By Roznah Abdul Jabbar
Potential house buyers need to educate themselves so that they do not just aspire to own a home, but are also focussed on avoiding a situation where they become disappointed and “house poor”, warns The National House Buyers Association (HBA).
“Our recommendation is to encourage all potential first-time low-medium cost homebuyers to attend homeownership education programmes before they begin their search for a home or sign a purchase contract,” HBA’s secretary-general Chang Kim Loong said.
Responding to the statement from the Association of Banks in Malaysia (ABM), promoting My First Home Scheme (SRP) to home buyers, Chang said balancing the risks of homeownership policies and homeowners’ welfare is very important.
First introduced in 2011, SRP aims to aid those who aspire to own a home and the scheme allows buyers to obtain 100 per cent loan from participating banks.
Chang said that the government should not be too overzealous about promoting home ownership without first educating the public about how to assess the risk between the choice of buying and renting.
“Buying and owning a home is a riskier proposition for households compared to renting. Buyers take on enormous debts, sign multi-year loan agreements and become responsible for the cost of their homes,” Chang told Real Spaces.
He said making sure lower income households have sufficient personal financial management skills is more than a supplementary issue.
“Financiers, local authorities and communities benefit from homeowners being better informed on their rights and responsibilities as homeowners and borrowers. Support for potential home buyers and owners is crucial to the expansion of this practice,” he added.
Chang warned that foreclosures can devastate a family’s economic and social standing, leaving them poorer instead.
“To not educate yourself and learn from the mistakes of others only sets you up to be, at best, disappointed and at worst, ‘house poor’,” he reiterated.
In its statement, ABM highlighted that first time home buyers may want to consider applying for government schemes such as the SRP for assistance in their property purchase, in which 11 commercial banks and 11 Islamic financial institutions in Malaysia are actively participating.
However, ABM said that home buyers are advised to avoid obtaining more credit, which may not be sustainable in the long-term, and over-stretching themselves financially as there may also be hidden costs or charges which may not be apparent.
It noted that commercial banks have been offering housing loans to eligible applicants, considering several factors, adhering to their respective risk appetites and/or the guidelines set by the regulators.
ABM advises applicants to pay attention to few factors to improve their standing of obtaining a housing loan. These include keeping a good credit record, the ability to prove financial capability to make monthly payments, and full and accurate disclosure of all material information with regard to their financial position.
“Shop around for a financial institution as each may offer different packages, so it is important to get loan estimates from multiple lenders before making a purchasing decision,” ABM said.
It said that loan applicants should work with their financiers when making suitability and affordability assessments for any facility applied for to pave the way for more robust financial management on the part of consumers.
“Consumers are thus encouraged to shop around to find a financing package which best suits their needs. Borrowers may also want to consider getting pre-approved for a housing loan before looking at purchasing a property,” ABM advised.
On the SRP, Chang said that it is an is a good scheme to help first time house buyers to buy their dream home, as coming up with the 10 per cent down payment is one of the biggest hurdles, due to rising cost of living and various other commitments.
“The scheme, which allows buyers to buy property up to RM500,000, is also reasonable and the salary cap at RM5,000 for individual borrower and RM10,000 for joint borrower is rational as many middle income segment is within this income bracket,” he said.
Particularly, he praised the requirement for the properties under the programme to be owner-occupied as “a good move”. However, HBA urges the authorities to conduct periodic checks to ensure that this being complied with and said action should be taken against anyone breaking this rule.
“HBA further urges an additional requirement that the property cannot be resold within 10 years from vacation possession. This is to reduce speculation and to deter those who want to take abusive advantage of this scheme,” he said.