How Much House Can I Afford?

How Much House Can I Afford?

Now that you are ready to take a dip in the property pool, do you know what kind of property and at what price point should you consider purchasing? Determining your housing affordability isn’t always simple. Can you afford a brand new condominium near the city, or can you only afford an apartment in the suburb?

How much cash do you need to have to purchase a RM500,000 property? Will you be able to afford the down payment or the monthly repayment with your current income? Before you start looking into property listings, take a look at your finances and decide how much you can realistically pay.

What’s the maximum loan you can get? 
Before you can determine an affordable price for your property, there are a few things you’ll need to consider. These include your monthly income, cash amount you have available, and how much you can borrow.

Your loan amount depends on a number of things, including the market value or purchase price of your house, the type of property (e.g. residential or commercial), the location of the property, and your profile (i.e. age and income level).

To estimate the maximum property loan amount that banks would approve, it’s best to ensure that the total monthly instalment on all you existing loans, and your prospective property loan do not exceed 70% of your net income.

How about upfront payments? 
Buying a house is not all about instalments – the largest upfront cost in a home purchase is the 10% down payment. But that’s not all. There are various fees and charges involved.

1. Stamp duty for transfer of ownership title (also known as memorandum of transfer or MOT)
a. 1% for the first RM100,000
b. 2% on the next RM400,000
c. 3% on the subsequent amount

2. Sales & Purchase Agreement (SPA) Legal Fees
a. 1% for the first RM150,000
b. 0.7% of remaining value of property within RM1 million

3. Stamping for SPA
a. Under a hundred Ringgit

4. SPA Legal disbursement fee
a. A few hundred Ringgit

5. Loan facility agreement legal fees
a. 1% for first RM150,000
b. 0.7% of remaining value of loan within RM1 million

6. Stamp duty for loan
a. 0.5% of loan amount

7. Legal disbursement fee for Loan Facility Agreement
a. A few hundred Ringgit

8. Fee for transfer of ownership title
a. A few hundred Ringgit

9. Mortgage Reducing Term Insurance
a. Think of it as a life insurance for your home loan. It can come up to RM1,000 or more, but this may be optional with some banks.

10. Government Tax on Agreements
a. 6% of total lawyer fees

11. Bank processing fee for loan
a. RM200

*Note: Fees and charges are just an estimation based on recommended numbers and industry averages. Actual Figures may differ.

Always have extra funds on top of the money allocated for the 10% down payment before making any property purchases. To put things into perspective, a home valued at RM 500,000 with a 90% loan may set you back by another RM20,000 in fees and charges.


Source: DurianProperty.com

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