Freehold and leasehold are the two top land titles people are confused with. However, they vary from each other. One always has its own advantages depending on what you need. We’re going to simplify the differences between these two properties for you in terms of the availability, location, price differences, transaction procedure & mortgage.
As you know, in Malaysia there’s a lot of housing area which is labelled differently due to the land title. Freehold is quite difficult to be found rather than leasehold because of the limitations. Under the Land Acquisition Act 1960, the state can take any freehold land if it’s for economic development or other public purposes. That’s why it is limited especially those areas which governments have been wanting to develop public transport such as the MRT station.
It is almost easy to find. It is not as limited as freehold. So if you’re searching for a leasehold, it will be easier to manage if you’re looking for someplace near your workplace. It is also good for property investment if you’re looking for the right land title to start off.
The place might be out of town which is most likely undesired. Public transportation is limited due to certain areas. It is also quite far from shopping malls & supermarket. In this case, it’s hard to get the complete basic needs. It requires you to go out to the town to get things done too. For example, post office, college or even school.
However, for leasehold, it is usually located in strategic and best places. Public transportation is also easily available no matter when and where you are. In certain places, there will be free shuttle bus which will come in every 10-15 minutes which is so convenient than freehold areas. In this case, it is easy for you to go to shopping malls, supermarket, post office & etc because it’s so much nearer.
It is more expensive compared to leasehold. The main reason is that it will belong to you forever. You also can do whatever you want under this land title including renovating and upgrading the house.
On the other hand, leasehold is cheaper. Usually by 20%. It depends on the locations too. The reason why it is much cheaper is that leasehold has a period of time which can expire.
The transaction is mostly easy and straightforward because you don’t need the approval from the state government. It takes approximately four months to process. Sometimes, in specific locations, even though the land is termed as “freehold land” any dealings on such land still require the consent of the local authority.
The transaction for this one is more complex compared to freehold. You need the state government’s approval, and the process might take more than six months. You also need a good lawyer and a huge amount of money to make sure the process goes well, especially when you want to sell it. To avoid any difficulties and confusion, you need a good read or advisor as well.
It is easy to obtain the mortgage or housing loan for freehold properties because most banks are not picky with freehold rather than leasehold. It is most likely because the price is higher.
To obtain the mortgage for leasehold is hard. Financial institutions tend to not lend to those with less than 50 years remaining on the lease. Let’s say you have more than 75 years left on the lease; the bank will approve your loan. If your loan is approved for financing, your total loan amount will probably be lower than the maximum 90%. It means you’re going to need more money for you to pay the downpayment.