So you’ve secured a mortgage and are looking forward to moving into your first home. Hold your horses, for your home-owning expenses do not end there. It takes more to buy and finance a property than just paying the deposit and home loan.
Many first-time homeowners may be unprepared when they discover that owning a home comes with additional expenses. These are a series of miscellaneous (and often unexpected) hidden homeowner costs.
Here are some top expenses homeowners will need to look out for before settling in.
1. Property assessment tax (cukai pintu)
Property assessment tax or cukai pintu, is imposed by your local authority on every household. This tax is to finance the construction and maintenance of public infrastructure, cleaning services and upgrading works in the area under its jurisdiction.
How is this tax calculated?
It is calculated based on the (estimated) annual rental value of a property (what the property can be reasonably rented for, multiply by 12 months), and then multiplied by a set of rates. This set of rates is determined by local authorities, generally at a rate of 2-7% for residential units.
How do you pay cukai pintu?
It is payable in two instalments annually. This is usually on or before February 28 or 29 (for the period of January to June) for the 1st half. The 2nd half has to be paid on or before August 31 (for the period of July to December).
Let’s say a residential property’s annual rental value amounts to RM12,000 per annum (RM1,000 per month). If the assessment tax rate is at 4%, the tax will amount to RM480 in a year.
Annual rental value of a property varies according to factors such as market rate, location and condition of the property.
2. Quit rent (cukai tanah)
Besides the assessment tax, the other main cost associated with property and land ownership in Malaysia is quit rent or cukai tanah. It is a form of land tax collected by State Governments and is imposed on owners of freehold or leased land.
How do you pay cukai tanah?
The National Land Code makes it compulsory for all landowners to pay quit rent, typically on or before May 31. It is to be paid once a year to the relevant land office.
How is cukai tanah calculated?
The amount of quit rent you need to pay varies from state to state and even within each state. In Kuala Lumpur, the chargeable rate for quit rent is about RM0.035 per square foot per annum. However, the rate may differ for different locations. This is the highest income contributor to the Kuala Lumpur City Council (DBKL).
If you own a 2,500-square-foot terrace house, you will have to pay RM87.50 in quit rent every year. The quit rent payable for residential properties is generally estimated to be less than RM100 per year.
3. Home insurance
Home insurance is also referred to as homeowner insurance, householder insurance or houseowner insurance. It provides coverage for a homeowner from damages caused by theft, natural disasters, accidents, vandalism and other risks.
There are three main types of home insurance policies in Malaysia to protect homeowners, their property and household goods:
a) Homeowners fire insurance policy
This policy covers the loss or damages to your property building and contents caused by fire, lightning and explosion of gas used for domestic purposes only.
b) Homeowners insurance policy
This policy provides additional coverage compared to the basic fire insurance policy. It covers your building, including fixtures and fittings, garages, walls, gates and fences, against specific risks. This may include loss or damage due to flood, burst pipes, theft, windstorm and earthquake.
c) Householders insurance policy
This policy covers your household contents, including moveable possessions, against specific risks. It also provides fatal injury coverage to the person injured. However, it does not cover damage to the house itself.
| Cover/Types | |||
| Damage caused by fire, lightning and explosion (caused by gas used for domestic purposes) | |||
| Damage caused by aircraft, explosion (caused by gas used for non-domestic purposes), vehicles, animals, bursting or overflowing of water tanks or pipes, electrical installations, windstorm, tempest, earthquake, volcanic eruption and flood | |||
| Theft with forced entry | |||
| Loss of rental | |||
| Liability to third parties’ accidents | |||
| Death compensation for the insured | |||
| Subsidence and landslide* | |||
| Riot, strike and malicious damage* |
These policies can be bought separately and/or together. Home insurance is not compulsory, but it will alleviate some of your worries and anxieties, and protect your family against the unexpected.
The type of insurance you should get is dependent on your lifestyle, locality and risk factors. For example, you might want to consider homeowners or householders insurance if floods are a regular occurrence at your area.
