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Buying a property is one of the more exhilarating purchases you’ll make in your lifetime. With proper planning, it can provide many great advantages and opportunities too! Apart from having a home to call your own, owning a property will increase your overall net worth, and can give you added income in your retirement years. 

 

But getting a house is also expensive and can be the most significant financial commitment you may ever make. So before the excitement of owning your first home takes over, it’s important that you purchase the right home that is suitable for your needs, budget and life circumstances.

 

Failing to do so may end up costing you a financial commitment that you can’t get out of easily. To ensure that you make the best possible decision, here are 8 financial questions to ask yourself before purchasing your first home. 

Question 1: What is a suitable property price range for my income? 

You’ve found your dream home and probably wondering if you can afford it?

 

It all depends on your income and monthly commitments. Yes, your income plays a big role in determining the home loan/financing amount that will be approved by the bank. A good indication of the property price that is suitable for your income range would be the amount of loan/financing people of your salary get.

 

Assuming your loan/financing term is for 35 years with an interest/profit rate of 4% and the percentage of income spent on the loan/financing is 50%, these would be your house affordability and the maximum loan/financing amounts for a range of income bands. Also, keep in mind that you may receive a home loan/financing up to a maximum of 90% of the property value. 

 

Single/Household 

Annual Income (RM) 

Maximum Loan/Financing  (RM) Property Value (RM) 
30,000  180,679 200,000
40,000 255,886 285,000
50,000 331,320 370,000
100,000 707,583 785,000

 

One method to determine your affordability is the 3-3-5 rule. It’s an advisable but not mandatory guideline that you can take into consideration before purchasing your first property.

 

The rules are:

 

3 — You should have a capital of at least 30% of the property’s asking price.

3 — You should not spend more than ⅓ of your monthly wages on your monthly mortgage repayment.

5 — The price tag of the property should not be more than 5 times your annual income.

 

You can also easily calculate the suitable property price based on your income using CIMB Property Affordability Calculator.

Question 2: Can I afford my monthly mortgage payment? 

However, income alone is not an indicator of your loan/financing affordability. Another key factor that influences your monthly mortgage affordability is your Debt-to-Service Ratio (DSR). This calculates the amount of your income that is used to service your financial obligations and the remaining amount of income after paying off your expenses.

 

A general rule of thumb to follow is that your Debt-to-Service Ratio should not exceed 70% of your income. But do note, that each bank will have its respective set of requirements.

 

To find out your DSR, use the formula below:

 

Debt or Expenses     X      100    = DSR

Net Income

 

Remember that your debt includes all of your existing loan/financing payments, fixed monthly expenses and the monthly mortgage of the home you are interested in purchasing. Get an estimated value of your monthly mortgage with the CIMB Property Monthly Instalment Calculator.

 

CIMB FlexiOwn

 

CIMB’s FlexiOwn can help you to enjoy lower monthly instalments compared to normal monthly home loan/financing. With CIMB FlexiOwn, your monthly instalment for the first 5 years is reduced by up to 10%. This gives you the freedom to truly choose the house that you want and ultimately enables you to own the home of your dreams! 

 

For more information, click here.

Question 3: Do I have enough saved for the downpayment and other upfront costs? 

Most Malaysian banks offer loan/financing of up to 90% of the property’s price. Hence, your downpayment would be the remaining 10% of your loan/financing. For example, if your property of choice is priced at RM500,000, the downpayment of 10% would cost RM50,000.

 

Apart from the downpayment cost, you should also be aware of various additional charges that often go unnoticed. These miscellaneous fees can include:

 

  • Stamp Duty for Transfer of Ownership Title
  • Sale and Purchase Agreement Fee
  • Loan/Financing Agreement Legal Fees
  • Other Government-Related Taxes
  • Bank Processing Fees

 

CIMB Zero Moving Cost Campaign

 

However, some home loans/financing can help you with these costs, such as CIMB’s Zero Moving Cost campaign. The CIMB Zero Moving Cost home financing package reduces your upfront cost by absorbing the stamp duty, legal and valuation fees. This makes it easier for you to settle into your new home!

