Types of Property Taxes in Malaysia

1. Cukai Pintu (Assessment Tax)

• What It Is: This is a local tax imposed by the local municipal council for the maintenance and upkeep of public services and infrastructure such as garbage collection, street lighting, and parks.
• How It’s Calculated: The assessment tax is calculated based on the annual rental value of your property. Each local council sets its own rate, which generally ranges between 4% to 10% of the annual rental value.
• Payment Frequency: Typically paid twice a year.

For example: If your property’s estimated annual rental value is RM36,000 (RM 3,000/month), you would owe RM 1,440 in the assessment rate annually to the local council. As assessment rates are collected in 2 separate payments during the year, house owner would need to pay RM720 every 6 months.

Calculation: RM3000 x12 months = RM36,000
Tax Rate: 4% x RM36,000 = RM1,440

Types of Properties Subject to Assessment Tax or Cukai Pintu

Here is a list of property types that are subject to assessment tax:

• Residential Buildings: Includes all types of homes and housing units.
• Commercial Buildings: Covers properties used for business activities, such as offices, shops, and retail spaces.
• Industrial Buildings: Includes factories, warehouses, and other industrial facilities.
• Agricultural Land: Refers to land used for farming and agricultural activities.
• Vacant Land or Undeveloped Lots: Includes empty plots of land that have not yet been developed.

2. Cukai Tanah (Quit Rent)

• What It Is: A land tax imposed by state governments, primarily on leasehold properties.
• How It’s Calculated: The quit rent is calculated per square foot or based on the size of the land. Rates vary depending on the state and the type of property (residential, agricultural, commercial, etc.).
• Payment Frequency: Usually paid once a year.

3. Cukai Petak (Parcel Rent)

• What It Is: Parcel Rent, known as Cukai Petak, is a tax specifically levied on stratified properties, such as apartments and condominiums. This tax is imposed by the state government and is intended to cover the costs associated with the maintenance and management of common areas and facilities within the strata development. This includes expenses related to elevators, swimming pools, security services, and other shared amenities.

• How It’s Calculated: The calculation of Parcel Rent is based on the size and usage of the stratified unit. Each unit owner pays a portion of the total tax amount, which is determined by the share unit factor outlined in the property’s strata title. The share unit factor takes into account the floor area of the unit, its usage (residential, commercial, or mixed-use), and the overall value of the development. The specific rate is set by the state government and may vary depending on the location and nature of the property.

• Payment Frequency: Parcel Rent is typically paid once a year. Unit owners receive an annual bill from the state government detailing the amount due and the payment deadline. It is important for property owners to pay this tax on time to avoid penalties and ensure the continued maintenance and operation of their building’s common areas and facilities.

4. Real Property Gain Tax (RPGT)

• What It Is: RPGT is a tax on the profit gained from selling a property.
• How It’s Calculated: The rate depends on the holding period of the property. For instance, if you sell your property within three years of purchase, the RPGT rate is higher compared to selling it after five years. The rates have varied over time, so it’s important to check the current rates applicable at the time of sale.
• Payment Timing: Paid upon the sale of the property.

Check out how much of your current salary can afford a house before you decided to

Important Considerations for Homeowners

1. Tax Rates and Exemptions:
   • First-Time Homeowners: Some states offer lower rates or exemptions for first-time homeowners. It’s beneficial to check if you qualify for any tax breaks. Check out the Malaysia SJKP programme announced by Government to see how it helps.
   • Senior Citizens and Disabled Individuals: Certain councils provide exemptions or rebates for senior citizens and disabled individuals.
2. Documentation and Payment:
   • Keep Records: Ensure that you keep all tax-related documents, such as receipts and statements, safely. These are important for both current and future reference.
   • Timely Payments: Paying your taxes on time is crucial to avoid penalties. Late payments often incur fines and could lead to legal complications.
3. Consulting Professionals:
   • Seek Advice: If you’re unsure about any aspect of property taxes, it’s wise to consult with a tax advisor or real estate professional. They can provide detailed insights and help you navigate the complexities of tax obligations.
4. Understanding Local Regulations:
   • Stay Informed: Tax rates and regulations can vary significantly from one locality to another. Staying informed about local laws and any changes in tax regulations will help you stay compliant and avoid unexpected costs.

Conclusion

Understanding property taxes in Malaysia is essential for all homeowners to manage their financial responsibilities effectively. By being aware of the different types of property taxes, how they are calculated, and when they need to be paid, you can ensure that you are prepared for these expenses. Additionally, taking advantage of any exemptions or rebates and seeking professional advice when necessary can further help in managing your property-related finances smoothly. Being informed and proactive about your tax obligations will ultimately contribute to a more secure and stress-free homeownership experience.

