5 Mistakes Young Homebuyers Make
Let’s avoid it together, shall we?
Admit it: you’re young, you’re ready to invest in property but you’re oh-so-lost because no one ever taught you how to dabble in this real estate business! But hey, you have the funds to buy a house so everything should be fine, right? I mean, a house is an investment after all.
Well, my good fellow, we believe that a house is an investment only when everything is done right. One mistake, and it could be a liability. So, let’s avoid that situation, shall we?
Here are 5 mistakes to avoid as a young homebuyer!
1. Low down-payment
While there are developers that offer 0% down-payment to home buyers, it really is not the best choice to make despite how attractive it sounds. While that may be a good idea for a short-term investment, it’s not a risk you should take.
Paying a lower down payment will result in higher monthly mortgage. Think about it, would you rather break your bank once or stress about a high mortgage monthly?
Picture this: You are loaning RM600,000 from the bank with zero downpayment and an annual interest rate of 3.5% for 30 years. Putting your down payment below 20%, you will need to pay for PMI (Private Mortgage Insurance). All in all, your monthly mortgage will be about RM3,024.27 including PMI and Principal & Interest. Yikes.
So, consider making sure your down payment helps you secure a payment you’re comfortable making every month. Find out your budget for mortgage here.
Image via Vakil Housing
2. Not revising credit reports and correcting errors
Loans will always come with an interest rate. Thus, before getting your mortgage loan, be sure to check and correct your credit reports.
A credit report with errors may cause you to be charged with a higher interest rate than what you can afford. So, to avoid this mistake, borrowers can request for a credit report only from Bank Negara called The Central Credit Reference Information System (CCRIS) at no cost. The CCRIS is a centralised database which offers an understanding of a borrower’s financial loan payment record.
However, a CCRIS report does not give a direct credit score or rating. It does include a relevant and comprehensive history of credit which lenders and financial institutions can assess, such as credit card debts, house loans, car loans, personal loans, etc. This information is important for banks to scrutinise evidence on steady repayment.
Additionally, if one bank rejects your loan application due to a negative credit score, doesn’t mean another will. This is where you should pay attention to fixing errors in your credit report so as to avoid paying more once your loan gets pre-approved!
Image via SME loan
3. Turning a blind eye to first-time homebuyer benefits
Have you ever tried food delivery apps? First-time users get the benefit of little or no delivery fees for the first few orders. Well, the same concept applies to first-time homebuyers! Buying a home comes with a lot of incentives, especially for new homebuyers.
The Malaysian government has introduced certain programs that can benefit first-time homebuyers such as Skim Rumah Pertamaku (The My First Home Scheme) which will allow homebuyers to receive a facility of 100% loan from banks on properties esteemed somewhere in the range of RM100,000 to RM400,000.
For those living, working or born in the federal states, there are also the Residensi Wilayah, Rumah Selangorku and Rumah PR1MA (including Northern states, Melaka, Sabah and Sarawak) initiatives to ease your home ownership.
4. Not having extra savings
Whether you buy a new home or a previously owned home, always make sure you save up more than the amount of the mortgage loan and interests.
Additionally, what people don’t tell you about buying a house are the hidden fees! When buying a home, you should know that you will need to have some extra cash on the side to pay for loan agreement legal fees which is an estimated 2-3% of the loan amount, the valuation fee (0.5% from the loan amount), mortgage insurance, assessment tax and the quit rent including maintenance, insurances and utility bills such as electrical and water bills.
In conclusion: Buying property will be bank-breaking, but eased with home ownership programs and incentives. Home buyers should also take initiative to have at least 6 months worth of savings for emergency cases.
Image via Insurance Portal
5. Not surveying mortgage rates before surveying for a house
While it may be fun to survey for houses, young homebuyers should be sure to survey houses that are within their allocated budget. We wouldn’t want to fall in love with a house, and then get disappointed when we can’t afford it. When buying a home, making sure the condition and environment is worth the price is crucial. It is a big investment, and regretting it when the deal is sealed is as useful as crying over spilt milk. Get your loan pre-approved, and then start surveying for the home of your dreams!
If you have any interesting first-time home buying experiences or tips, let us know at email@example.com.
Cover image via Moving.com