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Looking To Purchase A Home All You Need To Know About Stamp Duty Charges & Other Costs Involved When Buying A House

Ah, the beauty of buying a new home! The emotion, the frustration, the enthusiasm, and the costs! This whirlwind of emotions will accompany you into your new home.  And into a lot of financial problems, if you don’t find out all there is to know about the extra costs involved when buying your house.

Some developers advertise all sorts of attractive promotions that might lead you to believe the cost of your house is smaller than it actually is. But you won’t just have to cover the down payments and the monthly instalments that follow.

You’re in for a big surprise. Read along to see those extra expenses pilling up so that you can plan your budget accordingly.

1. Stamp Duty

Costs Involved When Buying House-1

Stamp duty is the price you’ll have to pay for your property documents. You can’t avoid stamp duty whether you’re buying or transferring a property.

Stamp duty represents a percentage of the acquisition price, as follows:

  • 1% for the first RM 100,000
  • 2% for the next RM 400,000 aka anywhere between RM 100,001 and RM 500,000 for the price of your house
  • 3% for RM 500,001 – RM 1 million
  • 4% for over RM 1 million

Surprise bonus stamp duty: You need to pay for stamp duty even when you make a loan. However, the percentage is smaller here. It’s just a 0.5% flat rate of the total amount you’re borrowing.

Practical Example Time

If those percentages got you confused, let’s see an example. Let’s say your property costs RM 600,000. Here’s how you calculate stamp duty:

  • 1% for the first RM 100,000
  • 2% for the next RM 400,000 aka anywhere between RM 100,001 and RM 500,000 for the price of your house
  • 3% of the remaining RM 150,000 equals RM 4,500.
  • 0.5% of the amount you loan. Let’s say you loan 90% of the total cost of your property, aka 90% of RM 600,000, which is RM 540,000. 0.5% of RM 540,000 is RM 2.700.

Add the amounts you get at the above points and you need to pay RM 16,200 in stamp duty. Fun, yes?

Surprise Special Exemptions 

The government of Malaysia wants to look out for first-time buyers, so you may be one of the lucky ones. You can even get a stamp duty waiver! Here’s what you can expect:

Properties that cost under RM 300,000 get a complete exemption for the loan stamp duty cost and transfers if:

  • You buy the property until December 31st 2020.
  • You buy one residential property.
  • You’re a citizen of Malaysia.
  • It’s your first time buying a home.

Properties between RM 300,000 and RM 500,000 get a stamp duty exemption for the loan of RM 1,500 if:

  • You buy the property until December 31st 2020.
  • You buy one residential property.
  • You’re a citizen of Malaysia.
  • It’s your first time buying a home.

2. Legal Fees

The legal fees are the costs you’ll pay to your appointed solicitor, who’s in charge of the documents and contracts you need for buying the property.

You don’t have to hire a solicitor, but it’s the wisest move if you don’t have a legal background. It’s better to be safe than sorry.

These legal fees depend on the cost of your property:

  • 1% for the first RM 500,000
  • 0.8% for the next RM 500,000 (if your home costs between RM 500,001 and RM 1 million)
  • 0.7% for the next RM 2,000,000 (if your home costs between RM 1,000,001 and RM 3 million)
  • 0.6% for the next RM 2,000,000 (if your home costs between RM 3,000,001 and RM 5 million)
  • 0.5% thereafter (if your home costs more than RM 5 million)

Practical Example Time

Let’s get back to the previous example where your home costs RM 600,000. In this case, the legal fees cost:

  • 1% of the first RM 500,000 equals RM 5,000.
  • 0.8% of the next RM 100,000 equals RM 800.

The grand total for the legal fees is therefore RM 5,000 + RM 800 = RM 5,800.

Keep in mind that some developers may include the legal fees in the total cost of the house. However, they rarely do that with stamp duty fees.

3. Real Property Gains Tax (RPGT)

This tax refers to real property but exempts imaginary ones. Just kidding.

Real property gain tax comes into effect if and when you’re selling the house and you’re making a profit. You can choose to sell your home for a variety of reasons, such as buying a bigger home, moving to a new city because of work, or a booming market.

That’s why it’s important to learn about RPGT in advance so that you can sell your house at a good moment. This strategy saves you money in the long-term.

