Budget 2021 seems to be focused on first-time home buyers. Now, they have stamp duty exemption until 2025. When we buy a property, it is not just the property price which we need to worry about. A RM500,000 home is not just the RM50,000 downpayment which we needed to save like crazy to achieve. As renovation costs are quite personal, let’s look at the other costs which everyone would need to also prepare in advance as well.
We focus on a RM500,000 home because I think this is considered within the affordability of M40 household (M3 / M4) or higher who are careful with their spending. If you like to know who’s in the M40 household and how much is the monthly median income, here’s the chart for reference. General idea is that banks would be willing to lend if the housing loan is just 30% of the median monthly income. I repeat, general idea. It depends on the credit card debts and other debts too.
Now that we are clear, let’s look at all other costs to buy a home of RM500,000. We will start with stamp duty which is usually many thousands of ringgit and this would also have to be paid when we purchase any property.
Stamp Duty on MOT (first-time home buyers in Malaysia do not need to pay this until after 2025)
Next would be the Sale and Purchase Agreement (SPA) fees.
We do need lawyer’s assistance. So the next one is the Loan Agreement Legal Fees
What’s the typical total cost of purchase for a RM500,000 home?
By the way, down payment is not a cost because this is our money and it goes into the payment of the house price. The others are all considered costs because there are paid to someone else and will no longer be our money…
RM9,000 + RM5,000 + RM5,000 = RM19,000 ADDITIONAL on top of our RM50,000 downpayment which we have gotten ready earlier. So, do we have this extra RM19,000? if the answer is not yet, then the RM500,000 property will have to wait while we do our best to save another RM19,000.
Should we buy then since so much cost, why not just rent?
To those who are adamant in renting, I will not stop you yeah. From the perspective of a one time payment of down payment and all these costs, renting is by far a cheaper option. From the monthly repayment perspective, renting may still make more sense and saves us money! Just remember there’s also that long-term perspective where the owner will enjoy the potential capital appreciation while the tenant basically loses everything he paid no matter how many years he pays the rental.
Choice is yours, everyone has their own opinion and we just need to be happy and responsible for what we decide today which will affect our tomorrow. Happy deciding.
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