Various Hidden Costs That Come with Homeownership in Malaysia

What are the hidden costs of owning a home in Malaysia?

They say buying a house is a harder decision to make than choosing where to eat for lunch. It's not just about finding the perfect space to call your own, it's about understanding the financial responsibilities that come with homeownership. We do know that buying a property is an exciting venture and monumental step, but the anticipation of becoming a homeowner, it's crucial to be prepared for the various hidden costs that come with homeownership in Malaysia. 

 

Other than the purchase price, there are several hidden expenses that can catch homeowner off guard. In this guide, PropertyGenie will help you to understand and budgeting for additional hidden expenses to ensure a smooth financial planning to buy a home in Malaysia.

5 Hidden Costs of Owning a Home in Malaysia

Upfront Fees and Charges

When purchasing a property, there are various upfront fees and charges that homeowner need to budget for. These include:

• Sale & Purchase Agreement (SPA)
  • Legal fees
  • Stamp duty
  • Legal disbursement fees

(Exemption Stamp Duty for First Home Buyers)

• Loan agreement
  • Legal fees
  • Stamp duty
  • Legal disbursement fees

• Transfer of ownership aka memorandum of transfer (MOT)
  • Fee
  • Stamp duty
• Tax on legal agreements
• Bank administrative charges for your home loan
• Property agent fees (if you made your purchase with the help of any)
• Runner fees (if you used any)

How much exactly that is depends on the price of the property you have purchased and it's crucial to do research and consult with a legal advisor or a property agent to get a clear understanding of the upfront fees and the breakdown of these costs to plan your budget accordingly. 

You can also use our home loan calculator to not only estimate your expected monthly repayment, but also on both loan and SPA stamp duty fee, legal fee.

Utility Deposits and Charges

Another important consideration is setting aside funds for utility deposits and ongoing utility charges. When you move into your new home, it will come with its own set of expenses. Utility companies may require deposits for services such as:

• Electricity (Tenaga Nasional Berhad - TNB)

Tariff A: Domestic Tariff  (Residential tariffs) - The minimum monthly charge is RM3.00

TARIFF CATEGORY	UNIT	CURRENT RATE
For the first 200 kWh (1 - 200 kWh) per month	kWh sen	21.80
For the next 100 kWh (201 - 300 kWh) per month	kWh sen	33.40
For the next 300 kWh (301 - 600 kWh) per month	kWh sen	51.60
For the next 300 kWh (601 - 900 kWh) per month	kWh sen	54.60
For the next kWh (> 901 kWh) per month	kWh sen	57.10

 

• Water (SYABAS)

(Water tariffs) - Deposit RM150 

• Internet
• Gas (if applicable)

Some residences in Malaysia might have gas connections, and you may need to set aside funds for gas deposits and usage charges. Be sure to contact your utility providers in advance to get information on the deposit amounts and payment terms. By understanding these expenses, you can avoid surprises and ensure that you have the necessary funds available to cover the initial setup costs and ongoing utility charges.

Property Taxes and Assessment Fees

 

Property taxes and assessment fees are an ongoing expense that homeowners must budget for. The specific amount you need to pay depends on the location and value of your property. Here's a breakdown of the key components:

• Quit Rent (Cukai Tanah)
  • An annual tax imposed on landowners.
  • The rate varies based on the size and type of property.

• Assessment Tax (Cukai Pintu)
  • An annual tax imposed by local authorities.
  • Based on the annual rental value of the property.
  • The rate can vary between 2% to 7% of the annual rental value.

For example, if the annual rental value of your property is RM24,000 and the assessment tax rate is 5%, you would need to pay RM1,200 annually.

It's important to budget for these taxes and assessment fees to ensure that you meet your financial obligations as a homeowner. Additionally, late payments may result in penalties or legal actions, so it's advisable to stay informed about the payment deadlines and set reminders to make timely payments.

Maintenance and Repairs

 

Maintaining your home is a crucial aspect of homeownership. While it's natural to focus on the initial purchase price, it's equally important to budget for ongoing maintenance and repairs.

When buying a strata or gated community property, where you share common public facilities like the swimming pool and the gym, you are part of a larger private community managed by a strata title owners. 

Apart from mortgage payments, homeowners are often required to contribute to monthly maintenance fees and a sinking fund, for which you have to set aside some cash for the monthly maintenance fee and sinking fund.

The maintenance fees are generally used for the regular maintenance of common facilities. However, the sinking fund is a sudden expense or emergency fund that is used for sudden situations such as elevator breakdowns.

