Before you agree to buying a home, you must first have some funds in your account. Depending on what you are buying from a Housing Developer or the secondary market, you would need to budget for the original booking, deposit, professional fees, stamp duties, property valuation fees, and so on. In today's economy, getting 100 per cent loans to cover the whole home purchase is almost unlikely.

1. Where to get financing?

Your initial funds could well come from your own savings, loans from kind-hearted friends and families, advanced salaries from your employer, personal loan from the organization that you are affiliated with; to even the permitted withdrawal from your EPF contribution that is allowed for first home purchases. If you are qualified, you might want to explore the various schemes announced by the Government from MyFirstHome, Rent-To-Own, PR1MA to name a few.  

For the majority of your home finance needs, banks are the obvious alternative. Housing loans are also available from Insurance Companies, Licensed Finance Companies, Licensed Money Lenders, and Building Societies, but the interest rates, margins of lending, loan maturity, loan redemption, and conditions are all different from banks.

If you are a civil servant, you have the privileged option to apply for a housing loan from the Government.

2. When to look for financing?

Prior to committing to a home buy, it is still a smart idea to look for funding. There are also several different types of home finance deals available, and you can still browse around early to find one that fits your needs.

To begin, gather your proof of income so that you can begin contacting banks to inquire about the indicative range of loan amounts that they are willing to give you to fund your intended home purchase. This would greatly assist you in narrowing down assets that are within your budget and for which you have bankable credit. Otherwise, you risk misreading your own reputation and disappointing yourself.

Pay a visit to Bank Negara to review the CCRIS system, since this will help ensure that your expected loan application goes smoothly and without any needless remarks in your file. PTPTN is another marker for those of you who have taken out a loan to pay for your education.

If you are purchasing from the secondary market, do not take too long to browse for the best financing plan, since you will be expected to pay the balance sales price within the usual processing period of three months, otherwise you will be charged late payment interest and your deposit will be forfeited. Sign your Loan Agreement as soon as possible after signing your Sale and Purchase Agreement, hopefully no more than 2 weeks later.

3. Who will borrow?

This is not the same thing as asking, "Who would buy?" While it will be self-evident that the one who buys should also be the one who borrows, there are some strategic decisions to be made.

A Borrower may be a single person, a group of individuals, a Sdn Bhd, a Bhd, or even a Limited Liability Partnership (LLP). It may also be a landlord, with the homebuyer acting as a third-party creditor by charging the home to the bank.

The loan approval, margin of borrowing, loan maturity, and interest rate are all determined by the borrower's profile.

Joint borrowers with different incomes, on average, have a higher chance of getting a loan than a high income single borrower. In the case of a home purchase made in the name of a housewife with no salary, an income-earning husband will be welcomed as a creditor. One of the creditors or one of the guarantors may be an individual with a better financial status.

It is usual for the Directors or Partners of a Sdn Bhd, Bhd, or LLP to offer joint and multiple guarantees for the loan. Using a corporation to purchase a home for personal use would result in a smaller margin of financing, requiring the buyer to have a higher down payment.

4. What type of financing?

There is no such thing as a standard home financing plan and there are many options available to meet the diverse needs of homeowners and borrowers. For instance, there are conventional loans as well as Islamic financing, which operates on Syariah compliance and is open to all, including non-Muslims.

Pay attention to the details in things like term loans, flexi loans, overdrafts, daily rest interests, principal reduction, early redemption penalty, and effective lending rate in the traditional domain. Take the time to learn about the different aspects of the various housing loan packages available to you and choose the one that best fits your needs to ensure that you get the most out of it. Pay attention to the different provisions for the disbursement of the loan number, such as opening a new bank account, which may trigger a delay in the completion of the home purchase, possibly resulting in the obligation to pay late payment interest.

5. How to select your financing?

If you buy from a Housing Developer, there will almost always be a list of paneled of Banks willing to accept your loan application solely on the basis of your profile. Unlike the secondary market, a property valuation report must be completed on a case-by-case basis to satisfy the lending bank, as well as your profile as a creditor.

You'll have to contact the banks on your own, while the real estate agents and lawyers will be able to provide you with professional referrals from their network.

Consider your financing needs, your preferred income and repayment pattern, as well as your goal in purchasing a home to help you choose the right home-financing bundle. There is no uniformly a best loan package, but there is undoubtedly one that is best for you.

Whether or not you need mortgage insurance, such as MRTA/MLTA, is up to you until the loan plan specifies it as a requirement for acceptance. The premium may be included in the loan amount, or you may opt to pay it out of your own pocket. Mortgage Insurance has both advantages and disadvantages, and it is definitely worth exploring for a serious homebuyer.

_{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.}