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Saturday, April 12, 2014

Financially Ready to Buy a Property?


Before I buy a property, I thought it was always about looking at the property price, prepared the 10% downpayment, get a bank loan and job's done....but what happened over the last 3 months plus has given me a new understanding on what it really takes to buy a property.

OWNING A HOME?


First of all, knowledge is important, and one really need to check the details to ensure that they are financially ready to buy a property. It can be an ultimate dream to own a home, but with escalating real estate prices and the burden of lengthy loan repayment periods of about 30 to 35 years, buying and financing a property is not just about "I love it!". Here are some of the things that I believe is important for us to consider whether we are financially ready to buy a property.

UPFRONT COSTS...CAN YOU BEAR IT?

In Malaysia, most of the banks are going to offer up to 90% of the property's price for your first two residential properties. If you are taking 90%, make sure that the 10% of the property price is not a problem for you. Say for example, you're targeting a condominium in Puchong at about RM400,000, you must have a minimum of RM40,000 to pay upfront, be it from your savings or money from your parents or sibings. However you do it, you must make sure the RM40k is there. (Take note that the 10% is based on the property price. There are cases where your bank might value the property at a lower price than your purchase price. In that case, you must pay more than 10%)

EXTRA CASH FOR OTHER FEES & CHARGES

Most first time home buyers will not realize this. Buying and financing a home is more than just paying the deposit and loan...it also involves other other fees and charges...
Here are some of those that you might have to consider. The amount is based on the average of the industry. The actual amount might differ but this can be a good guide for you to follow.
  1. Stamp Duty - for transfer of ownership title, also known as memorandum of transfer (MOT). 1% for the first RM100,000; 2% for the subsequent RM400,000; 3% for the subsequent amount.
  2. Sales & Purchase Legal Fees (SPA) - 1% for the first RM150,000; 0.7% for the remaining value of a property within 1 million.
  3. Stamping for SPA - less than RM100.
  4. SPA Legal Disbursement Fees - a few hundred Ringgit
  5. Loan Facility Agreement Legal Fees - 1% for the first RM150,000; 0.7% of remaining value of a property within 1 million.
  6. Stamp Duty for Loan - 0.5% of loan amount
  7. Loan Facility Agreement Disbursement Fees - a few hundred Ringgit
  8. Fee for transfer of Ownership Title - a few hundred Ringgit
  9. Mortgage Reducing Term Insurance - basically, this is similar to how a life insurance works, but for your property. About RM1000. If you are close to the bankers, you may try to ask them to waive this for you.
  10. Government Tax on Agreement - 6% of Total Lawyer Fees
  11. Bank processing fee for loan - Approximately RM200
It is important to ensure that you are able to settle all these when you plan to buy a property.

It will probably take you about RM20,000 plus should you decide to buy a property of about RM400k. 

READY FOR MONTHLY INSTALLMENT?

Well, this is pretty straightforward, but it's also important that you make sure you can bear the monthly installment. 

If you are taking the current rate of about 4.2% to 4.4% pa for a standard home loan, you probably have to fork out about RM1,700 for monthly installment (for a condo of about RM400,000). If you want to count the monthly installment, you could easily find the calculator online from iproperty, propwall and many other websites. You could also download an excel calculator on your own as well. 

As most financial experts would suggest...allocating not more than 1/3 of your income to pay off your home loan. This means you need to have about RM5000 plus in order to buy a home of about RM400,000. 

Make sure you do the maths and ensure that your monthly installment can be covered. 

OTHER THINGS TO CONSIDER

A) INCREASE IN EXPENSES FROM OWNING A HOME

Besides all of those that I have mentioned, you must also consider the expenses that will increase from owning a home...your maintenance fees, utility bills, broadband etc will also go up. It is important to take note of that. It is likely to increase your expenses of up to RM300 to RM400 a month.

B) IS RENOVATION REQUIRED?

If you are buying from a subsale, you must also consider this...is renovation required...recent survey helped me find that a simple renovation on a condo would probably take up to RM30,000. So, if there is a need for renovation and repair of the property, you must also take this into account. 


Well, if you are keen on buying a property, make sure that you are prepared to handle it...buying a home is a great pleasure but one must ensure that this dream will not cause distress to your cash flow. Hope that this help those who want to buy a property get an estimate of their financial capability to buy a Property.

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Monday, March 31, 2014

Malaysia Income Tax Guide - Tax Reliefs


So, it's the time of the year again - the income tax season. For those who has already getting their salary deduction monthly through the PCB or Scheduler Tax Deduction (STD), this is the time where you can claim back what you have paid in advance to the government.

The purpose I am writing this blog post is to remind as many as possible to do the income tax filing as soon as possible; reason being, you will get your income tax refund faster and you will get the peace of mind of having something done before the deadline. There is still another 30 days to go before the deadline, so some might still been struggling to find or get receipts to prove their tax reliefs claim, but in my opinion, for those who are having taxable income in the middle of one tax bracket, those reliefs won't really affect much - unless the deduction brings you to a lower tax bracket.

What is tax reliefs? It is defined as “an amount that can be deducted from a person’s annual income to reduce the amount on which tax is paid”. To describe it in a more clear and concise manner, it is actually a way for you to lessen your chargeable income.


For example, you take home a annual paycheck of RM40,000 from your company in 2013 and if there were no tax exemptions or reliefs, your chargeable income will remain the same and your tax for the year would have been in the 11% bracket; but because every residents get up to RM9,000 tax relief your chargeable income will now be RM31,000 and tax at 6% bracket.


The following are the reliefs available for Malaysians:-
* Removed:- RM500 for broadband


Tax reliefs
Max amount (RM)
Self and Dependent
9,000
Life insurance and EPF
6,000
Husband/Wife/Alimony Payments
3,000
Ordinary Child relief (per child)
1,000
Interest expended in 2013 to finance purchase of residential property dated 2010 (but interest payments starting in 2011 only)
10,000
Net saving in SSPN's scheme
6,000
Education Fees (Individual)
5,000
Updated: PRS Voluntary Contribution
3,000
Purchase of personal computer (every 3 years)
3,000
Insurance premium for education or medical benefit
3,000
Special relief for tax payers earning an income of up to RM8,000 a month (RM96,000 annually). Only applicable for the 2013 year of assessment.
2,000
Purchase of books, journals, magazines and publications
1,000
Complete medical examination
500
Purchase of sport equipment for sport activities
300
Disabled Individual
6,000
Basic supporting equipment (for disabled self, spouse, child or parent)
5,000
Medical expenses for serious diseases
5,000
Disabled child 
5,000
Medical expenses for parents
5,000
Child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in Higher Education Institute that is accredited by related Government authorities
4,000
Disabled Wife / Husband
3,500
Child age 18 years old and above, not married and receiving full-time tertiary education
1,000
Premium on new annuity scheme or additional premium paid on existing annuity scheme commencing payment from 01/01/2010 (amount exceeding RM1,000 can be claimed together with life insurance premium)
1,000

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