Subscribe to Our Newsletter

We know you love savings. Sign up for more!

Buying a House? Here's 2020 Stamp Duty Charges & Other Costs Involved

Updated 22 Nov 2020 – By Contributor - iProperty


*This article was repurposed from "Latest stamp duty charges & 6 other costs to consider before buying a house in 2020", first published on iProperty.com.my


You’re planning to buy a house, which means you need to be aware of the closing costs involved - especially the newbies. This is important because you don’t want to face financial setbacks and disappointment in realising your dreams of owning a home. 

You might think you’ll be paying less because of the promotions, discounts and rebates by developers. However, it's not just the down payments and progress billings that will make up your total costs. Below are other costs that you should take into account.

 

1. Stamp duty

An unavoidable cost in property purchases, stamp duty is the tax placed on your property documents during the sale or transfer of the property. This includes stamp duty on the Sale and Purchase Agreements (SPA) of your property and stamp duty for the Memorandum of Transfer (MOT), which are calculated based on the purchase price. You will also need to pay the stamp duty on your loan agreement based on a flat rate of 0.5% of the total loan.

The sale or transfer of properties in Malaysia which are chargeable with stamp duty must be stamped within 30 days from the date of the execution (property transaction).

In 2019, the government announced a stamp duty hike for properties costing more than RM1 million, where the rate was increased from 3% to 4% (refer to the table below). Hence, the latest stamp duty rates (on the SPA & MOT) are calculated on a tiered basis as below.
 
PRICE TIER STAMP DUTY (% of property price)
First RM100,000 1%
Next RM400,000 (RM101,000 – RM500,000) 2%
RM500,001 – RM 1 million 3%
More than RM 1 million 4%

Not sure how to calculate? Here's an example. Let's say you purchase a property which costs RM750,000, you will have to pay a total of:

{(First RM100,000 X 1%) + (Next RM400,000 X 2%) + (Remaining RM250,000 X 3%) } + 0.5% of loan amount (90% of RM750,000)
= {RM1,000 + RM8,000 + RM7,500} + 0.5% X (RM675,000)
= RM16,500 + RM3,375
= RM19,875

New Stamp Duty Exemptions in 2020

However, there are a few stamp duty exemptions available for homebuyers – PM Tan Sri Muhyiddin Yassin announced during the short-term economic recovery plan (PENJANA) briefing on 5 June that the government will be extending the HOC 2020.

The HOC which previously ended in December 2019 will now be made available from 1 June 2020 until 31 May 2021. Homebuyers will get to enjoy stamp duty waivers for the purchase of new launch properties priced between RM300,000 and RM2.5 million.

Details of the available stamp duty waivers are as below:
 
Property Purchase Price Terms Stamp Duty Exemption
Properties purchased under the HOC 2020

RM300,000 < PPP ≤ RM1 mil
1) SPA Date: 1 June 2020 – 31 May 2021
2) Malaysian citizen  
3) Purchase of residential property – Does not include SOHO, SOVO, SOFO & serviced residences built for commercial use. 
4) Residential properties in the primary market (homes that have been launched or completed)
Full stamp duty exemption on both Instrument on Transfer (14A/DOA)  and Instrument on Loan Agreement 
Properties purchased under the HOC 2020
RM1 mil <PPP ≤ RM2.5 mil
1) SPA Date: 1 June 2020 – 31 May 2021
2) Malaysian citizen
3) Purchase of residential property – Does not include SOHO, SOVO, SOFO & serviced residences built for commercial use. 
4) Residential properties in the primary market (homes that have been launched or completed)
For Instrument on Transfer – Adoption of old stamp duty rate of 3% (not 4%) for the “Thereafter (> RM 1 million)” tier. 

For Instrument on Loan Agreement – Full stamp duty exemption
RM300,000 < PPP ≤ RM500,000 1) SPA Date: 1 July 2019 – 31 December 2020
2) Purchase 1 residential property (house, condo unit, apartment, flat)
3) Malaysian citizen & first time home buyer
Full stamp duty exemption on transfer instrument and loan agreement for the first RM300,000 only. The remaining amount will be subjected to the prevailing rate of stamp duty.
PPP ≤ RM300,000 1) SPA Date: 1 January 2019 – 31 December 2020
2) Purchase 1 residential property (a house, condo unit, an apartment, a flat)
3) Malaysian citizen & first time home buyer
Full stamp duty exemption on transfer instrument and loan agreement (14A/DOA) 
 

Budget 2021 Stamp Duty Exemption For First-Time Buyers

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz announced during the tabling of Budget 2021 on 6 November that stamp duty exemptions on the memorandum of transfer documents (MOT) and loan agreements will be provided for first-time home buyers.

The exemption will apply for the purchase of residential property from 1 January 2021 to 31 December 2025,  for homes priced up to RM500,000. It was stated that the Sales and Purchase Agreement (SPA) must be executed and signed within the stipulated period.

