home2u.com.my - Tiny Content

Home Buying Guide

1. Buying and Selling procedures
2. What is the difference between leasehold and freehold property?
3. Getting a Loan and Insurance
4. Legal Issues

1. Buying and Selling procedures

Renting Property
Step	Action
1	Property found
2	Pay one month deposit
3	7 days from confirmation signing of tenancy agreement (Pay additional 2 months rental and utility deposit)
4	Stamping of tenancy agreement
sample of tenancy agreement sample of tenancy extension agreement

Buying & Selling Property
Step	Action
1	As the buyer, you have to find the property. After you have made your decision, you are required to fill in an application form prepared by the broker and pay the booking fee (min 2% or more). A receipt will be given to you after you pay the booking fee. If you, as the buyer go back on your word, the seller has the right to confiscate the booking fee. Otherwise, the seller has to double pay the booking fee to you if he or she goes back on his or her word.
2	You have 2 choices: 1: You provide the financial documents to the broker. They will assess your credit, income and assets to quickly determine what loans you qualify for. 2: You provide any relevant details and financial documents to the broker. The buyer has to prepare his or her identity card and deposit. The broker will hand over seller's detail, buyer's detail and title to the lawyer for preparing the Sell & Purchase Agreement. The deposit will be handed to the seller only after both parties (seller and buyer) have signed the Sell & Purchase Agreement.
3	All the relevant financial documents will attach to the application form and submit to the bank for approval.
4	After 7 days, as the bank reply the approval, loan will be processed and an offer letter will be prepared. The buyer needs to sign the offer letter.
5	Before signing the Sell & Purchase Agreement, both parties can decide the date of settling the rest of the deposit. Normally, the buyer is given three months for settling the rest of the deposit. The buyer can request the seller to extend for one month. However, within this one month, the buyer has to pay the interest that is calculated per day. The amount of the deposit depends on the amount of the loan. For example, if you loan 70%, you are required to settle 30% deposit within three months.
6	The buyer will hand over the deposit to the lawyer for settling the ransom from the bank or financial company and property tax in order to redeem the property. Then the process of transfer can be carried on.
7	As the property is being redeem and the seller has settled the property tax, the lawyer will submit the transfer form to the Land Service for registration. If the transfer form is approved, the lawyer will hand over the rest of the deposit to the seller. At the same time, the seller has to pass the right of the property to the buyer as final realize.

2. What is the difference between leasehold and freehold property?

THE land laws of Malaysia are governed by the National Land Code, 1965 (Act 56 of 1965). Section 40 of the National Land Code, 1965 states that all state land belongs to the state authority.

When state land is disposed off by the state authority to an individual in perpetuity for an indefinite period, this land is now granted as freehold title.

When the state land is disposed of by the state authority to an individual for a term of years, by virtual of law, not exceeding 99 years, this land is now granted as leasehold title. Upon expiry of the period of the lease, the land should be reverted to the state authority.

The owner will then have to either apply for a renewal of the lease before its expiry or apply for a fresh alienation if the lease has expired. These will involve the payment of a hefty premium which would be close to buying the land all over again with perhaps some discount.

Issue	Leasehold	Freehold
Land uses Leases are subject to a higher level of control.	Lease duration usually 30, 60, 99 or 999 years. Limited by purpose of lease and land legislation. Stocking levels, cultivation, etc may be restricted by lease conditions. Limited by environmental and town planning controls.	Limited by environmental and town planning controls.
Duty of care Leases are subject to a higher level of control.	High level of duty of care defined in land legislation. May be responsible for developing and maintaining improvements. May be required to engage in property planning.	Duty of care following common law and as required by some Environment Protection Acts or its equivalent.
Transferability, aggregation and subdivision Leases are subject to a higher level of control.	Lease transfers require State or its equivalent's approval.	Few limitations on transfer. Unlimited right to subdivide and aggregate subject to town planning controls.
Retrieval / resumption Leases are subject to a higher level of control.	Powers to acquire leasehold interest or withhold land when lease expires.	Some powers to acquire land for public works.
Security of tenure In general, leases are less secure than freehold. Perpetual leases approach the level of security of free hold	Varies according to lease type but forfeiture for non-performance may be possible.	Very high level of security.

