Purchasing property, be it for personal use or to add to an existing investment portfolio, may seem very unnerving at first particularly considering the amount of money one needs to fork up in advance as a down payment which usually ranges from 10-20% depending on the property itself. However, with the right knowledge and myriad of financing options available out there in this day and age, one only needs to strategize the most ideal course of action that works in one’s favour.
Before committing to such a big-ticket item, we’ve compiled a list of tips to assist you in sourcing out your initial deposit: -
Save, save, save
As the saying goes, “if you would be wealthy, think of saving as well as getting”. Putting aside a portion of one’s income into a coffer that can’t be easily accessed and having a clear picture of the ultimate objective plays a crucial role in determining the length of time required to accumulate the amount required for a down payment.
Withdrawal from EPF Account 2
In Malaysia, contributing to the Employees Provident Fund (EPF) is a mandatory duty of all Malaysians working in the country. The EPF consists of two accounts, Account 1 and Account 2 in which 70% of the total contribution is retained in the former account and shall only be made available for withdrawal upon retirement, while the remaining balance is inserted into the latter. Tapping into Account 2 for the purposes of financing one’s first home is allowed but subject to eligibility terms and conditions that must be adhered so tread carefully before opting to utilise this.
Consideration of Home Financing Initiatives from the Government
There exists a number of down-payment assistance schemes afforded by the Malaysian government and includes PR1MA, MYHOME Scheme, My First Home Scheme, Youth Housing Scheme, and Rumah Selangorku. We shall provide you with a detailed breakdown of all of these accommodating initiatives in one of our later articles but fundamentally, these schemes aim to help young Malaysians who are looking to acquire their first home through a little financial relief. Never be embarrassed to take advantage of these initiatives, as they could very well be the ticket to realising your dream home!
Islamic Home Financing Loans
Through Islamic home-financing, homebuyers are presented with two options, the ‘buy and sell’ approach termed “Murabahah” or the ‘leasing’ approach labelled “Ijarah”. Under the ‘Murabahah’ concept, upon choosing the intended household to purchase, the homebuyer and the participating bank will enter into a contract in which the bank buys the property on behalf of the homebuyer and resells it back to them at a higher price over a fixed period of time via instalments.
Under the ‘Ijarah’ or ‘to give something on rent’ concept however, it denotes an agreement whereby the homebuyer buys out a particular property from the participating bank while paying for rent. It is derived ‘where one party transfers the right to use an item he owns to another party for a specified period in exchange for an agreed consideration, the item in question being a house in this instance.
Despite being more of an affordable route to homeownership rather than a tip to assist in financing one’s down payment for a house, sub-sale properties refer to second-hand properties that are sold in the secondary market. Unlike new or ‘under-construction’ properties, a sub-sale one usually has a pre-existing owner and although it may not be as exclusive as buying new, but you’ll be surprised as to the number of exceptional deals out there, depending on the locale and market situation of the day. In certain occasions, one may even be lucky enough to find deals that are below market value and with cheaper properties comes lower down payment.
The views and opinions expressed in this article are those of the authors and not intended to malign any company, individual or necessarily reflect the official policy or position of any agency or organization. Focal Times is a subsidiary of Maxworld Consulting Sdn Bhd, a regional organization founded by a mixture of agile and experienced corporate finance, venture capital and industrial experts. This establishment focuses on sharing current banking affairs, latest property developments and updates and more.