A full stamp duty exemption on an RM500,000 home will provide you RM11,250 in savings!


2. Legal fees

Unless you have a legal background and possess some of the required expertise and knowledge, you are most likely to engage in legal assistance for your property purchase. Your appointed solicitor will prepare all the necessary documents and contracts to facilitate the transfer of the property.

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 legal fee rates in Malaysia are as below:
 
PRICE TIER LEGAL FEES (% of property price)
First RM500,000 1%
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%

Say for instance you are purchasing a property which costs RM750,000, you will have to pay a total of:

(First RM500,000 X 1%) + (Next RM250,000 X 0.8%) 
= RM5,000 + RM2,000 
= RM7,000 


Note that some developers may absorb the legal fees but you will always need to pay the stamp duty yourself as a buyer.

 

3. Real Property Gains Tax (RPGT)

One thing you should take into account is the possibility of you eventually selling the house in the future. This may be because you might want to upgrade, leave the area for a new job, find a home better suited to your preference or just sell it for financial purposes because the market is booming. No matter what the reason is, disposing your home to a new buyer will also entail paying real property gains tax (RPGT) if you are profiting from the transaction.

Doing advance research on RPGT could help you sell your property at the right time and save you a lot of money.




The RPGT has been revised as per the announcement made during Malaysia’s Budget 2019 tabled last November. Malaysian individuals who sell off their property in the sixth (and subsequent) years of ownership will now have to pay a 5% RPGT (no charges were applied before). Meanwhile, those who dispose of their home after less than 3 years will be charged 30% RPGT; 20% in year 4 and 15% in year 5. To know more, check out this article and if you're not sure how to calculate it, you can use this calculator by Loanstreet

Also, bear in mind that there are RPGT exemptions for the following conditions:

a) An exemption of 10% of profits or RM10,000 per transaction (whichever is higher) for these 2 scenarios:

Citizens & Permanent Residents
i) If an asset is transferred as a gift by a donor who is a Malaysian citizen and the acquirers are either husband and wife, parent and children or grandparents and grandchildren. This exemption is not applicable for transfers between siblings.
ii) Once in a lifetime exemption on the chargeable gain on disposal of 1 private residence by a Malaysian citizen or Permanent Resident (PR).

b)  Homeowners who own low or medium cost housing priced below RM200,000 are exempted from RPGT when disposing of their property.

 

RPGT amendments in 2020

In the recent Budget 2020,  the government made an amendment to the RPGT – Beginning 1 January 2020, for the disposal of older properties which were bought years ago, the base year used to calculate the property gains tax chargeable on its profit from the sale is 1 January 2013.  Previously, 1 January 2020 was used as the initial point of valuation (base year). The base year amendment to 2013 is good news for homeowners as they will now pay less tax upon selling off their property. 

Meanwhile on 5 June 2020, the PM announced that the government will be introducing RPGT exemptions for disposal of residential homes from June 1, 2020, to December 31, 2021, where the exemption is limited to the disposal of three units of residential homes per individual.

However, it has not been clarified whether the exemption will be made available for all disposals or only for disposals of properties in the sixth and subsequent years of ownership – This information will be updated accordingly as soon as we receive news from the Government.
 

4.  Agent fees



If you engage property or real estate agents, especially in securing property in the secondary market, their fees will be an additional cost on top of the price you pay for your home. Although most buyers nowadays are aware of this, some DO NOT factor agent fees in the total cost. This could be a setback, especially if you are on a tight budget.

The maximum fee chargeable on services provided by agents on the sale of any land and building is normally 3%, although many brokers and agents charge less than that on a case-to-case basis.

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.

 

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. Insurance - MRTA/MLTA



Most banks will require buyers to purchase insurance on their homes as part of the housing loan package to protect the value of the property. This type of insurance is usually referred to as the Mortgage Reducing Term Assurance (MRTA) and its costs are dependent on the age of the borrower (usually the older the borrower, the higher the MRTA) and the total mortgage on the property (usually estimated at 3% to 5% of the total mortgage). 

The MRTA isn’t the only option, however, homeowners can also consider Mortgage Level Term Assurance (MRTA), which offers the repayment of your outstanding home loan as well as a guaranteed cash value back at the end of the scheme. Here's an article to know which insurance suits your need - Which mortgage life insurance to pick - MRTA or MLTA?

 

7. Renovations



For example, 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.

Here’s a tip: Most experts recommend not spending more than 10% of your home value on renovations.


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 2020", first published on iProperty.com.my
Continue reading...

Suggested Articles

Here are the Best Fixed Deposit Promos in Malaysia 2020

Here are the Best Fixed Deposit Promos in Malaysia 2020

How Banks Fooled You with the Rule of 78

This Is How Banks Fooled You With the Rule of 78

Maybank Extends Repayment Assistance Application Until Next Year

Maybank Extends Repayment Assistance Application Until Next Year