How to know that you are ready to buy first home? Check your current financial status by asking yourself 3 important questions as below:
1) How much money do you have to pay for down payment?
- Buy new house from property developer: 5% to 10% down payment, normally others charges are waived.
- Buy old house from sub-sales market: approximately 20% of cash to be prepared for down payment, sales and purchase agreement, legal fees and other miscellaneous charges.
Therefore, it makes more sense to buy a new house from developer for first time home buyer instead of buying old house.
2) How much money do you afford to pay for mortgage monthly payment?
- 30% of your salary should be the maximum allocation for your monthly housing loan installment.
Before buy a house, try to transfer 30% of your salary immediately after you received it to another new savings account for couple months, consistently. This is a good practice to know your readiness and affordability to pay for the mortgage monthly payment.
3) How much money do you able to withdraw from EPF Account II?
- Check your EPF account via www.kwsp.gov.my to confirm how much money you are allowed to withdraw from EPF account II to pay for down payment.
From what I have seen, the EPF withdrawal helps a lot of people to own their first house faster, especially for those fresh graduates. Besides, the money invested in their first house is usually able to have better ROI instead of putting their money in EPF. It is mainly due to the property capital appreciation and effects of leveraging.
Are You Ready?
Everyone wish to own their dream house and most probably it is the most expensive investment in life for many of us. Any mortgage commitment might easily burden your monthly cash flow for 25 to 30 years. Therefore, it is extremely important to know are you ready to buy your first home. Hope these three simple questions will help you to have better brainstorming.