The post Understanding Malaysia Property Taxes: What Homeowners Need to Know appeared first on HousingWatch.

To facilitate homeownership in Malaysia, various Government-assisted schemes are introduced to enable first-time house buyers and youths to purchase a home. Financial institutions in Malaysia also offer competitive products to eligible borrowers to purchase or construct a home.

Financing Advisory Services

Khidmat Nasihat Pembiayaan (MyKNP)

MyKNP is a collaborative effort between Bank Negara Malaysia, Credit Guarantee Corporation Malaysia Berhad and Agensi Kaunseling dan Pengurusan Kredit, with the support of the financial industry which aims at improving financing applicants’ experience, including providing greater understanding of the factors affecting their financing applications as well as helping in raising their eligibility for future financing.

Government Assisted Financial Schemes

Skim Jaminan Kredit Perumahan

Guarantee scheme to enable applicants above 18 years old with good repayment capability but without fixed income, to purchase their first home priced up to RM300,000.

My First Home Scheme (Skim Rumah Pertamaku)

Guarantee scheme that enables applicants below the age of 40 with monthly income of up to RM5,000 (for single) and RM10,000 (married) to purchase homes of up to RM500,000.

Update: SRP is no longer available started from 1 Apr 2023.

BSN My Home (Skim Perumahan Belia)

Financing facility to assist single or married youths between 21 to 45 years old, with income of up to RM10,000 to own their very first home.

Special Financing Scheme

PR1MA Special End Financing Scheme

Financing facility to assist applicants above 21 years old to purchase PR1MA homes with flexible loan repayment.

The post Best 5 Malaysia Home Financing Assistance Programmes 2024 appeared first on HousingWatch.

Let’s take a look on the salary range and what are the house value that you can afford

In Malaysia, individuals earning various salary levels can afford properties at corresponding prices, and this impacts the loan amounts and monthly installments they might expect. Below is a breakdown of these details:

• Individuals earning RM3,000 can afford a property priced at RM200,000. The typical loan for such a property would be around RM180,000 (90% of the property price), with a monthly installment of RM830.

• For those earning RM3,500, the affordable property price increases to RM300,000. The loan amount would then be approximately RM270,000, leading to a monthly installment of RM1,245.

• Earning RM5,000 allows for purchasing a property valued at RM400,000. The corresponding loan would be RM360,000 with monthly repayments around RM1,660.

• At a salary of RM6,000, a buyer can look towards a RM500,000 property. This setup leads to a loan of RM450,000 and monthly payments of RM2,075.

• With RM7,500 in monthly income, a buyer might consider a RM600,000 property, securing a loan of RM540,000, and managing monthly installments of RM2,490.

• An income of RM8,500 increases the purchasing power to a RM700,000 property, with a loan amount of RM630,000 and a monthly installment of RM2,904.

• RM9,500 monthly income qualifies for an RM800,000 property, attracting a RM720,000 loan and monthly installments of RM3,319.

• Individuals earning RM10,500 can afford a home costing RM900,000, which translates to a RM810,000 loan and monthly repayments of RM3,734.

• Lastly, those earning RM11,500 can aim for a property worth RM1,000,000, with a corresponding loan amount of RM900,000 and monthly installments of RM4,149.

Other Factors to Consider before Buying a House in Malaysia

When buying a house, considering the housing loan is just one part of the process. There are several other factors and expenses that you need to be aware of to ensure you are not over compromised on the expenses that could occurs. Here’s a detailed look at other crucial aspects to consider:

1. Down Payment:

   • Typically, the down payment is a significant upfront cost and is separate from the loan. It usually ranges from 10% to 20% of the SPA price, depending on the loan arrangement. However, in recent years, many of the developers in Malaysia have claim their property to be at 0% down payment, by marking up the property price. With a higher property price, the 90% loan that first-time house buyers get from bank will be enough to cover even the down payment and that’s how down payment is waive.
     However, in most of the circumstances, if you cannot afford 10% of the down payment, it most probably means that you are at high risk where if anything happens, you do not have emergency fund to support the monthly house loan instalment. Waiving of down payment can encourage many buyers to afford their first home, but at the same time, it may lead to high percentage of loan unpaid issue.

   • Now, Government has introduced different housing schemes such as Skim Jaminan Kredit Perumahan SJKP programme to help low-middle income group to buy house at 0% down payment and even 100% loan! Check out the Skim Jaminan Kredit Perumahan (SJKP) programme for more details to see if you are eligible.

