Frequently asked questions
General
► Q1. How do I choose a developer?
Q1. How do I choose a developer?
If you are thinking of buying a property under construction, it is important for you to choose a property developer that you can trust. The main criteria to be taken into consideration include the reputation of the developer, whether it has valid licenses and advertising permits, financial strength, delivery time, track record, after-sales service and whether the maintenance charges for condominiums/apartments are reasonable. The developer's track record is crucial as its past development projects can act as an indicator of what you may expect from it, in the future.
► Q2. Where are the current hotspots?
Q2. Where are the current hotspots?
Demand for properties is highest in big towns and cities. In the Klang Valley, areas in great demand include Kuala Lumpur City Center (KLCC), the Golden Triangle, Bukit Bintang, Ampang, Mont Kiara, Sri Hartamas, Bangsar, Damansara Heights, Kenny Hills, Taman Tun Dr Ismail and Bandar Utama. Foreign investors, in particular, usually target these areas as lucrative investment opportunities.
Other areas that enjoy increasing local interest include Kota Damansara, Mutiara Damansara, Ara Damansara, Putra Heighs, Puchong and Kota Kemuning.
► Q3. How and where do I start?
Q3. How and where do I start?
One of the most frequently asked questions is: "How and where do I start?" Your best bet would be to read and educate yourself about property investment. Attend talks and seminars, where you can learn from the experts by listening to the tips and advice shared with you. Property investment has a lot to do with common sense and sourcing for the right information.
► Q4. How much can I afford?
Q4. How much can I afford?
This depends on your disposable income and other financial obligations. The general rule of thumb for most property buyers is somewhere between two (2) and two-and-a-half (2 ½) times one's annual income. Generally, financial institutions extend loans on the basis that tile monthly loan repayment does not exceed one-third (1/3) of one's gross monthly income. It also takes into account other debt payments such as car loan(s) and credit card repayments.
► Q5. What is the benefit of buying instead of renting?
Q5. What is the benefit of buying instead of renting?
It is usually more advisable to buy instead of to rent - property, as the total monthly installments are usually comparable to the amount paid in rentals. More importantly, the property actually belongs to the buyer, once the mortgage is fully settled. However, renting out a property for investment purposes also has its merits, with certain developers even guaranteeing rental returns on select properties. Some even go to the extent of setting up management companies that actually assist investors to maintain the properties, and ensure that they are rented out.
► Q6. How long does the loan process take?
Q6. How long does the loan process take?
It usually takes about 2 weeks for the loan application to be approved after all the relevant documents are presented. To avoid delays in the approval process, obtain a checklist from the institution and submit all relevant documents. Usually the disbursement of payments takes longer as the bank has to wait for all relevant approvals, before it can release the final payment to the seller.
► Q7. Why do I need a valuation?
Q7. Why do I need a valuation?
A valuation is required by the bank for all completed properties to ensure that the property provides sufficient security for the loan applied for. It also provides an indication that the property is worth the purchase price.
► Q8. Do I need to appoint a lawyer?
Q8. Do I need to appoint a lawyer?
Yes, a lawyer has to be appointed to draw up the loan documentation. In Malaysia, the bank will usually provide you with a panel of lawyers that you can choose from. If you wish to engage your own law firm that is not on the panel, you are advised to discuss it with your financial institution.
► Q9. Who pays the legal fees?
Q9. Who pays the legal fees?
Generally, the legal fees are borne by the buyer. Some developers and banks do, however, offer a waiver on the legal fees documentation as part of their marketing packages. For a secondary (second-hand) property, both the buyer and seller are expected to bear the cost of the Sales & Purchase (S&P) Agreement, where they can either appoint different lawyers or employ the services of the same legal firm.
► Q10. Why does my outstanding loan remain high at the initial stage despite the regular repayments?
Q10. Why does my outstanding loan remain high at the initial stage despite the regular repayments?
During the initial years of your loan, a significant amount of the monthly repayments go toward the interest payments. So if you make partial payments to repay the principal outstanding sum, you make substantial savings in your interest payments and shorten your loan tenure at the same time.
► Q11. Do I need a guarantor for a loan facility?
Q11. Do I need a guarantor for a loan facility?
This is at the discretion of the bank and usually depends on the credit standing of the borrower.
► Q12. When does the bank release the loan to the developer/seller?
Q12. When does the bank release the loan to the developer/seller?
For properties under construction, the bank will release the progressive payments to the developer based on the claim made upon completion of each construction stage, certified by the relevant body. For completion properties, the loan will automatically be released upon completion of legal documentation and the approval of the relevant authorities.
► Q13. If the developer abandons the project, am I still required to service my installment payments?
Q13. If the developer abandons the project, am I still required to service my installment payments?
Yes, you are still obliged to service the loan based on the loan agreement signed between you and the bank. However, since the bank has vested interest in the property, you can discuss a flexible repayment plan with the bank. Ensure as well that you report the matter to the Ministry of Housing & Local Government (in Malaysia).
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