You’re single and looking for a home with no more than RM 1,500 as mortgage repayments? Read this:
We tend to nag about the prices of properties of late. The price will never be right in accordance to our whims and fancies. If you have an average income of RM 3,000 to RM 4,500 and still whining about how erratic the market is, here are some tips in making that ‘big move’ possible.
Lifestyle Changes – It’s Not Impossible
The first thing that any experienced homeowner would say, “Change your lifestyle” whenever affordability comes into question. Young adults are now occupied in maintaining appearances as well as jetting off for holidays in ensuring a respectable social status. But for keen home owners, expanses for such lifestyle need to be on the chopping block and to be deterred immediately.
In fact, 2/3 of a young adult’s salary is spent on food, leisure, entertainment and repaying debts. An estimated 23,366 youths aged below 34 from 95,799 people were declared bankrupt from 2012 to August 2016. Bad debts like car loans, personal loans and credit cards are said to be the root causes to premature bankruptcies.
There are numerous unnecessary expenditures that can be avoided, which include:
Malaysians notoriously spent RM 6.8 bio within 2016 to 2017 on smartphones. Meanwhile, technology enthusiasts would easily splurge up to RM 3,000 or even more for Apple’s latest gadget every quarter. Imagine saving all those money for a home?
And if you are now splashing RM 800 – RM 1,000 for room rental in a posh high-rise development, well you aren’t that far off from paying an actual monthly mortgage for your own home.
If you could put aside RM 20 daily for that all-round Europe trip in December, you are definitely capable to come up with RM 20,000 for down payment of a condo unit and even for a small scaled landed property.
And imagine how much you can save from those monthly gym fees by owning an affordable condominium unit that comes with fitness facilities?
These unnecessary expanses are the root causes of why young adults are living paycheque to paycheque and can’t afford to purchase a home. Imagine eliminating all of them?
Dreamers Versus Realists
Dreaming is not necessarily bad for home seekers. But if it clouds one’s better and realistic judgement, then dreamers should immediately stop dreaming and start being realists. We all do dream of a house with white picket fences, lavished with great aesthetic vision and contemporary décor to the delight of many. What you want in most cases aren’t necessarily what you need in real life.
Getting a home based on one’s income needs fact checking above everything else. Monthly mortgages should at least be 35% of your pretax income. Hence, those with average salary of RM 3,500 to RM 4,500 could opt for homes from and below RM 400,000 in order to pay at least RM 1,500 for monthly repayments.
If you need to fork out deposit payments, do opt for your EPF Account 2. Deposits would normally cost you 10% from the home purchase price. Hence, RM 40,000 to RM 45,000 would be the ideal amount to have in your Account 2. Other than that, you also need to put aside extra stash of cash for stamp duty, lawyer’s fees and even renovation.
On a brighter note, property overhang is now a major problem facing by the market and the ball can be in the buyer’s court. Developers are now throwing in ‘never seen before’ packages, which include down payment as low as RM 5,000 or even ‘buy now and pay later’ schemes to lure buyers to buy. If you are cash strapped or have insufficient fund, do look out for these offers.
The Art of Give and Take
Being a home buyer on a tight budget, one must learn the art of give and take. In this scenario, you would do the giving more than the taking.
If you are seeking for bigger space, you would have to stay farther from the town or city center. Hence, longer commute will be the biggest sacrifice that you need to do especially if you are working in the city center itself.
If you don’t possess any form of vehicle, then developments within the proximity of public transportation would be the place to go. Do avoid properties within the city center as the price would spike vastly. For an instance, if you are working within KLCC, you would most likely take the LRT to work. Find areas with the same rail connection but located farther from the central area.
Show Me the Money!
Perhaps additional income just might do the trick in easing the financial woes. Uber and GrabCar are gaining popularity among young adults in terms of earning the extra cash. One could earn right up to RM1,200 monthly on a part time basis. Meanwhile, online businesses such F&B based businesses (baking and food delivery) as well as fashion retail are doable, sustainable as well as flexible.
On the other hand, you must not neglect your personal debts despite having these additional incomes. Personal debts must be at bare minimum. Its total should be within the range of RM 500-RM 600, max.
Hence, limiting credit cards expenditures and hopefully eliminating ongoing rental payments could help in making this possible. Most importantly, take time to clear off your debts, at least a year before applying for a home loan. You still need to have a credible credit score to avoid loan rejection.