BY Roznah Abdul Jabbar
For most Malaysians, the first factor to consider in property buying is the price. For the uninitiated, there is only one thing to look at – the monthly instalment for the home loan. As long as you can commit to that amount, you should be fine, right? WRONG!
Next to the price tag, buyers often overlook the hidden costs which are applicable before, during and after saying yes to the sales agent.
First of all, the down payment you have saved up for is just part of the cost. The harsh reality is that buying a home isn’t as easy as simple as that. In fact, the deposit is the easy part. The challenge is making sure you have enough cash to pay for all the other unstated costs.
Listed here are ten items you should be prepared to fork out for before signing on the dotted line.
Legal fees and stamp duty
There are two types of agreements which will involve these costs – sale and purchase agreement (SPA) and loan agreement (LA). Legal fees are calculated based on the property purchase price, with a minimum of 1 per cent for the first RM150,000. Stamp duty charges for SPA start at 1 per cent for the first RM100,000, while fixed at 0.5 per cent for LA.
Under Budget 2015, for first time homebuyers, there will be a 50 per cent stamp duty discount for residential property purchases worth RM500,000 and below.
This is charged when formal valuations are required, usually by the bank. Fees start at 0.25 per cent for the first RM100,000.
Real estate agent’s fee
This cost will depend on the situation. Usually, the fee will be borne by the seller (for secondary homes) or developer, but, may be charged to buyers in several instances. The amount varies from 2 per cent to 3 per cent of the purchase price.
Assessment tax and quit rent
Property assessment tax or cukai pintu, is imposed by local authorities on every household to finance the construction and maintenance of public infrastructure, cleaning services and upgrading works in the area under its jurisdiction.
The tax is calculated based on the (estimated) annual rental value of a property (what the property can be reasonably rented for, multiplied by 12 months), and then multiplied by a set of rates. This set of rates is determined by local authorities, generally at a rate of 4 per cent for residential units and 10 per cent for commercial property.
The annual rental value of a property varies according to factors such as market rate, location and condition of the property.
Quit rent or cukai tanah is a form of land tax collected by state governments and is imposed on owners of freehold or leased land.
The National Land Code makes it compulsory for all landowners to pay quit rent, typically on or before May 31. It is to be paid once a year to the relevant land office.
The amount of quit rent you need to pay varies from state to state and even within each state. In Kuala Lumpur, the chargeable rate for quit rent is about RM0.035 psf per annum (the rate may differ for different locations). This is the highest income contributor to the Kuala Lumpur City Council (DBKL).
There are two types of insurance involved for home owners – home insurance and mortgage insurance.
Home insurance, which is aimed to provide coverage for a homeowner from damages caused by theft, natural disasters, accidents, vandalism and other incidents, come in three main types – homeowners fire insurance policy, which covers the loss or damages to property building and contents caused by fire, lightning and explosion of gas used for domestic purposes only; homeowners insurance policy, which provides additional coverage compared to the basic fire insurance policy including loss or damage due to flood, burst pipes, theft, windstorm and earthquake; and householders insurance policy, which covers the household contents, including moveable possessions, against specific risks.
As for mortgage insurance, there are two types available – Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA).
These are basically a form of insurance for your home loan. Both offer protection for the homeowner by helping them settle their outstanding home loan in the event of illness, disability or death.
Although not mandatory, they grant you peace of mind against unforeseen circumstances.
Any cost that is there-figure or above should be taken into account and the cost for a moving company or truck to move your belongings definitely falls under this, unless all your possessions can fit into one suitcase.
Before you get to use any utilities, you need to make deposits for them. This involves services such as electricity, water, telephone, internet, cable TV and sewage treatment. Your utility cost will vary depending on location and lifestyle.
This is for strata-titled properties, where you will be required to pay monthly maintenance fees, averaging about RM0.20psf in the Klang Valley, and sinking fund.
The former covers general costs and management costs to upkeep the common areas and the facilities, while sinking fund is paid in advance for any major fixtures, fittings or repairs needed for the building, including painting of the buildings.
Repairs and upkeep
It is an unwelcome situation for buyers when a newly purchased property turns into a money pit. However, it is best to set aside savings for unexpected costs such as repairs for a damaged roof and loose tiles, removing an overgrown garden, mitigating fungal growth, pest control and others.
Landscape and garden
While having your own private garden and landscape is nice, the upkeep needs to be included in your expenses. Whether you handle the work yourself or hire a professional, you will have to pay something to keep your landscaping in check.