Malaysia's property market is overgrowing, making it an attractive investment opportunity for many buyers. However, like any real estate investment, there are risks involved. Whether you're a first-time buyer or a seasoned investor, it's essential to be aware of the common mistakes that can be made when buying property in Malaysia. This article will discuss five common mistakes to avoid when buying property in Malaysia.
1. Failing to Conduct Proper Research
One of the most common mistakes that buyers make is failing to conduct proper research before making a purchase. It's important to research the area you're interested in, the property's value, and any potential issues with the property before making an offer. Failing to do so could result in overpaying for or buying a property with hidden issues. Consider all the information you've gathered and weigh the pros and cons of each property carefully. Here are some key steps to follow when conducting research before making a property purchase:
- Determine Your Budget: Determine your budget will help you focus your research on properties within your price range. Consider all the costs involved in a property purchase, including down payment, closing, and ongoing maintenance costs.
- Choose a Location: Consider the location carefully when researching a property purchase. This includes the neighbourhood, nearby amenities, and proximity to work and schools. Look at factors such as crime rates, property values, and future development plans in the area.
- Research Property Listings: There are various property listing websites such as Iproperty and Property Guru that you can use to conduct your research. These sites typically provide information on properties for sale, including pricing, photos, and descriptions. Look for properties that fit your budget and location preferences, and take note of any that seem promising.
2. Not Understanding the Financing Options
Financing is a critical part of any real estate purchase, and buyers must understand the financing options available in Malaysia. A common mistake is failing to explore all financing options and choosing the wrong package. It is essential to compare the interest rates, payment terms, fees and eligibility criteria of different options. It is also important to calculate the loan's affordability and ensure that the monthly repayments fit within your budget. There are several financing options available when it comes to purchasing a property, including:
- Home loans from banks or financial institutions: This is the most common way to finance a property purchase. Banks and financial institutions offer home loans with flexible payment terms and interest rates. Home loans typically require a down payment of 10% to 20% of the property value.
- Developer financing: Some property developers offer financing options for their projects, such as instalment plans, deferred payment plans, or financing with low-interest rates. This option is usually available for new projects and may have specific terms and conditions.
- EPF withdrawal: If you are an eligible member of the Employees Provident Fund (EPF), you can withdraw funds from your account to finance a property's down payment or purchase price. The amount you can withdraw depends on your savings in the account and other factors.
- Personal loan: You can also consider taking a personal loan from a bank or financial institution to finance your property purchase. However, personal loans usually have higher interest rates than home loans.
- Mortgage loan from insurance companies: Some insurance companies also offer mortgage loans for property purchases. These loans may have different terms and conditions than home loans from banks.
3. Neglecting to Hire a Professional
Many buyers try to save money by handling everything themselves, but this is a mistake. Hiring professionals such as real estate agents, lawyers, or property inspector is essential to help ensure a smooth and successful transaction. These professionals can help you navigate the legal and financial aspects of buying property in Malaysia.
- Attend Open Houses: Attending open houses is a great way to understand the property and its potential better. You'll be able to see the property firsthand, assess its condition, and ask questions of the seller or agent.
- Hire a Professional: Consider hiring a real estate agent to help you with your research. A good agent will be familiar with the local market and can provide valuable insights into the properties you're considering. They can also help you negotiate the purchase and navigate the legal and financial aspects of the transaction.
4. Ignoring Additional Costs
It's essential to consider the additional costs that come with buying property in Malaysia. These include stamp duty, legal fees, renovation costs, and property management fees. Buyers must factor in these costs to avoid overextending themselves financially. There are several additional or upfront costs associated with buying a property in Malaysia. These costs can vary depending on the type of property, its location, and other factors but generally include the following:
- Down payment: The down payment is the initial amount you pay towards the property's purchase price. This is typically a percentage of the property value and is paid upfront at the time of signing the Sale and Purchase Agreement.
- Legal fees: Legal fees include the cost of engaging a lawyer to handle the legal aspects of the property purchase. This consists of preparing the Sale and Purchase Agreement, transfer of ownership, and other legal matters. The cost of legal fees varies depending on the property value and the complexity of the transaction.
- Stamp duty: Stamp duty is a tax paid to the government for the transfer of property ownership. The amount of stamp duty depends on the property value and is usually a percentage of the purchase price.
- Valuation fees: Valuation fees are charged by a professional valuer to assess the property's market value. This is usually required by the bank when applying for a home loan.
- Processing fees: Processing fees are charged by the bank for processing the home loan application. This includes the cost of credit checks, property inspection, and other administrative expenses.
- Insurance fees: Insurance fees include the cost of fire insurance and mortgage reducing term assurance (MRTA), which are typically required by the bank when applying for a home loan.
- Maintenance and sinking fund: Maintenance and sinking funds are payments made to the management corporation for the maintenance and upkeep of the common areas and facilities in the development.
It is important to consider these additional or upfront costs when budgeting for a property purchase in Malaysia. These costs can add up to a significant amount and may impact your affordability and loan eligibility.
5. Failing to Check Loan Eligibility and Credit Reports
If you're planning to apply for a home loan in Malaysia, checking your loan eligibility and credit reports beforehand can help you understand your borrowing capacity and improve your chances of being approved for a loan. Here are some steps to follow when checking your loan eligibility and credit reports in Malaysia:
- Calculate Your Loan Eligibility: The first step is calculating your loan eligibility. You can use an online home loan eligibility calculator or speak with a bank representative to determine how much you can borrow. This will help you understand your borrowing capacity and give you an idea of the type of property you can afford.
- Obtain Your Credit Reports: You can obtain credit reports from Credit Reporting Agency Malaysia (CTOS) or Credit Bureau Malaysia (CBM). These reports will give you an idea of your creditworthiness and help you identify any potential issues that may need to be addressed before you apply for a home loan.
- Review Your Credit Reports: Review your credit reports carefully and check for errors, discrepancies, or inaccuracies. These can include incorrect personal information, outdated account information, or inaccurate credit scores. If you find any errors, you should dispute them with the credit bureau and have them corrected before you apply for a home loan.
- Improve Your Credit Score: If your credit score is lower than you'd like, you can take steps to improve it. This can include paying down debt, making timely payments, and reducing your credit utilization ratio. Improving your credit score can increase your chances of being approved for a home loan and help you secure a lower interest rate.
Conclusion
Buying property in Malaysia can be a significant investment, but it's essential to avoid the common mistakes that can be made. Conducting proper research, understanding financing options, hiring professionals, considering additional costs, and negotiating are critical to a successful real estate transaction. You can make an intelligent investment in the Malaysian property market by avoiding these common mistakes.
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About Author
Fatiha
Fatiha is a freelance content writer specializing in commercial writing, loves travel, and enjoys walking on the beach.