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The cost of your house, and what other costs?
Buying a home can be a wonderful experience. However, when buying a home, it is important to understand all the costs involved. The purchase price that you negotiate when buying a home is the starting point, not the final amount.
Most people might not think of the closing cost when assessing home ownership – which generally makes up about 10% to 20% of the purchase price. Based on the media sales price of RM414,469 from The Residential Price Quarterly Update Q3 2018 reported by the National Property Information Centre (Napic), you might pay between RM50,000* and RM150,000* in closing costs.
*Cost provided is just an estimate and not the actual figure. Actual cost may vary depending on situations.
Let’s look at the 6 additional costs that will add up to the property price.
- Stamp Duty
With the new Budget 2019 in place, Malaysia will now have to pay an additional 1% for properties RM1 million and above till RM2.5 million. The 2019 Stamp Duty scales are as follows:
Period: 01 January 2019 to 30 June 2019
| Stamp Duty Scale | |
| First RM100,000 | 1% |
| RM100,001 to RM500,000 | 2% |
| RM500,001 and above | 3% |
Period: 01 July 2019 to 31 December 2020
| Stamp Duty Scale | |
| First RM100,000 | 1% |
| RM100,001 to RM500,000 | 2% |
| RM500,001 to RM1,000,000 | 3% |
| RM1,000,001 to RM2,500,000 | 4% |
Unless you’re a first time home-buyer, the stamp duty exemptions are different. You can read about it here.
Legal Fees Stamp Duty
| Stamp Duty Scale | |
| Loan Amount | 0.5% |
But let’s take a look at how much the stamp duty will cost for a RM550,000 property with a 90% loan.
| Property Price RM550,000 | Stamp Duty Scale | Stamp Duty Cost |
| First RM100,000 | 1% | RM1,000 |
| RM100,001 to RM500,000 (RM400,000) | 2% | RM4,000 |
| RM500,000 to RM1 Million (RM50,000) | 3% | RM1,500 |
| Loan Amount | ||
| RM495,000 | 0.5% | RM2,475 |
| Total | RM8,975 |
The stamp duty fees for the property price will be RM8,975. However, if you are buying within the HOC 2019 period (01 January 2019 to 30 June 2019), the stamp duty will be waived (for ‘residential properties’ purchased from registered developers with HOC 2019 only). You may read more about the HOC 2019 here.
- Legal Fees
Unless you are a lawyer with your own practice or have a family member who is one, you will likely be subjected to paying a professional legal fee for the purchase of your home.
The rate for the legal fees are as follows:
| Property Price | Legal Fee Rates |
| First RM500,000 | 1.0% |
| Next RM500,000 (RM500,001 to RM1 Million) | 0.8% |
| Next RM2,000,000 (RM1,000,001 to RM3 Million) | 0.7% |
| Next RM2,000,000 (RM3,000,001 to RM5 Million) | 0.6% |
| After RM5 Million | 0.5% |
Do note that the 6% SST Government Tax and the stamp duties are not incorporated into the professional legal fees yet.
From the previous example of a RM550,000 property with 90% loan, here is what you would be subjected to.
| Property Price | Rate | Legal Fee Cost |
| First RM500,000 | 1.0% | RM5,000 |
| Next RM500,000 (RM50,000) | 0.8% | RM400 |
| Total | RM5,400 |
Again, this figure would be different for first time home buyers because the stamp duty fees will be waived until 31 December 2020.
However, depending on your negotiations, developers will sometime absorb the legal fees but not the stamp duty cost (The stamp duty for legal fees are waived (for ‘residential properties’ purchased from registered developers with HOC 2019 only during the campaign period).
- Agent Fees
Most people who have never purchased a house wouldn’t know this but the maximum amount of commission for agent fees is set at 3% of the property price by the Board of Valuers, Appraisers & Estate Agents Malaysia. However, most agents do charge less than that on a case-to-case basis. Do note that the 6% SST Government Tax might also sometimes be absorbed by the agent.
Before engaging in an agent’s service, do make sure to negotiate and confirm the agent fees before officially engaging them to represent any property transactions for you.
- Valuation Fees
A valuation fee is a fee imposed by the bank to evaluate the property before the loan to finance the property is approved. The cost will be borne by the Individual looking to secure a loan from the bank. The rate are as follows:
| First RM100,000 | 0.25% |
| Next residue up to RM2 Million | 0.2% |
- Mortgage Insurance
Since buying a home is a huge commitment and the loan repayment can take up to a maximum of 35 years, banks usually require an insurance policy in addition to the housing loan incase anything unfortunate happens to you.
The more popular options are Mortgage Reducing Term Assurance (MRTA) or the Mortgage Level Term Assurance (MLTA). MRTA is a life insurance plan with a decreasing sum assured over time. It is used as a protection for the bank in case of misfortunes that stop you from servicing the loan. MRTA offers a flexible payment and is usually paid in one lump sum.
On the other hand, MLTA offers an alternative to borrowers who are looking for a life insurance policy with a guaranteed return at the end of your loan tenure. MLTA feels more like an insurance policy with a savings return and is paid periodically over the tenure of the mortgage, on a monthly, quarterly or yearly basis.
- Renovations
This is actually a very important question that is so very often forgotten. Not knowing your furnishing and renovation costs can lead to you procrastinating on furnishing your unit. Not knowing exactly how much you need can lead to you shopping around and getting quotes from many different contractors and ID companies, because you simply have no idea what the fair market rate is. Most professionals would recommend not spending more than 10% of your home value.
- Real Property Gain Tax
This wouldn’t really matter if you are purchasing a property for yourself to last till your golden years. However, if you are looking to make a profit from your property by selling it off later, you will probably be taxed with Real Property Gain Tax (RPGT). Which is why buying a property with a goal in mind would certainly help with researching the total cost of the property beforehand which in this case includes the Real Property Gain Tax if you are looking to sell of your property for a profit.
The Budget 2019 comes with the new tax rates for RPGT is at:
| RPFT Rates | Individuals (Citizens & Permanent Residents) |
| Disposal in the 1st year | 30% |
| Disposal in the 2nd year | 30% |
| Disposal in the 3rd year | 30% |
| Disposal in the 4th year | 20% |
| Disposal in the 5th year | 15% |
| Disposal in the 6th year onwards | 5% |
There is also a 10% exemptions of the profits or RM10,000 per transaction, whichever is higher, for certain scenarios but that would be for another article.
You would also get a deduction for the allowable expenses which are any incidental costs incurred in disposing the property such as the legal fees, sales commission for agent, administrative fees and etc.