In 2019 and 2020, the RPGT is:

  • 30% if you’re selling your home during the first three years of owning your home.
  • 20% if you’re selling your home during the fourth year of ownership.
  • 15% if you’re selling your home during the fifth year of ownership.
  • 5% if you’re selling your home beginning your sixth year of ownership and thereafter.

Looking at these percentages is a little disappointing because the RPGT keeps growing every one or two years.

The good part is you can benefit from a 10% RPGT exemption per profits or a RM 10,000 exemption for each transaction if:

  • You’re a Malaysian citizen and you’re giving your home as a gift to:
    • A married couple
    • A parent with their kids
    • A grandparent with their grandchildren

* you cannot give your home to your siblings to get this exemption

  • You are a Malaysian Citizen or Permanent Resident who is disposing of one private residence, you can get a once-in-a-lifetime exemption for your chargeable gain

You’re also exempted from RPGT completely if you’re disposing of your property that costs under RM 200,000.

4. Agency Fees

Costs Involved When Buying House-2

Remember you’ll have to pay for your real estate agent or your property estate agent. You’ll need such an agent especially if you’re buying a house from the secondary market.

Top tip: the maximum agency fee is usually 3%. The rule of thumb of most agents is to keep their fees well under 3%. Therefore:

  • Choose your agency carefully and don’t trust someone who has a much bigger fee.
  • Be ready to employ your negotiation skills to keep this agency fee as low as possible.
  • Make sure to confirm the final fee with your agent before officially agreeing to hire them as your representative.

5. Valuation Fees

Chances are you don’t have the entire sum of money you need for purchasing your home. In this case, you’ll want to take on a housing loan or a personal loan.

However, before approving your loan, the bank or the licensed moneylender needs to appraise your property. These valuations depend on your house’s purchase price as follows:

  • 0.25% of your first RM 100,000
  • 0.2% of the next RM 1,900,000

Practical Example Time

Let’s get back to the previous example where your home costs RM 600,000. In this case, the valuation fees cost:

  • 0.25% of your first RM 100,000 equals RM 250.
  • 0.2% of the remaining RM 500,000 equals RM 1,000.

So, your valuation fees cost RM 1,250.

6. Insurance – MRTA/MLTA

Most housing loans come with the condition of getting insurance so that you can make sure the value of the property doesn’t decrease.

You have two options in terms of insurance:

Mortgage Reducing Term Assurance (MRTA):

  • It depends on your age. The older you are, the more money you have to pay.
  • It depends on the total mortgage on your house. The percentage varies between 3% and 5%.
  • It’s a popular and affordable option.
  • Your coverage decreases gradually together with what remains of your outstanding loan.
  • The loan settlement goes to the bank in case you die, not to your family.
  • It varies depending on your interest rates.
  • Best for: People who aren’t planning to sell their houses quickly; people with reduced budgets.

Mortgage Level Term Assurance (MLTA)

  • It depends on your age. The older you are, the more money you have to pay.
  • It offers loan repayment and value back when the scheme finishes.
  • Your family can benefit from the money in case of potential death or permanent disability.
  • The assured sum remains constant.
  • You can surrender the policy whenever you want.
  • It’s more expensive.

Best for: People who are planning to sell their houses soon; people who are the only breadwinners with many dependants.

7. Renovations

Costs Involved When Buying House-3

After you’ve bought your home, you might want to do some changes to it. Depending on your preferences, you might change the floors, roof, or colours.

Keep in mind that you shouldn’t spend over 10% of your house’s cost on these renovations.

Conclusion

Add the cost of the fees above and you’ll notice that they add up to about 15-40% of the total cost of your home. For our example with the RM 600,000 house, the additional costs add to RM 86,250 without renovation and an MRTA insurance. We also considered that you’re not going to sell your house during the first six years of ownership.

With that in mind, you can plan your budget better. And, if you ever need a quick loan to finance your house or additional costs, don’t forget to get in touch!

About Intime Advance Enterprise

We offer loans that are special designed with higher limit and lower interest rate to meet your needs.

Our loan solutions are designed to meet your needs and match you with the financial situation, interest rates as low as 1% per month and the repayment period are always flexible.

Send us an enquiry today and our financial consultant will arrange a flexible package to you and make sure the payment will not burden you.

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