 

For more information, click here.

 

Home Ownership Campaign

 

Another way that can help ease the cost off you is the Home Ownership Campaign (HOC).  An initiative by the government, HOC was developed to support homebuyers looking to purchase properties while encouraging the sale of unsold properties around Malaysia. Amazing benefits of HOC include full stamp duty exemption of up to RM 1 million, partial stamp duty exemption up to RM 2.5 million, instruments on securing loans/financing exemption including a 10% house discount. Do note that HOC 2021 will be running until 31 May 2021. 

Question 4: Am I eligible for a home loan/financing with my current credit score? 

 

It’s important for you to remember that a good credit score is key in determining if you’re a good paymaster, which increases your chances of successfully acquiring a loan/financing.

 

Your credit score acts as your financial report card that contains your financial background such as outstanding credit, loans/financing, credit card and loan/financing application history, payment history and more. A healthy CTOS credit score ranges between 697 and 850. The higher the score, the higher your chances are of getting your home loan/financing approved. 

Question 5: What are the available type of loans/financing options for me? 

 

In Malaysia, there are many financial institutions that offer housing loans/financing that suit your needs. Here are a few options for you to consider in 2021:

 

1. Full Flexi Loan/Financing

 

A Flexi loan/financing is a type of loan/financing that provides you with the flexibility of repayment to deposit any amount, anytime. Any excess repayments will then be used to offset the principal loan/financing amount and ultimately reduce your overall interest/profit rate. Full Flexi loans/financing are usually tied to the borrowers current account which also gives you the freedom to withdraw any excess repayments that have been made. For more information on these type of loans/financing, click here

 

2. Semi-Flexi Loan/Financing

 

Similarly to full Flexi, Semi-Flexi loan/financing also offer borrowers the flexibility to pay off their home loan/financing quicker by making prepayments (subject up request) and ultimately save on interest right from the start. Apart from that, you enjoy the flexibility of paying lower monthly instalments for the first 5 years with CIMB FlexiOwn, a Semi-Flexi package offered by CIMB. To find out more, click here

 

3. Regular Term Loan/Financing

 

This would be your regular term loan/financing that follows a fixed repayment schedule until the end of the loan/financing tenure. For more information, click here

Question 6: What are the current housing loan/financing interest/profit rates in Malaysia?

 

The interest/profit rates in Malaysia are often calculated based on a Base Rate (BR) set by banks as the minimum rate. Take advantage of the current interest/profit environment that offers a low base rate of 2.75%!

 

But keep in mind, the final interest/profit offered to you may vary depending on other factors such as the type of home loan/financing (Term, Semi-Flexi, Flexi), the loan/financing tenure, margin of finance, the type of property and your credit score. For more details on this, click here.

 

Question 7: Am I financially prepared for this commitment or is it a FOMO syndrome? 

 

If you have gone through all of the above questions and done the math, the final question is to ask yourself how comfortable are you after adding it all together? It’s everyone’s dream to own a house, but it’s also important to not rush into your first home loan/financing. You should understand your financial situation and know that you’re able to confidently commit to your decision in the long run.

 

As societal pressure may overcloud your decision, try to take a step back and ask yourself if you’re ready or because you don’t want to miss out. If you’re ready - congratulations, otherwise, let’s start planning on saving for that dream home of yours!

 

This article is for informational purposes only and CIMB does not make any representation and warranty as to the accuracy, completeness and fairness of any information contained in this article. As this article is general in nature, it is not intended to address the circumstances of any particular individual or entity. You are advised to consult a financial advisor or investment professional before making any decisions based on the information contained in this article. CIMB assumes no liability for any consequences arising from your reliance on the information presented here.