Entry Costs of Buying a Property
When we talk about buying a property, the first cost that comes to mind is always the initial down payment. But is that all? Aside from the down payment, there are other entry costs such as legal fees, stamp duty, valuation fees and real estate agent’s fee which are equally important, but usually neglected.
Here, we unveil to you the possible costs which you may incur when buying a property.
1. Down payment
10% of the total purchase price OR the difference between the loan amount and the purchase price
10% of the total purchase price OR the difference between the loan amount and the purchase price
2. Costs related to S&P Agreement (Legal Fees + Stamp Duty)a. Legal Fees
Purchase Price Charge
First 150,000 1.000% (subject to a minimum fee of RM300)
Next 850,000 0.700%
Next 2,000,000 0.600%
Next 2,000,000 0.500%
Next 2,500,000 0.400%
Thereafter 0.300%
First 150,000 1.000% (subject to a minimum fee of RM300)
Next 850,000 0.700%
Next 2,000,000 0.600%
Next 2,000,000 0.500%
Next 2,500,000 0.400%
Thereafter 0.300%
b. Stamp Duty or Memorandum Of Transfer
Purchase Price Charge
First RM100,000 1.000%
Next RM400,000 2.000%
Thereafter 3,000%
Note: As part of the Malaysian government's efforts to reduce the cost of ownership for first time home buyers, until 31 Dec 2014, for first time home buyers, there will be a 50% stamp duty discount on the instrument of transfer agreements and loan agreements for residential property purchases worth RM400,000 and below.
First RM100,000 1.000%
Next RM400,000 2.000%
Thereafter 3,000%
Note: As part of the Malaysian government's efforts to reduce the cost of ownership for first time home buyers, until 31 Dec 2014, for first time home buyers, there will be a 50% stamp duty discount on the instrument of transfer agreements and loan agreements for residential property purchases worth RM400,000 and below.
*Update: The new limit entitlement for the 50% stamp duty exemption is now for properties RM500,000 and below in accordance to Budget 2015. This will take effect starting 1st January 2015
3. Costs related to Loan Agreement (Legal Fees + Stamp Duty)a. Loan Legal Fees
The legal fee percentage and structure for loan agreement is similar to S&P legal fee structure. However, it will be based on the loan amount (unlike S&P that is based on the purchase price).
b. Stamp Duty / Loan Agreement
Loan Amount Charge
Any Amount 0.500%
Any Amount 0.500%
4. Valuation Fees (Where formal valuations are required)Valuation Charge
First RM100,000 0.250%
Next RM 1,900,000 0.200%
Next RM5,000,000 0.167%
Next RM 8,000,000 0.125%
Next RM35,000,000 0.100%
First RM100,000 0.250%
Next RM 1,900,000 0.200%
Next RM5,000,000 0.167%
Next RM 8,000,000 0.125%
Next RM35,000,000 0.100%
5. Real Estate Agent’s Fee (Usually paid by the seller but may be charged to buyer instead)Purchase Price Charge
Any Amount 3.000%
Any Amount 3.000%
Conclusion
There are people who make the mistake of underestimating the affordability before they make a purchase of a property. In most cases, it is the lack of knowledge regarding the hidden entry costs that causes complications.
There are people who make the mistake of underestimating the affordability before they make a purchase of a property. In most cases, it is the lack of knowledge regarding the hidden entry costs that causes complications.
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