2. Other Costs:

   • Every buyers should know, buying a house would incurred also other costs, not just the monthly loan instalment. Examples include appraisal fees, attorney fees, registration fees, transfer taxes, and title insurance. Closing costs can range from 2% to 5% of the property’s purchase price. Only consider to buy a house if you are financially ready.

3. Property Taxes:

   • Depending on the location, property taxes can vary significantly and can have a substantial impact on your monthly housing costs. It’s important to understand how much you will be paying annually. Some property taxes you must know is Cukai Pintu, Cukai Tanah and Cukai Petak. These are applicable to most residential.

4. Home Insurance:

   • Most bank require homeowners insurance, which covers potential damage to your property. The cost can vary based on the property value, location, and coverage amount. For most properties range from RM300-700K, the insurance could cost an extra RM100-RM200 to your monthly instalment. You can opt in to choose either MRTA or MLTA, which will be explain in another article. 

5. Maintenance and Repair Costs:

   • Owning a home means you are responsible for all maintenance and repairs. It’s wise to budget for unexpected issues, such as roof repairs, plumbing issues, or electrical problems. For condominium, the average maintenance fees monthly is around RM200-RM500, depending on the size of your units. For luxury condos or any condos that have many facilities to maintain, it can cost up to RM1000 to RM1500, just for the maintenance fees. This is not included in your mortgage loan, so your expenses would be Monthly Instalment + Monthly maintenance. Make sure that you check with the property agents or developers what are the maintenance fees rate before buying a house. 

6. Utilities:

   • Costs for electricity, water, gas, and waste disposal services are not included in your mortgage payment. New homeowners should estimate these monthly costs based on the size of the home and typical usage rates in the area.

7. Homeowners Association (HOA) Fees:

   • If the property is in a community with an HOA, monthly or annual fees may be required. These fees cover common area maintenance, and possibly amenities such as a community pool, fitness center, or security.

8. Living Expenses:

   • We cannot simply looking at just your income level and loan affordability when buying a house. As a smart buyer, you should factor in the daily expenses that you incurred to maintaining your quality of life. Always consider how much income left after deducting this portion, and think twice if you really can afford the property. 

In conclusion, buying a home is more than just getting a loan—it’s a big financial commitment that includes many other costs. As potential homeowners, you need to think about all the expenses involved, from the initial down payment and closing fees to ongoing costs like property taxes, insurance, and repairs. It’s also important to consider the location of the home, local schools, and how much the area might grow in value over time. By looking at all these factors carefully, you can make sure the home fits both your needs and your budget. Remember, buying a home is not just about the price you pay today, but also about managing the costs and responsibilities that come with it in the long run.

The post How much of your salary can afford a house in Malaysia? appeared first on HousingWatch.

In making these decisions, you are advised to follow these guides:

What to bear in mind?

• Borrowing money costs money. It is important that you borrow what you need to borrow and not what you can borrow.
• Borrowing money becomes a problem when you borrow more than you can afford.  You should work out how much you can afford to repay every month based on your monthly income, expenses and debt repayments.
• Apart from your housing loan repayments, consider whether you can afford other costs of homeownership such as assessment fees, quit rent, fire insurance, management service fees and utilities bills.
• You need to make sure you will be able to cope with future events such as higher interest rate and changes in your financial situation.
• Make sure you buy a home that you can afford.

How much can I afford to borrow?

1. Firstly, look at your savings and determine how much you can afford for a down payment. The bigger the down payment, the smaller your housing loan which can save you a lot of money in interest charges. Generally, financial institutions would offer a housing loan up to 90% of the property value. In other words, you need to pay for the remaining 10% of the property value with your savings. Check out how much can you afford a house with your salary.
2. Apart from the down payment, there are many costs associated with purchasing a home. The financial institution will require a professional valuation of the property to establish how much the institution is prepared to lend you. The valuation fee will be borne by you. Some financial institutions charge loan processing fee before the loan is disbursed. You will also need to pay two sets of legal fees, one for the execution of the Sale and Purchase Agreement and the other for the loan agreement prepared by the financial institution’s panel lawyer. There may also be fees for the Memorandum of Transfer of the ownership of your property.
3. Next, you need a clear idea of how much you are currently spending to work out what you can comfortably afford to service the monthly loan repayments. Your current spending will include all your monthly:
   • living expenditures (e.g. transportation, food, telecommunication, etc.)
   • current loan repayments (e.g. car loan, credit card, personal financing, etc.)
   • other financial obligations (e.g. child maintenance, life or medical insurance)
4. You should also take into account the other costs of homeownership such as quit rent, assessment fees, fire insurance, utilities bills and management service fees, if applicable.
5. This will give you an idea of how much you could afford for the monthly housing loan instalments. Many financial institutions’ websites have housing loan calculator to help you estimate the amount you could borrow based on the monthly instalments you can afford to repay.
6. You also need to set aside some funds for repairs and home maintenance.