3. Getting a Loan and Insurance

There are a few sources of funds to choose from:

Commercial banks
Finance companies
Government loans
Employees housing loans
Building Societies and Corporations

Normally, home buyers get their loans from commercial banks. Commercial banks offer several types of loans:

Loan facility
Overdraft facility
Loan and overdraft facility
Endowment mortgage
Mortgage from Islamic banks

Features of commercial banks loans :

Mortgage amount:
Basically banks offer up to 80% loan of the purchase price.

Repayment period:
Maximum 25 years.

Interest rate:
Normally 10%-13% depending on the Base Lending Rate

Criteria for Loan Approval:

Income
Age minimum 18 years old
Employment Purpose of Mortgage

Insurance

Insurance will protect your investment and also your family welfare from unpredictable disasters. In the case of property under financing, it is mandatory to insure your house through a financing bank. A House/Fire Insurance will protect you and your family from natural disasters like fire, flood, lightning, earthquake, etc or man-made disasters such as riots, explosion, theft, aircraft accident, etc. A Mortgage Life Assurance is designed for those who are entitled to a housing loan. Your outstanding loan balance will be cleared by the insurance company if anything happens to you (death or disablement).

4. Legal Issues

Legal issues are complex procedures of paper work signing. Of course you have to understand every aspect before you put down your signature. There are a few things you should keep in mind:

You should make your payment to developers through your own solicitor or lawful owner as he/she will protect your interests.
You must read and fully understand the terms and conditions stated in the Sale and Purchase Agreement. Consult your solicitor if you want to amend anything before you sign the Sale and Purchase Agreement.
Your solicitor should be fully responsible for the purchase of your house, and do not share the same solicitor with the seller, as a conflict of interest may occur.

Things that your solicitor should get:

Photocopies of purchaser's and seller's addresses, telephone numbers, and etc for identification.

Original copy of Sale and Purchase Agreement.

Deed of Assignment.

Search on the master title of the house to assure that the seller is the rightful owner.

Lawyer Fees

Effective from January 1, 1992, legal fees are standardized by the Solicitors & Remuneration Order 1991. There are 2 types of calculation for legal fees:

1. Sale and Transfer : Lawyer fees are determined by value of the house in the Sale and Purchase Agreement.

House Value	Buyer	Seller
1^st RM100,000.00	1% of House Value (Minimum RM200)	1% of House Value (Minimum RM200)
Next RM4.9 million	0.5% of House Value	0.5% of House Value
Thereafter	0.25% of House Value	0.25% of House Value

2. Charges, Debentures and Security Loan Documents :
Lawyer fees are determined by the loan amount for the above documentation.

Loan Amount	Legal Fees to buyer
1^st RM100,000.00	1% of the Loan Amount (Minimum RM200 per transaction)
Next RM4.9 million	0.5% of Loan Amount
Thereafter	0.25% of Loan Amount

** Fees subject to 5% government tax.

Stamp Duty

There are 2 types of Stamp Duties:

1) Stamp Duty on Loan Amount

Loan Amount (RM'000)	50	100	150	200	250	300
Stamp Duty (RM)	250	500	750	1000	1250	1500

2) Progressive Present Stamp Duty on Transfer of House Title

House Value	Stamp Duty Payable
1^st RM100,000	1%
Next RM400,000	2%
Next RM1.5 million	3%
Thereafter	4%

Tax for Sales of Property

Buyers and sellers have to file their forms under the Real Property Gains Tax Act to avoid penalty. The Seller has to pay tax for profit on disposal of property under the Real Property Gains Tax Act. Rate varies according to the number of years you hold the property.

Number of years	Tax rate
Within 1-2 years	30%
3 years	20%
4 years	15%
5 years	5%
Thereafter	None