Purchasing a RM500,000 home isn’t really just going to cost you RM500,000. There are various costs in the equation that you have to be ready to fork out after making the plunge. Lets take a look at the various fees involved and what they are for.
1. Legal Fees
Legal fees is an attorney fee that is paid by the buyer of a property for the preparation and recording of official documents.
In Malaysia, the 2 legal fees that you have to prepare for are the S&P Agreement and Loan Agreement.
The charges of legal fee for both agreements can be found in the table below. The percentage and calculation of cost for both agreements are similar. However, the S&P legal fee is based on the purchase price, while the loan legal fee is based on the loan amount.
Purchase Price Charge
First RM 150,000 ➯ 1% (subject to a minimum amount of 300)
RM 150,000 – RM 1,000,000 ➯ 0.7%
RM 1,000,000 – RM 3,000,000 ➯ 0.6%
RM 3,000,000 – RM 5,000,000 ➯ 0.5%
RM 5,000,000 – RM 7,500,000 ➯ 0.4%
Remainder ➯ 0.3%
Example : For property value of RM500,000 and 90% (RM450,000) financing
SPA legal fee for first RM 150, 000
= RM 150,000 * 1% = RM 1500
SPA legal fee for remaining RM 350, 000
= RM 350, 000 * 0.7% = RM 2450
Total SPA legal fee
= RM 3950
Loan legal fee for first RM 150, 000
= RM 150,000 * 1% = RM 1500
Loan legal fee for remaining RM 300, 000
= RM 300, 000 * 0.7% = RM 2100
Total loan legal fee
= RM 3600
Total legal fees (SPA + loan)
= RM 3950 + RM 3600 = RM 7550
2. Stamp Duty
Stamp duty is a tax that is levied on the legal recognition of certain documents, in this case, the S&P Agreement and Loan Agreement.
The charges for stamp duty of your S&P documentation can be found in the table below.
Purchase Price Charge
First RM 100,000 ➯ 1%
RM 100,000 – RM 500,000 ➯ 2%
M 500,000 or above ➯ 3%
Example : For property value of RM500,000 and 90% (RM450,000) financing
Stamp duty for first RM 100, 000
= RM 100,000 * 1% = RM 1000
Stamp duty for remaining RM 400, 000
= RM 400, 000 * 2% = RM 8000
Total stamp duty
= RM 1000 + RM 8000 = RM 9000
The charges for stamp duty of your loan agreement can be found in the table below.
Loan Amount Charge
Any amount ➯0.5%
Example : For property value of RM500,000 and 90% (RM450,000) financing
Total stamp duty
= RM 450, 000 * 0.5% = RM 2250
Note: As part of the Malaysian government’s efforts to reduce the cost of ownership for first time home buyers, until 31 Dec 2014, for first time home buyers, there will be a 50% stamp duty discount on the instrument of transfer agreements and loan agreements for residential property purchases worth RM400,000 and below.
*Update: The new limit entitlement for the 50% stamp duty exemption is now for properties RM500,000 and below in accordance to Budget 2015. This will take effect starting 1st January 2015
3. Valuation Fees (When formal valuations are required)
Valuation fee is a cost that pays for the service of determining the current worth of an asset. This cost incurs when the buyer buy from a seller who is not a developer.
Below is the table for valuation fees
Valuation Charge
First RM 100,000 ➯ 0.250%
Next RM 1,900,000 ➯ 0.200%
Next RM 5,000,000 ➯ 0.167%
Next RM 8,000,000 ➯ 0.125%
Next RM 35,000,000 ➯ 0.100%
Example : For property value of RM500,000 and 90% (RM450,000) financing
Valuation fee for first RM 100, 000
= RM 100,000 * 0.25% = RM 250
Valuation fee for remaining RM 400, 000
= RM 400, 000 * 0.2% = RM 800
Total valuation fee
= RM 250 + RM 800 = RM 1050
Conclusion
The entry cost of property purchasing can add up to quite a significant cost. One of the ways to help reduce the cost is to look for a home loan that helps offset some of the costs as a part of their promo package. An example would be Citibank’s FlexiHome Loan that covers your loan document legal fees plus a 0.28% cashback from your loan amount of up to RM10,000 for loan amounts of RM400,000 and above.