Before you start calling the property agents

2 09 2009

Before you start calling the property agents and viewing your next dream home, the first thing you must do is to set the budget. Below are some helpful way to set a realistic budget:
1) Cash in Hand
You must have more than 10% of the total property price. The amount of cash in hand must be enough to make the 10% deposit payment and for the legal fees.
2) EPF Account
As at the point of this writing, you are allowed to withdraw the money in your EPF account 2 to purchase the house.
Here is an example of the calculations on how much you can withdraw based on the salary you get monthly:-
Salary = RM 5,000
Monthly EPF Contribution
= 12% (employer) +11% (employee)
= 23%
= RM5,000 x 23 %
= RM 1,150
Amount for EPF Account 2
= 30% x Monthly EPF Contribution
= 30% RM1,150
= RM 345
There are 2 type of withdraw methods you can opt for:
Method A: Withdraw for maximum of 10% of the property price.
You can withdraw not more than 10% of the total property price with the minimum saving balance of RM500 in the EPF account 2. You only can withdraw the money with the sales and purchase agreement of the property. Upon approval, EPF will bank in the money into your personal bank account.
You can refer to the link below for the details: http://www.kwsp.gov.my/index.php?ch=p2members&pg=en_p2members_wdrawtype&ac=1850
Method B: Withdraw for monthly house loan installment.
You can withdraw your EPF savings to pay for the monthly installment as long as your Account 2 meets the minimum balance of RM500. The money will be transferred from KWSP directly into your bank.
You can refer to the link below for the details: http://www.kwsp.gov.my/index.php?ac=2197&ch=p2news&pg=en_p2news_press
You are not allowed to choose both methods above at the same time. You only can apply for the Method (a). After 3 years, you may apply for Method (b) with the minimum saving balance of RM500 in the EPF account 2.
3) Monthly Installment
As a general rule of thumb, your total monthly installment for all your existing loans, together with the loan you are applying, must not exceed 80% of your total monthly income.
Current monthly income = RM5,000
Your maximum monthly installment for your loan
= RM 5,000 x 80 %
= RM 4,000
Assume currently you have car loan with RM2,200 monthly installment. Your remaining monthly installment after you deduct with car loan:
= RM 4,000 – RM 1,200 = RM 2,800
Hence, you are only allowed to apply for a housing loan package whereby the monthly installment is not more than RM2,800.
4) Housing Loan Package
You need to survey on which bank offer the best package with the lowest interest.
You can go to this website to check on all the packages offer by the bank in Malaysia.
http://www.money3.com.my/MalaysiaFinancialTool/HomeLoan/LoanFinder.aspx?SMId=1
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