By EDY SARIF edy@thestar.com.my | Oct 16, 2010
Tips for first-time house buyers
BUYING a house for the first time is like getting married. You need to be level headed, think wisely, plan well and eliminate the chances of regretting the decision later.
For first-time house buyers, scouring the market for a suitable property can be exhilarating but it can also be frustrating if you don’t find “the one” or you do but it comes with a bust-your-budget price tag.
There are a few factors to consider in the pursuit of buying your first dream house. Firstly, a prospective house buyer should ascertain how much upfront money he or she can fork out, says SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng.
“This is important. There are heavy upfront costs depending on what you buy, including transfer cost, legal fees and so forth,” she says.
Secondly, the prospective buyer needs to check with the bank on the amount of loan that can be secured based on the income level. “At the same time, try to have savings amounting to at least three to six months of loan instalments plus household expenses as reserve fund, in case of an emergency,” Chan says.
In short, if you want to buy a house, you need to figure out your affordability – how much you can afford.
A real estate agent tells StarBizWeek that the rule of thumb is that monthly loan repayments should not exceed one third of the gross monthly income.
“In assessing your repayment capability, the financial institution would also take into account your other debt repayments such as car loan, personal loan and credit cards,” he says.
He adds that the margin of financing can go as high as 95%.
“The higher the margin, the higher you will have to pay per instalment. Plus, at a given rate, a shorter tenure will require you to pay higher instalment,” he says.
He adds that after you have set your finances right, make a list of features you are looking for in a house.
“Be sure that the house you are buying is big enough to meet all your future needs, in case you have additional members in the family,” he says.
“Take good note of the area and the neighbourhood as these aspects will play a crucial role in determining the price of the house in case you want to sell it in future,” he adds.
In terms of financing, buyers have a wide array to choose from be it conventional or Islamic.
Under the conventional financing, one’s outstanding loan consists of principal plus the interest charged.
“The interest is actually the financial institution’s cost in obtaining the funds. Islamic financing works on the concept of buying and selling where the financial institution purchases the property and subsequently sells it to you above the purchase price,” says a banker.
As for the loan tenure, it can range from anything up to 30 years or until the borrower reaches the age of 65, whichever is earlier.
She also advises that it’s better to buy than to rent a home as the latter is largely expense without equity.
Furthermore, she says: “When you invest in a home, it offers the possibility for appreciation in value. At the same time, the equity becomes yours when you’re still paying off your mortgage. You even get to live in it while your investment matures.”
Still, the key determinant ought to always be keeping within the budget.
“That’s most important. It’s easy to be swayed into wanting a bigger home or a bungalow just because your friends or someone else has one. This is nice to wish for but definitely not practical if it’s way out of your budget. Be realistic,” the banker says.
Ask on the “right” timing to buy a house, she says there is no “right” time to buy or sell anymore.
“If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes do not usually occur fast enough to make that much difference in price and a good home will not stay on the market long,” she says.
Other News:
Is there a property bubble? As prices of properties climb, there is a problem of affordability.
Here is a problem faced by a first time buyer.
Oct 21, 2010
Q&A: Should we buy now or should we just wait?
Dear Azizi Ali,
I have recently just got married and wish to start a family by buying our first property. As you know, housing prices in Klang Valley are rocket high. Even if both my husband and I can afford to down for a new house or second hand, the monthly instalments will take up a big portion of our net disposable income (which puts a strain on us). We are now looking at an area known as Bukit Subang (next to Denai Alam). The price is half of Denai's (same size). We want a house that will have reasonable appreciation as a form of future investment and for current purpose, for own stay.
However, we are receiving opinions that we should delay the purchase as the property bubble may burst. Reason being, that a lot of executives whose monthly salary is in the region of RM5,000 to RM6,000 are buying houses that are worth almost a million for investment and when it’s time to start paying the instalment, defaults will begin and foreclosure will kick in. At the same time, supply is more than genuine demand (i.e. investor demand is more than genuine purchase).
Do you think we should buy in that area? Should we buy now or should we just wait? If we do buy, do you think that it is wise to stretch ourselves (i.e. instead of buying Bukit Subang, we buy in Denai Alam?)
Advice and opinions are appreciated.
Regards,
Aquila
http://www.starproperty.my/PropertyGuide/Finance/7698/0/0
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