May Peace be Upon You
Last year I decided to bought an apartment just for the sake of investment because I thought it is a good way to discipline myself from over spending my salary. I want to train myself to keep on saving as much as I can while I am being young and when I reach my 50's, I want the money do the work for me while I am sitting at home play with kids or go travel around the world making new friends. Finally, I managed to get one but my saving account was not big enough to pay for the down payment. So, I borrow some money from my parents and pay the money to the developer. Due to my lack of knowledge, I thought my job is done once I paid the down payment but actually it is only the beginning of my nightmare.
The first mistake that I did is just blindly follow what other people told me. The first thing that I should is gather as much as I can the knowledge about the step in purchasing a house and applying loan. Other than that I need to know the hidden charges that I may need to pay to proceed with my purchasing.
Second, I have not prepare enough money to pay all the items related to my purchase. My saving account money was not big enough to cover 20% of the house value. Lastly, I need to know my limitation in applying loan based on my paycheck and must have good financial history.
For those of you who wanted to buy a house no matter it is just a terrace, semi-detach or bungalow, here are the things you need to know, things you need to prepare, and lastly things you need to do in order to successfully bought a house without feeling regret at the end of the day.
Let's take an example where the House price is RM 200,000.00
Things you need to know:
1. Which bank give you the lowest interest rate.
- The higher the interest rate means that the amount you need to pay to the bank each month will become bigger which make you lose more than pay to other bank who has lower interest.
2. What are the hidden fees that you need to pay
- There are 2 items that are compulsory for you to pay which are The Sales and Purchase Agreement Cost (stamp duty and legal fees) and Loan Documentation Cost. Total of this cost is about 4% of house value. So, 4% of house value is RM 8000.00
- Another compulsory item to pay is to the Valuator. This brings about 0.3% of the house value
- Another fee is depend on the developer which is the Real Estate agent fee which brings about 3% of house value
So, if I accumulate all the hidden fee that you need to pay, maximum it could be is about 10% of the house value that you need to prepare beforehand.
3. The amount of loan you can easily get.
- You can get this info by going to the respective bank that you are interested or you can just search google about this.
4. How much money you are willing to sacrifice each month to pay the loan.
- Let say you are willing to pay RM 1000 each month, then you can use this calculation,
RM 1000 x 200 = RM 200,000
which mean you can bought any house that has value lower than RM 200,000.
Things you need to prepare:
1. Your saving account must have enough for you to pay the down payment and also another extra 10% of the house value. This money is for you to pay the hidden charge. If your loan is approved at 85%, then the amount of money in your saving account must be at minimum 25% of the house value where 15% will be used for down payment and another 10% is for all the hidden fees.
2. Time. This is important because you may need to go back and forth either to the bank or to the developer or to the lawyer's office to sign the paperwork.
Things you need to do:
1. Compare the interest rate for each bank that you plan on applying for a loan.
2. Make sure your loan is approve first before you pay the down payment. This is biggest mistake I did was I pay the down payment first and apply for the loan later. This is actually the biggest risk that you should not do because if you did not mange to get a loan in no matter what condition, then the down payment money that you paid to the developer will be a waste.
3. Ask yourself whether you really want to buy that property or not. If you feel halfhearted and lack of confidence, then DO NOT PROCEED with the purchase because later, you are the one who need to pay the consequence not anyone else.
That's all for this entry, I hope you can apply this to your real life especially to those who are trying to buy a house for their first property. Please remember to gain knowledge first, and do not listen to others. The only person you can trust is yourself.