Which housing loan is right for me?

• Different housing loans have different features to meet different customer needs. Make sure you understand the options and features when you shop for a housing loan. This will help you choose a loan that best suits your needs and financial circumstances. Two key factors are the loan tenure and interest rate type.
• The loan tenure refers to the length of time it will take you to fully repay your housing loan. The longer the tenure, the lower your monthly instalments. However, the longer you take to pay off your loan, the more you will pay in interest charges. The maximum tenure for a housing loan is 35 years. For a housing loan of RM300,000 with interest rate at 4.65%, the total interest charges for 35 years would amount to RM308,061.
• If your housing loan tenure extends into your retirement age, you should have a plan on how to service your repayments after your retire.
• Interest rates come in two major categories: fixed and floating rate. The interest rate for a fixed-rate loan will stay the same for the entire loan term or for a specific period (e.g. 5 years). At the end of the fixed rate term, the housing loan will switch to a floating rate. A fixed rate home loan has two key advantages:
  1. It makes budgeting easier as you know the monthly instalments will be fixed during the specified term or the entire loan tenure;
  2. It safeguards you against future rise in interest rate. However, you will not benefit from any reduction in interest rate.
• As for a floating-rate loan, the interest rate can rise and fall during the loan tenure. The interest rate is usually tied to the Base Rate. Your financial institution must disclose how the Base Rate is derived and the possible scenarios that could result in a change to the Base Rate.
• The key advantage of a floating-rate loan is that any decrease in the interest rate will reduce your monthly repayments. The opposite also applies, your monthly instalments will increase if the interest rate goes up. Keep in mind that the rise and fall of interest rates are difficult to predict. Make sure that you will be able to adjust your budget in case your monthly repayments increase.
• Some financial institutions may offer a promotional rate for the first 3 to 5 years to attract new customers. Before you accept a promotional rate offer, make sure you know what rate you will pay and how much your monthly instalments will increase when the promotional rate period is over. The financial institution may impose an early settlement penalty if you fully settle the housing loan before the end of the promotional rate period (commonly known as the lock-in period).

How do I compare housing loan packages?

• The best way to compare housing loans is to request for a housing loan Product Disclosure Sheet (PDS) from the financial institutions (see the attached sample).
• Use the PDS to compare the effective lending rate, monthly instalment, total repayment amount, lock-in-period, early settlement penalty, fees and charges.
• The effective lending rate and total repayment amount allow you to compare the total costs of borrowing for different housing loan packages with varying interest rates and loan tenures.
• The PDS will also tell you how a rise in the interest rate affects your monthly instalments and the total repayment amount over the life of your loan.

How financial institutions make credit decision?

• Each financial institution has its own internal policy and credit assessment criteria. Generally, to qualify for a housing loan you will have to prove to the financial institution that you can afford to repay the loan throughout the loan tenure. The financial institution will need information on:
  1. your income after statutory deductions (i.e. tax, EPF, SOCSO);
  2. all your current debt obligations from financial institutions and other credit providers (e.g. co-operative society, and merchants that provide credit sales).
• If you have no permanent employment or are self-employed, the financial institution would assess the stability of your income over a period of at least 6 months.
• The financial institution will assess your ability to meet monthly repayments based on the debt service ratio (DSR):
  
• Financial institutions must set a prudent DSR level to make sure that you have sufficient financial buffers to deal with any unexpected adverse events (e.g. future increase in interest rate, any changes that might affect your income or expenses in the future).
• Financial institutions would also consider the nature of your employment, the number of your dependents and other factors that have a bearing on your monthly expenditures and future income growth.
• If you earn less than RM5,000 per month and live in urban centers (i.e. Kuala Lumpur, Penang, Johor Bahru) or if you live in other areas but earn less than RM3,000 per month, financial institutions generally set the DSR at 60%. In other words, you monthly debt repayments including the new housing loan should not exceed 60% of your net income.
• If your income is not sufficient to repay the amount you want to borrow, you would need to reduce the housing loan size or your other existing debts.

What if interest rate rises?

