of requirements which applicants must meet to be eligible for the scheme.

6. Expense covered by developer

Nowadays, there are various marketing gimmicks by developers or sales agents, therefore buyer should always be extra careful of discounts and rebates offered by them.

For example, some developers or agents are offering free legal fee and free stamp duties. Buyer should always clarify what kind of legal fee or stamp duty are waived. Are they referring to the legal fee for loan agreement or SPA? Stamp duty for memorandum of transfer (MOT) or loan agreement? For each fee, the rates vary depending on the property price as well.

Always remember to seek for black and white or letter confirming the discounts or rebates offered by them before signing the loan agreement and SPA.

Below are the rates for legal fees and stamp duties for your reference.

7. Loan application

Finally, when you decided to confirm on your booking, the sales rep will request for your personal documents such as IC, pay slips and employment letter to apply for bank loan. Normally, we are advised to apply for loan from more than 1 bank, which allows us to compare which bank offers better financing scheme (such as lower interest). Besides, there are also chances that one bank might reject your loan application. Therefore, it is always better to apply for multiple bank loans.

For my case, the banks took around 2-3 weeks to update us on the status of loan application. The sales rep will assist to follow up with various banks. After approval is obtained, you will have an option to decide on the loan tenure period, which can be up to 20 to 30 years.

Other than that, you have to elect a home loan insurance (MRTA) to cover potential financial burden in situation of buyer’s death or total permanent disability. The duration of home loan insurance need not be the same as the loan tenure. For example, if your loan tenure is 25 years, you may opt for a home loan insurance of 20 years instead. It really depends on each individual’s circumstances. Read more about home loan insurance here.

When bank offer letter is issued, sales rep will proceed to arrange for the signing of Sale & Purchase Agreement (SPA) with the developer’s lawyer.

You may refer to the complete guide of applying home loan here and here.

8. Preparation before signing day

Before the signing of SPA and loan, I have requested the sales rep to provide me with a copy of SPA in advance, so I could read through every single clause stipulated in SPA prior to signing. Besides, it is important to ensure that the specifications stated in the Fourth Schedule of SPA is the same as per agreed previously.

Example of Fourth Schedule of SPA:

Hotcup’s Verdict

My first experience of home purchase has led me thinking that my dad 👨🏻, the sole breadwinner of my family was having so much financial pressure in the past but still he was able to provide us with a comfortable home and successfully shouldered his children education needs. A salute to all sole breadwinner of the family!

Owning a property is not just about paying the property price, it includes loan interest, legal fees, stamp duty and other expenses. The hefty amount of money to buy your dream house can be a heavy financial burden if you did not plan it properly.

So, are you financially ready for your first property?