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Buying a property is one of the more exhilarating purchases you’ll make in your lifetime.

 

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. 

 

However, a property is a significant financial commitment. So, how do you decide which property to get? These 7 questions can help you decide: 

What is a suitable property price range for my income? 

You’ve found a potential property and 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 or financing amount that the bank will be approve. One way to find out is by checking the amount of loan/financing that other buyers of similar income/salary received. 

 

Assuming your loan/financing term is for 35 years with an interest rate/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

 

Another method to determine your affordability is the 3-3-5 rule. It’s an advisable 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.

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.

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

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. 

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 2022:

 

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. 

What are the current housing loan interest/housing financing profit rates?

 

The interest/profit rates in Malaysia are often calculated based on a Standardised Base Rate (SBR) set by banks as the minimum rate. Take advantage of the current interest/profit environment that offers a low base rate of 2.50%!

 

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.

 

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.

#Financial Advice #Investment Plans #Investment Risk

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