If you’re anything like the majority of young adults today, you might be feeling overwhelmed by all the expenses you’re suddenly faced with entering the working world. Were petrol prices always this high? Why do groceries cost so much? All that, along with any car payments or student loan debts you may have might make owning a property seem like a far-fetched fantasy. After all, even a 10% down payment on a RM200,000 condo is RM20,000. But don’t despair, there is a possible solution to your home financing conundrum.
My First Home Scheme (MFHS) a.k.a. Skim Rumah Pertamaku (SRP) is an initiative introduced by the government that makes it more affordable and feasible for newly-working young Malaysians to buy their own property. Almost sounds like it’s too good of a deal so of course, you’d have questions. We’re here to answer them.
What does this scheme entail?
This scheme allows young Malaysians (age 35 or below) to receive a housing loan from the bank with a 100% margin of finance instead of the usual 90%. In theory, you wouldn’t have to pay a 10% down payment under this initiative, but we’ll talk more about that in the next question.
What’s the catch? Do I have to pay a higher interest rate or extra charges?
Not at all; when paying back the loan, your monthly instalments will be subjected to the same interest rates as borrowers who didn’t go through the MFHS. There are no hidden or extra charges associated with the My First Home Scheme. However – the loan covers only the purchase price of the property. The other fees included when buying a home will have to come from somewhere else (i.e. out of your own pocket). Read our guide on all the fees and charges you’ll need to budget for when buying a house.
Furthermore, be aware that there are some sellers/developers who will insist on the 10% down payment from you in advance, to ensure your commitment to buying the property. In cases like this, the bank will later reimburse you for this 10%. So even though the MFHS offers 100% financing, you might still need to make sure you have enough money saved up for that initial deposit.
Am I eligible?
Let’s see if you can tick all the boxes of the eligibility checklist.
– You’re a Malaysian citizen
– You’re under 35 years of age
– You work in the private sector (or a statutory body that doesn’t offer government housing and/or loans)
– You want to buy your first home
– Your gross monthly income does not surpass RM5,000 (RM10,000 for joint borrowers)
– Your other debt repayment obligations don’t exceed 60% (or whatever amount set by your bank, whichever is lower) of your net monthly income
If all of your answers to the above were ‘yes’ then yes! However, do note that if you have a pre-existing joint home loan with someone, you are not eligible to apply, even if you don’t actually live in the house.
My spouse works with the government but I work in the private sector. Can we both still have a joint application?
Unfortunately not. Only you would be able to apply since you work in the private sector.
Can I apply with my friend?
That’s gotta be a strong friendship. The answer is no, regardless. Joint borrowers must either be husband and wife, or siblings (and by that I don’t mean “she’s like a sister to me!”).
Can I buy a new property or a property under construction with this scheme?
Under this scheme, yes, you should be able to as long as it’s a residential property with a price that is within the RM100K-RM500K range. However, you will have to double-check with your financial institution as some don’t finance home loans for properties under construction.
It’s also recommended to search for a freehold property rather than a leasehold (especially if the remaining lease is less than 60 years) to avoid potential complications such as rejection of the application from Cagamas.
Cool, so I can buy property and rent it out. Right?
Wrong! You must live in the house that you intend to purchase under the MFHS. In a joint application, at least one of you must live in the property.
How do I pay off the loan?
Same as a non-MFHS loan — via monthly instalments, salary deductions, or standing instruction. Flexi-loan plans, though, are not permitted under this scheme.
How long is the financing tenure?
Most banks offer a tenure of 35-40 years or until the borrowers reach age 65, whichever is earlier. In a joint application, until both borrowers reach age 65.
Does this scheme cover home loan insurance (MRTA/MLTA/etc.)?
MFHS requires you to take out a Fire insurance/Takaful but home loan insurance depends on your particular financial institution.
Where/how do I apply?
You can apply with any of the 14 participating banks, a list of which can be found here.
We hope that we answered most, if not all, of your queries. Overall, My First Home Scheme does sound like a pretty good deal for us, young folks, who aspire to own a property but still aren’t at the stage in our life where we can do so without some help. Check out NuProp to see what kind of homes you could potentially buy under the MFHS! And follow our Facebook page to get more updates on financing benefits in Malaysia.
Images: CNBC.com, The Malay Mail Online, TravelAdventures