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New House Purchasing Preparation

Posted in Malaysia Investment, Malaysia Personal Finance |

Contributed by KC Wong

real-esate-for-sale
Before you start calling the property agents and viewing your next dream home, the first thing you must do is to set the budget. Below are some helpful way to set a realistic budget:

1) Cash in Hand
You must have more than 10% of the total property price. The amount of cash in hand must be enough to make the 10% deposit payment and for the legal fees.

2) EPF Account
As at the point of this writing, you are allowed to withdraw the money in your EPF account 2 to purchase the house.

Here is an example of the calculations on how much you can withdraw based on the salary you get monthly:-

Salary = RM 5,000

Monthly EPF Contribution
= 12% (employer) +11% (employee)
= 23%
= RM5,000 x 23 %
= RM 1,150

Amount for EPF Account 2
= 30% x Monthly EPF Contribution
= 30% RM1,150
= RM 345

There are 2 type of withdraw methods you can opt for:

Method A: Withdraw for maximum of 10% of the property price.

You can withdraw not more than 10% of the total property price with the minimum saving balance of RM500 in the EPF account 2. You only can withdraw the money with the sales and purchase agreement of the property. Upon approval, EPF will bank in the money into your personal bank account.

You can refer to the link below for the details: http://www.kwsp.gov.my/index.php?ch=p2members&pg=en_p2members_wdrawtype&ac=1850

Method B: Withdraw for monthly house loan installment.

You can withdraw your EPF savings to pay for the monthly installment as long as your Account 2 meets the minimum balance of RM500. The money will be transferred from KWSP directly into your bank.

You can refer to the link below for the details: http://www.kwsp.gov.my/index.php?ac=2197&ch=p2news&pg=en_p2news_press

You are not allowed to choose both methods above at the same time. You only can apply for the Method (a). After 3 years, you may apply for Method (b) with the minimum saving balance of RM500 in the EPF account 2.

3) Monthly Installment

As a general rule of thumb, your total monthly installment for all your existing loans, together with the loan you are applying, must not exceed 80% of your total monthly income.

Current monthly income = RM5,000

Your maximum monthly installment for your loan
= RM 5,000 x 80 %
= RM 4,000

Assume currently you have car loan with RM2,200 monthly installment. Your remaining monthly installment after you deduct with car loan:

= RM 4,000 ??RM 1,200 = RM 2,800

Hence, you are only allowed to apply for a housing loan package whereby the monthly installment is not more than RM2,800.

4) Housing Loan Package
You need to survey on which bank offer the best package with the lowest interest.

You can go to this website to check on all the packages offer by the bank in Malaysia.
http://www.money3.com.my/MalaysiaFinancialTool/HomeLoan/LoanFinder.aspx?SMId=1





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  • pandager

    I disagree with some of the options and points you made:

    1) Cash in Hand

    While 10%+legal fees is indeed the lower end of the bar, it would be much more advisable to have around 30% of the purchase on hand. This will allow for better negotiation with banks, allow you to be taken more serious as a buyer and greatly reduce the amount of interest payable to the bank. The more Cash in Hand you have, the better.

    2) Given the current situation I would not touch the money in EPF. Why? If your financials are sound, you should be able to negotiate an interest with you bank that will be significantly below the interest / divident paid on your EPF savings. As such not touching your EPF savings will increase your overall wealth.

    3) Your monthly loan-installment(s) should never be 80% of the household income. This will put you in a very tight financial spot and will leave you with little room for negotiation or flexibility for unforseen events. Personally my ceiling would be 50%, preferably lower

    4) Use money3.com.my to get an idea – all rates are negotiable with banks. Drive a hard bargain – even a slight reduction makes a big impact. Try to aim for low(er) initial interests too as this is the time when the loan amount is largest.

    5) Personal tip: always look at houses a “number” or two cheaper than your budget permits. You will find that most likely those are just as good and will give you greater financial flexibility. In addition you can allow for a greater renovation budget to change the property to your liking.

  • elims

    Wow… you are so pro in financial planning! ^_^