4. Mortgage insurance
In Malaysia, there are two types of mortgage insurance available – Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA).
They are basically a form of insurance for your home loan. Both offer protection for the homeowner by helping them settle their outstanding home loan in the event of illness, disability or death.
Despite what your banker might tell you, it is not compulsory to buy MRTA or MLTA, but having mortgage insurance gives you peace of mind and protects your family from the risk of losing a home.
The table below shows the difference between MRTA and MLTA:
| MRTA | MLTA | |
| Purpose | Protection | Protection, saving & cash value |
| Protection | Sum insured reduces according to loan tenure. | Sum insured remains the same on a fixed level sum assured basis. |
| Transferable | No | Yes |
| Nomination | Beneficiary is bank. | Beneficiary can be anyone. |
| Financing | Usually financed into home loan. | Usually self-financed. |
| Payment | Lump sum | Periodic (monthly, quarterly, semi-annually or annually) |
| Premium | Low | High |
| Cash value | None. It has a reducing cash value, which drops to RM0 at the end of the loan tenure. | Yes. It has a fixed cash value (guaranteed) throughout the loan tenure. |
| Claim | Insurance company will pay the loan balance to the bank & the beneficiary will receive the home. | Insurance company will pay the loan balance to the bank & beneficiary will receive the home plus cash. |
How much premium you need to pay for your MRTA or MLTA?
This is subject to your age, loan amount and your loan tenure. The older you are and the higher the loan amount, the more premium you will have to pay. The type of mortgage insurance you require will depend on your needs, number of financial dependents and lifestyle. It usually adds several hundred more ringgit on top of your monthly loan instalment.
Who should buy MRTA?
For instance, MRTA might be more suitable for the single individual with zero financial dependents. However, this is provided that he or she is able to afford the lump sum payment. It is also more suitable for those who are planning to own property for the long term, as MRTA is non-transferable.
Who should get MLTA instead of MRTA?
Meanwhile, MLTA might be more suitable if you have one or more financial dependents. A plus point is, MLTA pays directly to you or your nominee should something bad happen. It also provides accumulation of cash value, which you will be able to access after your loan tenure. The downside is of course, you will have to fork out a bigger premium.
5. Indah Water utility bill
Indah Water Konsortium (IWK) is mainly responsible for operating and maintaining the public sewage treatment plants and network of underground sewerage pipelines.
In 1994, the Federal Government awarded the company the concession for nationwide sewerage services which prior to that, was under the responsibility of local authorities. Since then, IWK has taken over the sewerage services from local authorities in all areas except the states of Kelantan, Sabah, Sarawak and Johor Bahru.
Tariff charges today are in accordance to the Water Services Industry Act 2006. It is also governed by the Water Services Industry (Sewerage Services Charges) Regulations 2022.
For IWK’s sanitary disposal services of household wastes, most urban domestic premises like houses are generally billed RM12 per month (27 sen a day) for sewerage systems that are connected to a public sewage treatment plant. For homes with individual septic tanks, the cost is now RM192 per service.
6. Maintenance fees
If you stay in a strata-titled property, you most probably have to pay for maintenance fees and sinking fund. These are paid to the management office of your property every month.
The maintenance fees are paid to cover general costs, and management costs to upkeep the common areas and the facilities of the condominium.
The sinking fund is paid in advance for any major fixtures, fittings or repairs needed for the building, including painting of the buildings.
Just like quit rent, these fees are calculated based on the size of your property, hence the bigger your condominium is, the larger the payment. However before the sinking fund is used, it has to be upon the majority of votes of the tenants who reside in the building.
An average rate for maintenance fee in the Klang Valley ranges from RM0.30 to over RM0.50 per square foot. A 1,200 square feet condominium may cost you maintenance fees ranging from RM360 to over RM600 a month.
Owning a property is not easy or cheap. After getting over the hurdle of paying the down payment and getting a home loan approved, you still need to continuously fork out money to pay for all these expenses. If there is any repair work that needs to be done (it will definitely happen during your home ownership), that will spell more money out of your pocket.
