How To Buy A House

Posted by Kris | Saturday, October 09, 2010 | | 2 comments »

Buying a house or property/condominium is one big financial commitment (for residency or rental/investment purposes) requires much thought and planning. I am writing this post based on my own personal experience for a friend who asked me what are things to lookout and do when buying a property.

Here is the checklist that i could think of right now.

1. Prepare cash..$$$$

Generally, you need to find at least 10% cash for the property you are interested so that you can proceed to sign the Sale & Purchase agreement. The deposit are hold in escrow by the lawyers and forfeit-able if you suddenly have cold feet and decided not to buy the property. The other way is true also; If a seller suddenly decided not to buy, he will be penalized also and forced to pay a sum to the disappointed buyer. I cannot remember what is the penalized fee though? Anyone knows do let me know.

The 10% deposit usually applies to secondary market sales or sub sale aka buying a second-hand house. New or yet to be developed properties may require less to encourage consumers to rush in to snap it up like hot cakes. Thus, it is very common in KL or Penang to see that a newly opened development being sold out in a single day!! Like buying

2. Find a bank to loan you the remaining 90% or less of the property's value

Well, i read from the website that is very common that a buyer might do some back-door transaction with the seller to mark-up the properties prices so that the buyer could lend more $$$ to do renovations, etc. To prevent excessive mark-up, the bank will send a independent property valuer agent(usually the fees will be borne by the bank) to judge the "real" value of the property.

So if the agent found the property value to be lower than market value, thus in theory the bank will only lend 90% of the lower value. But as of now , i have yet heard of this fact because banks want to loan you more so that they can earn more interest from you. (provided you have good credit scores)  :P

Another cost saving thing to watch out for while searching for a bank loan is to be hardworking to look around for the loan rates. Even though, in general most banks offer more or less the same packages if you look at the brochure or at their website but there is a way to get lower rates.

The answer is to seek out housing loan executives. Usually they are very very helpful to process your loan (they earn a good living on commissions), and if you ask for a lower special rate, (rates that are not advertised/official) they can give it to you pending your credit checks and also approval from their higher management. Housing loans are a very ultra competitive business among banks so these lower rates are very common "back-door" practices to avoid upsetting the other banks that belong in a specific cartel.

So remember to always ask for lower rates!!!

Once you got the offer letter of loan from the banks, you can take your sweet time to pick to sign your autograph.

3. MRTA is not compulsory by law

Mati Rumah Tetap Ada (MRTA) or in english is "if you die, you still own the house" is not compulsory by law even though you constantly getting pushed to buy it. If the banks requires some guarantee, you can always pledge your personal life insurance to the bank as collateral. This is what my insurance guru told me although I am not sure whether it is really feasible. Nevertheless, there are some banks that either force you to buy or can waive this requirement. MRTA are redeemable when you sell the property or can be transferred from an old property to a new one.

4. CTOS & CRIS (not Kris, my name)

Malaysia credit rating agency. So if you always have late payment or just pay minimum credit payment, these 2 agencies will lower your personal credit rating thus making you harder to get a loan. These agency will have information on all your previous and outstanding loans and also credit card spending behaviour. Typical a good score will enable you to loan up a higher amount. I did saw my own score and it was in the lower 30s, which means i am a good debtor. (agents were surprised to see my rating) typically the average score for any consumer is around 60.

5. Get a lawyer

The lawyer will basically do 2 agreements and it is not necessary that the same lawyer do both. The contracts are :

a) Sale & Purchase between buyer and seller (Note that buyer and seller can use the same lawyer (share costs) or each choose a different one)
b) Loan agreement between buyer and banker

Since lawyers are considered professional like engineers , their fees are non-negotiate able unless you are buddy buddy with him/her.  The bulk of payment concerning this S&P agreement is certainly regarding the stamp duties that is directly proportionate to your property prices. So don't be shocked when the lawyer demand a princely sum to do your S&P agreement, which usually includes the stamping fee.

The lawyers will perform ownership checks, ensuring the sellers are not bankrupt, all payments concerning the property are being paid to avoid you from getting the craps when the property is transferred to your name. There are also issues concerning strata titles (for condominium/apartment property) and also bumi-putera lots. (big topic here)

The lawyer fees for the loan agreement contract are also non-negotiable. The lawyer has up to 3 months to process this, as the loan offer letter is only valid for 3 months after issuance.

6. Get money out of EPF's 2nd account to pay loan principal

For virgin property buyers, the initial amount reimburse by EPF will be directly to your housing loan account. After that , you can get your money out every 6 months and you will get a cheque instead. You need to provide EPF initially with the S&P, identity card and loan account number.

7. Enjoy your new property.

Do let me know your comments and experiences of acquiring properties in Malaysia so we can share our collective knowledge to anyone out there that needs help.


  1. ChampDog // 12:45 PM  

    I think there is another like "fire insurance" that you will need to buy too...

    I think the most critical part is to watch out your spending for your house renovation. Usually people over-spend in renovation. :)

  2. Kris // 10:39 PM  

    You are correct, renovation can be up to like 10-20% of the property price, if you are not careful and did not do enough homework to find the best prices and quality in town.