As first time home buyers, there are plenty of questions you might have on a property and need objective answers for. While you can consult your property agent as they guide you as first time home buyers to make the biggest financial decision in your life, property agents are sales-oriented who make a living based on the commissions on what a house sells for. Because of this, you might have concerns that their advice and tips may not be as objective as you think it is.
Prolution wants to bring you out of your dilemma with tips and advice from property agents in Malaysia. Here’s what many reputable property agents say first time home buyers should take note of before deciding on anything.
1. Research everything you can if you are first time home buyers
While you can certainly rely on your property agent to give out the facts you need to know, people make mistakes and might miss a thing or two out. Hence, it is better for you to do the homework necessary before making your first property purchase. Don’t be allured to decide on anything solely based on market rumors and unproven trends without doing your homework first. Research is of the utmost importance here.
Ensure that the property you are choosing meets all your requirements. This is unique to each individual, as you might be buying the property for investment or for you to start a family in. If you are having trouble deciding which type of property you should go for, then visit our page now to get free advice on how you can decide. Remember to only seek advice from experts, such as reputable property agents like Prolution in the area of your interest.
2. Get flexible with your home loan as a first time home buyer
Most people complain that properties are expensive and are unaffordable in urban areas like the Klang Valley. However, if you are first time home buyers, there are some leverages that you can pull off against the property market.
i. If you are young, then stretch the loan term to the mandated maximum of 35 years. This makes monthly installments more affordable which makes banks more likely to approve your loan application.
ii. For your first home purchase, you are only required to fork-out an affordable 10% of the property’s value as down payment, while the remaining 90% can be financed with a mortgage from the bank.
iii. Opt for a flexible term on your mortgage scheme as this will allow you to repay the loan and bring your outstanding balance down to be settled in the shortest time possible.
3. Make comparisons for a better idea
How do you know if you’re getting the most out of the money you are investing in a property? Is getting a great deal on your first house purchase is nothing but luck? Well, sometimes, but not always. To know what your potential purchase is worth, gauge other recently sold properties in the market. Take properties that are similar in size, location, and condition to compare with. If a property is really underpriced or overpriced, then there is an underlying reason behind it. Check the property out with the help of your property agent.
A reputable property agency like ours will guide you on this, as we have the list of recently transacted properties in all the main booming areas all over Malaysia, and thus will be able to advise you to get the best deal.
4. Buy only what you can afford
While that bungalow of your dreams as your first home is ever so enticing, it is important to remember what your bottom line is. A good property agent will analyze your income and advise you on the price range of the property that you will be able to afford. If you proceed on incautiously, you may find that your bank loan to buy your first bungalow house will be rejected, and the deposit that you’ve paid might not be refundable.
Avoid this heartache by determining the loan amount you will get approved with from the bank, and only placing down payments and deposits that are refundable. Many property experts advise that the monthly installment to income ratio should be 33% only. This means that the monthly installment that is paid for your first-home purchase should not exceed 33% of your income.
5. First time home buyers should take property location into consideration
Decide on where you would like to buy your first property, before even engaging a real estate agent for their help. Your reason for buying the property and your lifestyle comes into play here. If you are moving to a new city to work, you might want to live nearby your workplace and have convenient access to public transportation. If you are looking to retire, then you might consider a residential area that is away from the main city.
6. Take advantage of home ownership schemes
In 2019, the House Ownership Campaign (HOC) helped eager property buyers by providing a full or partial exemption to stamp duty fees when a property is purchased. It remains unconfirmed if this exemption applies in 2020 but there are another initiatives that are executed by the government to help first time home buyers
Among these initiatives are the Funds for Affordable Homes by the Bank Negara Malaysia (BNM) which offers a concessionary interest rate of 3.5% and the Youth Housing Scheme by Bank Simpanan Nasional (BSN) which provides a monthly rebate of RM200 for monthly loan installments for 2 years. Property agents will earn the same for their services rendered to you, regardless of which housing scheme you pick and they will gladly help you in applying for it.
7. The 1% Rule
According to the New Straits Times (2019), the tip that many home buyers use to assess a property purchase’s profitability is the 1% rule. The general rule of thumb of this rule is that any property investment should generate at least 1% of the property’s purchase price every month. The profit that is generated can come from the rental income of the property or the capital gains that result with the increase of the selling price of the property.
For example, if you recently bought a landed double-storey home for RM1.2 million, then 1% of that would be RM12,000 a month. The income that is generated for you monthly with your investment should cover your monthly loan installment and any other expenses, if there is excess. If your property is unable to yield a return of 1%, then you’ve wasted your investment and time with the said property.
8. First time home buyers should aim for landed properties
There are pros and cons with choosing a landed property versus an apartment or condominium. But, one strong point that first time home buyers should pay attention to with landed properties are that the individual title for a landed property is much easier and faster to obtain, compared to the strata title of an apartment or condominium.
Getting your individual title early on helps to expedite your home loan approval process. Individual-titled homes also give you more advantages with regards to freedom on renovation works and less maintenance required as they are comprised of fewer-to-none mechanical, electrical, and vertical services like lifts, plumbing, and fire systems.
9. Take caution with auctions
Auctions are great a choice to scout for properties, because you may land yourself a really good deal in one of them. However, if RM300,000 for a double-storey landed unit sounds too good to be true, then it is prudent to look beneath the surface. Inspect the physical condition of the property as well as its location. Contact the auctioneer to obtain a copy of the Proclamation of Sale, once you are satisfied with the condition of the property.
Auctions are usually run by banks, selling properties that are defaulted by previous lenders. The terms and conditions for each property with each bank may vary, so read them carefully before making an auction property your first property purchase.
10. Do not rush, the right one will always be there for you
FOMO or Fear of Missing Out is something very real in buying properties as well, especially when you are buying your very first house and wishing to that elusive group of property owners. Because of that, many people rush to buy properties without thorough research and bringing it up to discussion with their family members. As a first-time home buyer, some things you should always check for are:
- Fair market price for the property you are interested in
- The physical condition of the property
- The math of loan repayment
- External factors like ensuring there are no high-tension cables, floods, etc. happening nearby your property.
Get Started with your first house
With these tips and advice, we hope that you’ll be able to exercise more caution and prudence with your purchase. While this list is not exhaustive, it is a simple guide for you to avoid problems and make the best of your investment. Remember, take as much time as you need before making any decisions because once it is made, reversing its effects are harder. If you need help, then get in touch with us for a FREE e-consultation session today!
Are you in the process of buying your very first property or are you an experienced investor instead? Share your experience and insights with us in the comment section below.