Guide for Buyers
Welcome to our buyers' guide, where we aim to provide you with relevant and up-to-date information. (Note: Some information here is not applicable to buying a new property.)
Buying a new property?
Guide for Buyer (Project)A trustworthy lawyer is essential for both buyers and sellers to handle the legal aspects of a property transaction. It's advisable to identify a legal firm early in the process to ensure a smooth sale. Seek advice from a lawyer whenever necessary.
While engagement isn't mandatory at this stage, it's recommended to shortlist several firms and inquire about their services and fees.
The following directories are for your reference.
Decide whether the property will be for personal use or investment purposes. Consider factors such as future family needs, proximity to work or school, and the potential for rental income. Additionally, compare new and existing properties by assessing your specific needs and weighing the respective pros and cons.
Thoroughly research neighborhoods based on your specific needs. Evaluate factors such as safety, amenities, school districts, and future development plans. It's essential to visit the area at different times of the day to observe the environment, traffic patterns, and overall atmosphere. Additionally, consider the daily commute to and from the property, as this will play a significant role in your future lifestyle.
Once you've narrowed down your options, it's time to schedule visits to see the properties in person. Don't hesitate to ask the owner any questions you might have about the house or anything unclear in the listing. They'll be happy to address your concerns and even accommodate a second viewing if necessary.
During your visits, pay close attention to the overall condition of the property, including any potential repairs or renovations that may be needed. Remember, finding the ideal home can take time, so carefully weigh the pros and cons of each option.
Reminder: For your safety, it's recommended to bring a trusted friend or family member to the viewing and always inform someone about your plans and schedule.
If you have decided to move forward with purchasing the property, the seller will require you to sign the Offer to Purchase (OTP) agreement. It is essential to carefully review this agreement as it outlines the fundamental terms and conditions of the transaction. Pay close attention to ensure that the terms are fair and not biased towards the seller. We strongly advise consulting your lawyer if you need further advice.
Offer To Purchase vs Option To Purchase
Do not confuse "Offer To Purchase" with "Option To Purchase" Agreement. They are different in terms of purpose, legal enforceability, and how they are used in property transactions.
Offer To Purchase
- It signifies the buyer's formal intention to purchase the property at an agreed price and terms.
- The seller acknowledges the offer but is not legally bound to proceed until the Sale and Purchase Agreement (SPA) is signed.
- The buyer typically pays an earnest deposit (2 to 3% of the property price) as a sign of commitment.
- This deposit is refundable if certain conditions (e.g., loan approval) are not met.
Option To Purchase
- The seller agrees not to sell the property to anyone else during this period.
- A non-refundable option fee (usually 1 to 2% of the purchase price) is paid by the buyer to the seller to secure the option.
- The option fee is forfeited if the buyer decides not to proceed with the purchase.
- If the buyer proceeds, the option fee is typically applied towards the purchase price.
Upon signing the OTP, it is customary for the buyer to provide an earnest deposit, typically amounting to 2 - 3% of the property's purchase price. To protect the interests of both parties involved, it is recommended to make the deposit payable to the seller's Solicitor. This measure ensures a transparent and secure transaction.
You may try to find the information of the seller's Solicitor in the following directories. If you need clarification, don't hesitate to ask the seller directly.
Once you sign the OTP, you should start your loan application as soon as possible. You will have limited time, usually 14 days, to complete this step. Applying early can help you prevent any problems or loss of your earnest deposit. To make the process smoother, you should get the necessary documents ready beforehand.
In case your loan application is rejected by the bank, it is typically expected that the earnest deposit can be refunded. It is crucial to have a clear understanding of the refund policy outlined in the OTP. Make sure that this aspect is explicitly stated to avoid confusion or disputes in the future.
Once your loan application is approved, the seller's solicitor will draft the Sale & Purchase Agreement (SPA). Here is where your solicitor comes into the picture. They will verify that all legal requirements are met and that there are no unfavorable or unclear terms in the agreement. Once both parties agree on the final terms, your solicitor will advise you to sign the SPA.
Note: It is generally prohibited for the same solicitor to represent both the buyer and seller in a property transaction to prevent conflicts of interest and ensure that both parties receive independent legal advice. Each party should engage their own solicitor to protect their respective interests throughout the transaction. If the seller suggests using his/her solicitor, seek independent legal advice before proceeding.
Other Information
Debt Service Ratio (DSR) measures your ability to manage your debt obligations based on your income. In general, it's calculated by dividing your total monthly debt payments by your gross monthly income. The higher your DSR, the more of your income is dedicated to debt repayments, potentially impacting your loan approval chances.
However, please note that DSR calculations and acceptance levels vary depending on individual circumstances and bank requirements. You are advised to consult the bank directly for more details tailored to your situation and needs.
Bank Negara Malaysia announced the release of the revised Reference Rate Framework on 11 Aug 2021. The Framework will be effective from 1 August 2022. Under the revised framework, the Standardised Base Rate (SBR) will replace the Base Rate (BR) as the reference rate for new retail floating-rate loans.
Current SBR: 3.00% p.a.
CIMB
Property Loan Interest Rate
Note: The link provided above is purely for reference purposes and does not indicate any affiliation between REALE and the mentioned bank. REALE does not engage in marketing or advertising activities related to the bank. For precise and tailored information pertaining to your individual circumstances, it is advised to consult qualified professionals or relevant parties. Thank you.
To budget effectively for your property purchase, be aware of these common closing costs: legal fees for the Loan and Sale & Purchase Agreements, stamp duties for the Loan Agreement and Instrument of Transfer (the official document transferring ownership), and the Valuation Fee. The attached file provides further details on each fee.
Property priced at RM500k and below
First-time homebuyers can enjoy a 100% stamp duty exemption on Memorandum Of Transfer (MOT) while purchasing a property priced up to RM500k. (Sale & Purchase agreement executed between 01-01-2021 and 31-12-2025.)
EPF members can withdraw from EPF Account 2 to finance the down payment & purchase of a house. Please find the calculation in the PDF file for your reference. (Kindly visit the official website for more information.)
Mortgage Reducing Term Assurance (MRTA)
This is considered an economical choice because the bank typically finances the single premium payment as part of your mortgage. This means you don't need to pay a large sum upfront. The coverage amount gradually decreases alongside your outstanding loan balance. In the event of a claim, the payout goes directly to the bank to settle your mortgage, ensuring your family inherits the property debt-free.
Mortgage Level Term Assurance (MLTA)
Similar to a life insurance policy, this is an option offered by insurance companies. MLTA provides a consistent level of coverage throughout your loan term. While it offers additional benefits, such as a death benefit for beneficiaries, the total premium cost can be significantly higher than MRTA. It is an additional monthly commitment apart from the mortgage.
You are advised to explore both options with banks and insurance companies to identify the most suitable mortgage insurance solution for your unique needs.
In Malaysia, the maximum loan tenure is 35 years or up to the age of 70, whichever is earlier.
On average, expect the process to take anywhere from 3 to 4 months, potentially longer if consent is required from the authority. The attached timeline breaks down the key stages and average durations for your reference.
Disclaimer: The information provided in this guide is intended for general informational purposes only. It is not intended to serve as legal or professional advice. Please consult with appropriate professionals, such as lawyers or financial advisors, for any specific circumstances or concerns. We disclaim any liability for actions taken or not taken based on the information provided herein.