Here are three questions to ask yourself before you decide to take the plunge and purchase a residential property.
Buying a house is no small matter. It wouldn’t be ridiculous to say that it may be one of the biggest decisions you will ever make in your life. Society is riddled with tales of people who made a bad decision of buying a home when they were not actually prepared to and then regretting their decision rather quickly.
There are many things to consider when purchasing your home – the price, the unit size, the location, freehold or leasehold, and a host of other questions. However, before you even get to a point where you need to consider these things, you need to determine if you are fundamentally ready to purchase your first home.
1. Why are you thinking of buying a home?
There are many reasons why someone would want to buy a home. Having a sense of stability and security is one of the main reasons, whether from a financial or locale standpoint. Although buying a property is commonly viewed as a rite of passage for young adults, you certainly shouldn’t be making this move just ‘because everyone around me is doing so’.
Different people are at different stages of their life at any given time. Your friend may feel that they are ready to buy and afford a home, but you may not be. It’s okay. Take your time, find a nice place to rent and bide your time until you actually need or are ready to own one. Or you could take advantage of the Rent-t0-own (RTO) scheme recently announced during Budget 2020 – this housing scheme is targeted for first-time homebuyers who find it difficult to come up with the initial 10% downpayment.
2. Can you afford it?
The big kahuna of questions – can you in actual fact afford it all? It’s not just a matter of calculating your mortgage against your salary. There will be ad hoc costs that you would have to assume, like repair works and assessments. If you are barely making rent or have to live somewhat hand-to-mouth at the moment, then we can safely say that you are not ready to purchase a house. But there are a host of other people who are a little on the line and may feel they might just be able to afford it.
A home loan, or more importantly, the ability to get one, forms one of the key components that will affect your decision to purchase a home. The process used to be complicated and clunky – basically involving your having to call, set appointment and meet various loan agents across the different banks, waiting for their responses and then comparing the offers before deciding on one.
And after all that, it’s not 100% certain that you will be guaranteed a loan. While the country’s household debt may have decreased to 83% last year from 84.3% in 2017, banks continue to be cautious and prudent when dishing out loans. Many home buyers are turned off by how complicated and time-consuming the loan application process is. In the past, this entire process could possibly take months to complete.
If your house search is inhibited by the daunting prospect of securing a home loan through such a lengthy process, then our LoanCare tool which helps you compare home loans across 17 banks in Malaysia, may just be the tool you need to get things moving.
The best part of this tool is that it’s really easy to use. Results can be obtained in three easy steps – Just fill in the required details, review the results and make your choice.
LoanCare uses a Debt Service Ratio (DSR) method to compare your loan eligibility across multiple banks, which will help determine you determine the property price range that you should be looking at in the first place too.
The tool will compute your current DSR (not inclusive of the future home loan obligation) – Typically banks would not want an applicant’s DSR to exceed 65-70% when the property’s monthly instalment is taken into account.
Here is a snippet of how the report you receive will look like:
You now will have a better idea of which bank(s) to approach when buying your new property, thus increasing your chances of getting your home loan approved the first time round.
3. Do you have a target property or area in mind?
It’s fine if you grew up living in a particular area and are completely wedded to the idea of living there, but what if you’re not? What if you’ve relocated from out of town to work in a city like KL? Have you considered where you would like to live? This is important because your search becomes a lot easier and more efficient if you know which targeted area to search within.
Things that usually inform decisions on location include proximity to family home, distance to the office and maybe the general locale of your social life and your friends.
Or on a separate note, have you considered if you would like to purchase a landed house or a condominium?
Depending on what you want, how resolute you are on the criteria and what you can afford – these three factors (questions) would help you decide if you should continue renting or start shopping for a home. If it is the latter, answering these questions will not only make you more confident as a buyer but enables for a more efficient process when engaging with a real estate negotiator once you are ready to transact too.
For a detailed guide on how to buy a house in Malaysia, read this next: How to buy a house in Malaysia in 12 steps
Edited by Reena Kaur Bhatt