Hidden cost of buying a house

Hidden cost of buying a house

There are many houses for rent nowadays, such as Penanghouse for rent. Buying a house is a long term commitment that involves a huge sum of money. Little did people know, buying a house is not only about the downpayment and monthly mortgage repayment. There are more to just downpayment and monthly mortgage repayment. This article will guide you through some hiddencost of buying a house in Malaysia.

Stamp Duties

a.      Sale and Purchase Agreement (SPA)
The Sale and Purchase Agreement states the terms of transaction between the seller and buyer for the sale and purchase of a house. The Sale and Purchase Agreement’s stampu duty uses a fee structure of 1% on the first RM100,000, 2% on the subsequent RM500,00 and 3% for the remaining.

b.      Loan Agreement
The Loan Agreement is different from the Sale and Purchase Agreement as it draws out the terms of the loan between the financial institution and the buyer. The stamp duty for loan agreement is 0.5% of loan amount or RM5 for every RM1,000.

c.       Transfer of Title
The Transfer of Title applies to completed properties only and represents the fees related with changing of name on ownership of property to its rightful owner, or purchaser. The stamp duty for Transfer of Title is the same as the one for Sale and Purchase Agreement.

Legal and Bank Fees

a.       Disbursement Fees
The Disbursement Fees cover the registration as well as the bankruptcy and land searches. The Disbursement Fees are payable to the Insolvency Department and Land Office. However, this would vary from state to state. As estimation of Disbursement Fee would be between RM300 to RM1,500.

b.      Legal Fees
There are some Legal Fees charged by the property lawyers for Sale and Purchase Agreement, as well as the Loan Agreement. Both contracts will follow a same fee structure of 1% on the first RM150,000, and 0.7% on the subsequent RM1,000,000.

Do bear in mind that the Sale and Purchase legal fees are calculated according to the purchase price of home, whereas the loan agreement is calculated based on the loan amount only.

c.       Processing Fees
Other that the above fees, there are the processing fees to be taken into account as well. The Processing Fees will be charged by the bank as administrative cost for processing the loan. The Processing Fees is incurred one time per application. The costs for Processing Fees range from RM50 for loans up to RM30,000, RM100 for loans from RM30,001 to RM100,000, and RM200 for loans above RM100,000.

d.      Valuation Fees
Valuation is necessary for bank to ensure the loan amount is equivalent or lesser than the value of the house. The report is done by recognized real estate valuation firm selected by the financial institution and the costs will be borne by the buyer. Valuation fees are calculated at 0.25% for first RM100,000, and 0.2% for remainder, up to RM1,900,000. Fee structure of Valuation Fees can be found from the Board of Valuer’s Valuation Fee Schedule.

Insurance

Before the bank gives out a loan, they will require the borrower to insure the property to protect the property against unfortunate event that might caused the loan bearers to suffer from permanent disability or death, where they are unable to continue servicing the loan.

These types of loans are known as the Mortgage Level Term Assurance (MLTA)or Mortgage Reducing Term Assurance (MRTA). The payment for Mortgage Reducing Term Assurance is a one time fee where the coverage reduces with decreasing balance of the loan over time. The Mortgage Reducing Term Assurance’s beneficiary will be the bank whereas the Mortgage Level Term Assurance’s beneficiary can be to anyone, therefore, more expensing and has a recurring fee. The Mortgage Level Term Assurance includes cash value to be paid to borrower’s beneficiary after the bank loan is settled.

Home insurance
Many people neglect the importance of having a home insurance and therefore overlook the need to purchase one home insurance. Getting a home insurance not only give you security but it also ensure that your home will be taken good care for the coming years. That being said, you should look out for the best home insurance that suits your need as there are many different kinds of home insurance available in the market.

Total Cost
Do remember that buying a house is not only about the downpayment and monthly monrtgage repayment. In addition, buying a house is a long term investment that requires a huge sum of money. The table below will give you an estimation of the total cost of buying a house in Malaysia:

Item
Estimated cost
Sale and Purchase Agreement’s Stamp Duty
RM9,000.00
Loan Agreement’s Stamp Duty
RM2,250.00
Transfer of Title’s Stamp Duty
RM9,000.00
Disbursement Fees (including transfer of ownership title, Sale and Purchase Agreement stamping fee, legal disbursement fee and loan facility agreement fees)
RM1,500.00
Valuation Fee
RM1,050.00
Processing Fee
RM200.00
Legal Fees for Sale and Purchase Agreement
RM3,600.00
Legal Fees for Loan Agreement
RM3,600.00
Total Fees
RM30,550

Do take note that the costs above is only a rough estimate and will vary according to different interest rates.

In conclusion, buying a home on your own is not diffuclt as long as you plan ahead and stay within your budget. Remember to always be realistic as you do not want to get yourself into a financial burden after getting a home.

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