Are you looking to buy a house in the coming months? You’ll need to prepare the deposit for a house. Let’s look at how much you’ll need.
A deposit is an amount of money you pay upfronts towards the total cost whilst your bank loan covers the rest.
The more money you save for a deposit, the less you need to borrow and the less interest you pay.
In Malaysia, there are three most common ways of buying a house.
Number one, buying a sub-sale house or completed house.
A sub-sale house usually is a completed house.
A purchaser will buy a completed house from a Seller either directly from the Seller or through a medium like Property Agent.
The buyer will usually need to pay a 10% deposit and will get the balance 90% loan from a bank.
However, if the property market value is less than the Property Purchase Price, the bank might give a lower loan amount, and the Purchaser will have to top up the difference.
Therefore, before buying a house, make sure you have checked the property value with a few banks.
For a typical case, a purchaser will pay 10% for the deposit, get a loan for the balance of 90% and prepare an additional 5-7% for other costs.
The other costs are lawyer fees, stamp duty, renovation costs, etc.
Hence, the deposit that a Purchaser will need is 10% + 5-7% = 15-17% from the purchase price.
For example, if the property price is RM500,000.
The deposit requires will be RM500,000 x 15-17% = RM75,000-RM85,000
Number two, buying an auction property house.
An auction house is also typically a completed house.
Usually, a house is under auction because the existing borrower cannot make the bank loan payment. The bank inserts their right to auction away the place and recover their losses.
Typically, auction houses are sold with lower market value because no people in their correct mind bid for a way higher home than a market value.
Auction house comes with a lot of baggage such as outstanding maintenance fees, assessment fees, utility bills, poor conditions of the house, caveat by people, existing owner or tenant still living in the house, etc.
Unless you are familiar or expert in dealing with all these issues that come with an auction house, then, by all means, go ahead and bid on an auction house.
If not, stay away from it.
People who are buying an auction house needs to prepare at least 30% of the deposit.
That includes the 10% deposit, 5-7% on legal fees, stamp duty, and 15% standby for repair, renovation and any outstanding fees.
Another issue that you might be facing too is when applying for a home loan. Well, not many banks are keen to finance an auction house. Therefore you will have fewer choices.
To enter the game of buying an auction house, you will need a lot of cash.
I’m not kidding; you will have to spend more cash on the auction house, and the stress level is unbearable.
It’s pretty challenging unless you understand the games and rules of playing and know how to overcome them.
The risk is higher for an auction house, but it also has a high return. Experienced people in the industry can easily make 10-20% from purchasing an auction house.
Number three, buying an under-construction house.
Under-construction houses used to be the king in the market. People love to buy under-construction homes because the deposit is lesser, and you get a brand new house. People love that!
But, in recent years. Things have changed.
The under-construction property is still a preferable choice, but people are more careful in buying it.
The reason behind this is that developer has increased the price of the property to a higher level.
A level that even after the property is completed, property value doesn’t increase or, in the worst case, drop!
Even though they give many rebates and discounts, all the price is incorporated in the purchase price. Nowadays, people know!
But, of course, some people still prefer buying from developers because most developers offer almost zero per cent deposit.
Usually, the developer will ask the Purchaser to pay a down payment of RM5000 or any amount. And claim the balance purchase price from the Purchaser’s bank.
Then, they will come up with rebates and discounts, and in the end, the Purchaser doesn’t pay a deposit.
If you are buying an under-construction property, make sure you can service the instalment as the instalment will be higher compared to the other two purchases as you will borrow more.
In the past, I have bought a sub-sale and under-construction house. Both have pros and cons.
The deposit for a sub-sale house is at least 15-17% and, while under construction, maybe zero or a lesser amount.
I have never experienced buying an auction property, but I have handled multiple auction cases.
The deposit for an auction house is at least 30%.
The adrenalin of working on auction cases are another level. Everything requires fast and precise. It can be challenging, but you need a good lawyer.
I don’t have time to look for an auction property ( which requires much effort), and to make an auction property look good again costs money, time, and energy.
But, if you have the money, time and energy, an auction house can be a gem.
If you have any further questions, please feel free to reach us at +6012-6946746.
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