by Eugene Chua
As most of you know, the overall cost of properties has been steadily rising. As such, most people cannot afford to buy a home, which would easily be the largest purchase one would make in their lifetime. In an effort to help the people, the government introduced the Malaysia My First Home Scheme, which SaveMoney.my will explain today.
The Malaysia My First Home Scheme (MFHS) or Skim Rumah Pertamaku was introduced in early 2011 by the government with the sole purpose of assisting young adults, who have joined the workforce and earn RM3,000 per month or less, to own their first home. After the 2013 Budget announcement, the monthly income eligibility was increased to RM5,000 for individuals or RM10,000 for couples.
This scheme allows young adults to obtain 100% financing from financial institutions (100% LTV / margin as opposed to the usual 90% offered by most banks), enabling them to own their first house without the need to pay a 10% down payment. The buyer is still required to pay a booking fee and/or deposit to the seller under the terms of the Sale and Purchase Agreement, pending disbursement of the home financing by the bank. When the financing documentation is complete, the buyer would then be reimbursed from the disbursement of the financing by the bank. The buyer may try to make an arrangement with the seller for deferment of deposit payment pending disbursement by the bank; such requests are dependent on the seller's willingness.
Cagamas SRP Berhad will guarantee the banks on financing above a 90% level, i.e. if a borrower obtains 100% financing, Cagamas SRP will guarantee 10% (thus raising 90% to 100%) of the financing. With this scheme, you can also enjoy a 50% stamp duty exemption on the purchase of your first residential property and this is available till 31st December 2014.
What are the personal criteria needed to be eligible for this scheme?
1. Malaysian Citizen.
2. First-time home buyer.
3. Individual up to age of 35 years.
4. Gross income not exceeding RM5,000 per month for single borrowers, or combined gross income of RM10,000 for couples.
5. All outstanding debt repayment obligations from banks and non-banks (including those not covered by CCRIS) must not be more than 60% of monthly income after statutory deductions (i.e. Tax, EPF, SOCSO) or maximum limit of the lending bank, whichever is lower.
Besides fulfilling all the personal criteria, there is also property criteria to qualify for Malaysia's My First Home Scheme:
1. Minimum property value of RM100,000.
2. Maximum property value of RM400,000.
3. Residential properties only.
4. For lease hold, remaining lease ≥ 60 years.
5. Owner occupied.
Last are the financing requirements for Malaysia's My First Home Scheme:
1. Repayment options of up to 40 years or until age 65, whichever is earlier.
2. Amortizing facilities only (no re-drawable features).
3. Installments payable via monthly salary deductions or standing instruction.
4. Compulsory Insurance / Takaful.
You may want to know, do you have to pay a higher interest rate or fee in this scheme? SaveMoney.my is happy to tell you: No, only the normal interest rates of the respective banks shall apply, and you do not have to pay for Cagamas SRP Berhad's guarantee. Also for your information, the scheme covers both completed properties and those under development.
*Eugene Chua is the Finance Sub-Editor of SaveMoney.my, an online consumer advice portal which aims to help Malaysians save money through smart (and most of the time painless) savings in their daily banking, technology, and lifestyle spending habits.