1. Stamp duty
Most of you might be wondering what stamp duty is. Every loan agreement, tenancy agreement and property transfer document including the Sale and Purchase Agreement (SPA) that require stamping will be charged a fee or a transactional tax.
As announced by the government back in 2019, the rates for a stamp duty increased 4% from 3% for properties costing over RM1 million. You can check out the latest tiered stamp duty (on the SPA & MOT) below:
|PRICE TIER||STAMP DUTY (% of property price)|
|Next RM400,000 (RM101,000 – RM500,000)||2%|
|RM500,001 – RM 1 million||3%|
|More than RM 1 million||4%|
Here’s how to calculate your stamp duty:
The property purchase price is RM1,000,000.
For the first RM100,000, 1% : RM100,000 x 1% = RM1000
From RM100,001 to RM500,000, 2% : RM400,000 x 2% = RM8,000
From RM500,001 to RM1million, 3% : RM500,000 x 3% = RM15,000
Total Stamp Duty Payable is RM24,000
Budget 2022 Stamp Duty Exemption For First-Time Buyers
Great news! During the Budget 2021 tabling, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, stated that first-time buyers will be given stamp duty exemptions on the memorandum of transfer documents (MOT) and loan agreements.
For homes priced up to RM500,000, the exemption will apply for the purchase of residential property from 1 January 2021 to 31 December 2025. It was also stated that the Sales and Purchase Agreement (SPA) must be executed and signed within the stipulated period.
This means you’ll get to save RM11,250 in savings with a full stamp duty exemption on an RM500,000 home!
2. Legal fees
Unless you have any legal background or expertise, seeking out legal assistance is required in dealing with property purchasing. The hired solicitor will be in charge of all the necessary contracts and documents for property transfer purposes.
The legal fees for preparation of the SPA are calculated as a percentage of the purchase price, varying from 0.25% up to 1% depending on the value of the homes.
The following are the legal fees rate in Malaysia:
|PRICE TIER||LEGAL FEES (% of property price)|
|Next 500,000 (RM500,001 – RM 1 million)||0.8%|
|Following RM2,000,000 (RM1,000,001 – RM 3 million)||0.7%|
|Next RM2,000,000 (RM3,000,001 – RM 5 million)||0.6%|
|Thereafter (> RM 5 million)||0.5%|
Note that some developers may absorb the legal fees but you will always need to pay the stamp duty yourself as a buyer.
(First RM500,000 X 1%) + (Next RM250,000 X 0.8%)
= RM5,000 + RM2,000
3. Real Property Gains Tax (RPGT)
If one day you suddenly decide to upgrade and sell your property, you will be charged a tax for every profit (gains) you receive from the new homeowner. Checking on the RGPT can notify you when to sell your property and help save money.
As you can see from the table above, RPGT will no longer be imposed on property disposals by individual owners starting from the 6th year according to the Finance Act 2021 gazetted on 31 December 2021, taking effect from 1 January 2022.
Worried about the RPGT being too overwhelming for you? Fret not, the following
Malaysian citizens or permanent residents are allowed exemption on profits from the disposal of a private residence once in a lifetime. According to the RPGT Act, a private residence is a building or part of a building owned by an individual or occupied as a dwelling place.
Exceptions for disposal of property between family members (such as between parents with children, spouses, and even grandparents with grandchildren).
Exemption for an amount equal to 10% of taxable profits, or RM10,000 (whichever is higher) per transaction will not be taxable.
4. Insurance - MRTA/MLTA
Of course, when you purchase a property you will need it to come with the insurance just in case any (God forbid) unwanted accidents happen that’ll cost you money. During that unforeseeable time, how could you ever survive and retrieve your home if not with the insurance you’ve subscribed to.
In most cases, banks would have offered an insurance package alongside the housing loan you’ve applied for. The Mortgage Reducing Term Assurance (MRTA) is usually the type of insurance that is offered, where the age of the borrower plays a huge factor on the costs (the older the borrower, the higher the MRTA), as well as the total mortgage on the property (total mortgage estimation of 3% to 5%).
Another option you can consider is the Mortgage Level Term Assurance (MLTA) that offers outstanding home loan repayment and a guaranteed cash value back by the end of the deal.
Check out this article to know which insurance plan is better suited for you: Which mortgage life insurance to pick - MRTA or MLTA?
5. Valuation fees
Unless you’re paying for the property in cash, you’re likely to be looking for a housing loan from banks to fund the purchase. Financial institutions will usually require a valuation of the property before approving the loan, and most banks will charge a fee for these valuations.
Similar to the legal fees, the valuation fee is calculated as a percentage of the purchase price:
For the first RM100,000 =0.25%
Next residue up to RM2 million = 0.2%
6. Agent fees
Usually when purchasing property or houses, one would deal with a real estate agent, especially when it comes to the secondary market. Even when dealing with any API services such as SPEEDHOME and PropertyGuru, a small non-refundable fee will apply for every successful housing deal.
If you are on a tight budget, you can always try negotiating with the agents before proceeding with the deal. Agents usually propose a maximum chargeable fee of 3% from the land and building sales.
As a buyer, make sure that you negotiate and confirm your agent fees before officially engaging them to represent you in any property transactions. This will help when calculating your total cost in advance.
Here’s a tip: Most experts recommend not spending more than 10% of your home value on renovations.
After you have completed the purchase of the house, you might want to change wall colours, doors, floorings, windows, fences, roofing, rooms and other elements of the house to suit your preferences. These could easily add up to your total costs, depending on whether the renovations involved are major or minor.
There you have it. Do you think you can handle the costs and are ready for the leap - financially? Check out Loanstreet's home loan eligibility report to determine whether you can get your finances approved.
*This article was repurposed from "Latest stamp duty charges & 6 other costs to consider before buying a house in 2021", first published on iProperty.com.my
** The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the articles.