Here are some common expenses to consider:

• General upkeep
  • Regular cleaning and minor repairs to keep your home in good condition.
  • Examples: Repainting, fixing leaks, maintaining plumbing and electrical systems.

• Major repairs
  • Occasional repairs that may require significant investment.
  • Examples: Roof repairs, HVAC system maintenance, structural repairs.

• Homeowner association (HOA) fees (if applicable)
  • If you live in a gated community or a condominium, you may need to pay HOA fees for the maintenance of common areas and shared facilities.
  • The amount varies depending on the property and the amenities provided.

It's advisable to set aside a portion of your budget for maintenance and repairs to avoid unexpected financial burdens. A general rule of thumb is to allocate around 1% to 3% of your property's value annually for maintenance and repairs. By proactively addressing maintenance issues and planning for repairs, you can ensure the longevity and value of your home.

Homeowners Insurance

 

Homeowners insurance is a critical expense that provides protection for your property and belongings against unexpected events. While it may seem like an additional cost, having adequate insurance coverage can save you from significant financial losses in case of damage or accidents. Here are some key points to consider:

Types of coverage

Insurance policy	Covers
Basic fire insurance	Loss or damage of the building or its contents caused by fire, lightning, and explosion.
Houseowner insurance	Same as Basic Fire Policy, with extended coverage such as floods, burst pipes, natural disasters, and theft for residential properties i.e. private dwellings.
Householder insurance	Same as Houseowner Policy, with extended coverage on fatal injuries caused by the insured items.

• Basic coverage: Protection against common risks such as fire, theft, and natural disasters.
  • Additional coverage: Optional coverage for specific risks, such as flood insurance or coverage for valuable items.
• Premiums and deductibles
  • Premiums: The amount you pay for insurance coverage, usually on an annual basis.
  • Deductibles: The amount you need to pay out of pocket before the insurance coverage kicks in.

• Factors influencing premiumsProperty value and location
  • Coverage amount and deductible
  • Security features and safety measures

It's essential to compare insurance providers, understand the coverage options, and choose a policy that suits your needs. By having homeowners insurance, you can have peace of mind knowing that your investment is protected and that you have financial support in case of unforeseen events.

Understanding the various hidden costs of owning a home in Malaysia is crucial for effective financial planning. By budgeting for upfront fees, utility deposits, property taxes, maintenance, and insurance, you can ensure a smooth homeownership experience and avoid unexpected financial challenges. Remember, being prepared for these expenses will not only help you manage your finances but also allow you to enjoy your new home without unnecessary stress.

 

Ready to buy your dream home? Contact PropertyGenie today for expert advice and start planning your budget with our home loan calculator.

Malaysian Property Tax

As a homeowner, you are legally required to pay tax on your property every year. The amount is determined based on the assessed value of your property. There are various taxes associated with owning a property, including:

• Quit rent (Cukai Tanah)
  • Charged by the Land Office for any land you own where your house was constructed
  • On average, quit rent can range from as low as RM50 to RM200 annually for residential properties.

• Real property gains tax (RPGT/LHDN)
  • Tax on the profit from the sale of a property.
  • The tax rate depends on the holding period and varies from 5% to 30%.
  • On average, if you've held the property for more than 5 years, the RPGT rate is typically around 5%.

• Assessment tax (Cukai Pintu)
  • Charged by Majlis Perbandaran, this tax is used to maintain the infrastructures and services in your area.
  • The rate is typically 4% of the annual rental value of the property.
  • On average, assessment tax for a residential property valued at RM500,000 may be around RM800 per year.

• Parcel Tax (Cukai Petak)
  • This is the apartment/condo version of land tax, charged by the Land Office for strata properties
  • On average, parcel tax for strata properties can range from RM100 to RM300 annually.

Understanding these taxes will help you estimate the overall financial commitment associated with homeownership.

 

Buying a property is an exciting venture, but being financially prepared for the hidden costs is essential. At PropertyGenie, we believe in transparency and empowering our users with knowledge to make well-informed decisions. By carefully budgeting for upfront fees, utility charges, property tax, home insurance, and monthly maintenance costs, you'll be well-prepared for the financial responsibilities of homeownership. 

For more insightful tips and guidance on navigating the real estate landscape, explore PropertyGenie. We're here to be your trusted partner on your homeownership journey, ensuring you have the information you need to make the best choices for your future. Happy house hunting!

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