• If your housing loan is based on a floating rate, the interest rate would change according to changes in the Base Rate of the financial institution.
• Assuming you borrow RM300,000 for 35 years with a rate of 4.65%, your monthly repayment is RM1,448. If the interest rate rises by 1% you have to pay an extra RM193 per month. The total interest costs increase by RM81,009 at the end of the loan tenure.
• If the interest rate increases by 2% you have to pay an extra RM395 per month and additional total interest costs of RM166,195 at the end of the loan tenure.

What information do I need to provide with an application?

1. Latest 3 months salary slips and evidence of your other income (e.g. rental income).
2. Latest EPF statement or income tax return form.
3. If you are self-employed, the latest 6 months bank statements and other relevant documents as proof of your income.
4. Your current debt repayment commitments (e.g. personal financing from a co-operative society, instalment plans with merchants, etc.).
5. Information about your other assets such fixed deposits and investment in unit trust.

What are my responsibilities?

• Provide adequate and accurate information in the application form. Disclosing inaccurate information may affect your risk profile causing the financial institution to impose a higher interest rate. The financial institution may even reject your application if you provide inaccurate information.
• Before signing, you are advised to read and understand the key terms of your housing loan agreement. Ask your lawyer to highlight critical terms that you should take note of and explain any terms that are unclear to you.
• Pay your monthly instalments by the due date to avoid being charged a late payment penalty.
• Try to pay down your housing loan if you have excess money in order to save on interest charges. Check with your financial institution if any fees apply for prepayment.

What are my rights?

• Your financial institution must provide you a housing loan statement at least once a year, detailing the payments made and the amount charged to your loan account.
• You will be notified 7 days in advance if the financial institution revises your monthly instalment amount due to a change in the interest rate.
• Your financial institution must inform you in advance (21 days) before changing any terms in your housing loan agreement, including fees and charges.
• If you are not satisfied in your dealings with the financial institution, you have the right to complain to your institution.

Do I need to buy insurance?

• Your financial institution must inform you of any requirement to purchase a Mortgage Reducing Term Assurance (MRTA) or Mortgage Reducing Term Takaful (MRTT) and fire insurance.
• MRTA/MRTT is an insurance policy that fully settles your outstanding housing loan with the financial institution upon your death.
• MRTA/MRTT policy ensures that your dependents will not lose the property in the event of your death. Your dependents are also free from the burden of repaying your housing loan.
• The protection cover of MRTA/MRTT reduces over time as the outstanding housing loan amount decreases.
• Your financial institution may offer to arrange MRTA/MRTT from its panel of insurers or takaful operators. You are free to purchase the policy from other insurers or takaful operators. However, your financial institution may include the premium as part of your housing loan if you purchase the MRTA/MRTT from its panel of insurers or takaful operators.

What if I fail to meet my repayment?

• If you have difficulty meeting your loan repayments, it is important that you contact the financial institution early to discuss repayment options. Your financial institution would explore viable options in assisting you to meet your repayments. You do not need to engage a third party agent to act on your behalf.
• If your financial institution contacts you via letter or phone, do not ignore this. It is important that you co-operate with your financial institution, if not, your financial institution may:
  1. Charge you a late payment penalty of 1% per annum on the amount in arrears causing your total outstanding loan to increase;
  2. Increase the interest rate causing your monthly instalments to be higher;
  3. Take legal action against you. Your financial institution may foreclose your property.  You have to pay for all the costs related to the foreclosure. If there is a shortfall after your property is sold, you are still responsible to pay the balance amount owing to the institution;
  4. Take bankruptcy action against you if you are unable to fully settle the shortfall amount after your property is auctioned off.
• Your financial institution must not foreclose your property unless all other reasonable attempts to resolve your repayment difficulty have failed, and they must give you reasonable notice before taking foreclosure action.
• You may seek the assistance of Agensi Kaunseling dan Pengurusan Kredit (AKPK). AKPK is an agency set up by Bank Negara Malaysia to provide services on credit counselling, financial education and debt restructuring for individuals. You may contact AKPK HQ at:
  

  Level 5 and 6,
  Menara Aras Raya (Formerly known as Menara Bumiputera Commerce),
  Jalan Raja Laut, 50350, Kuala Lumpur
  Tel    : 03-2616 7766
  Email     : enquiry@akpk.org.my
  Website : www.akpk.org.my

• Beware of third party agents who claim to be representatives of AKPK and promise to help you in restructuring your debts.
• You are advised to contact AKPK directly. The services of AKPK are provided free of charge.

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