The median household income in Malaysia in 2014 was RM4,585 a month, and an affordable home for such a middle-income family should be at RM165,000.
However, the sad truth is, houses with enough space for a family at that price point is very hard to come by. In Petaling Jaya, a 850-square-foot apartment with three bedrooms, cost about RM205,000. That’s RM40,000 above the affordable price point.
Housing affordability leaves the biggest impact on middle income households, not just in Malaysia, but also around the world. It is a major concern, especially in developed countries.
The biggest amount in any household budget is housing, and with prices of residential properties skyrocketing in Malaysia at a much faster pace than household incomes, Malaysians are finding it increasingly difficult to own a roof over their head.
The Government has implemented many initiatives to control the escalating property prices, from cooling measures to stop speculation, to financial aids to help the lower- and middle-income groups to be able to afford their first home.
One of the most recent effort is the MyDeposit scheme, which was launched by the Prime Minister Datuk Seri Najib Tun Razak earlier this month.
What is MyDeposit scheme?
The MyDeposit scheme was first announced in Budget 2016 last October. It aims to help the lower-and middle-income groups, with a household income of RM10,000 and below, to purchase their first home.
This is perfect for those who are struggling to save up enough to cover the down payment of a property. For first-time property buyer, whose finances is in the pink of health, they are typically offered a 90% property loan. Hence, the shortfall of 10% is paid in cash by the buyer as down payment.
Other than the 10% down payment, buyer will also have to fork out about 5% additional to cover miscellaneous costs such as legal fees and stamp duty. It is always recommended for home buyers to have about 20% of cash to cover down payment and these miscellaneous fees.
This means RM60,000 for a RM300,000 home. That’s a lot of money to save up!
The Government understands the difficulty faced by first-time home buyers, and hence, about RM200 million has been allocated for the MyDeposit scheme. This scheme essentially helps first-time home buyers cover the 10% of down payment, or a maximum of RM30,000, whichever is lower.
If you are purchasing a RM500,000 property, you will still need to come up with RM20,000 cash on your own, on top of the RM30,000 covered by MyDeposit scheme.
However, this scheme is limited to eligible home buyers looking to purchase residential properties priced at RM500,000 and below.
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What are the key concerns?
The scheme is undoubtedly a game changer for many lower- to middle-income groups, but there are a few danger areas that applicants must be aware of.
The 30-day period to sign the Sales & Purchase Agreement can be quite tight and will require applicants to follow-up closely with their lawyers to expedite the process. This also means applicants must do all the necessary property shopping and viewing prior to MyDeposit applications. The application approval process will take about two months.
All negotiations of prices must be done, and the seller or developer must be informed of your intention to apply for the MyDeposit scheme.
Buying a home with the MyDeposit scheme does not mean you can buy a home cash-free. You will still need to ensure you have enough cash to pay for the legal fees and other miscellaneous costs , and also enough cash to pay for the booking fee.
Before you get the lawyers to draft the Sales & Purchase Agreement, which should be done before the approval of the MyDeposit application, you will need to pay a 2% to 3% booking fee to the developer/real estate agent, so the seller would not sell the property to anyone else.
Upon receiving the approval for MyDeposit, you are required to sign the Sales & Purchase Agreement within 30 days, from the date of the approval. Failing to sign the Sales & Purchase Agreement within the 30 days, will result in the buyer forking out the full down payment amount.
This can be quite risky as all proceedings have already been kick started with the lawyers (seller and buyer). Don’t forget, all the costs that you have already incurred with the booking fee, legal fees, stamp duty and other costs of buying a property.
However, if you are confident that you will get the approval for the scheme, here’s how you are going to get it.
Who is eligible for the MyDeposit scheme?
The Ministry of Urban Wellbeing, Housing and Local Government has been tasked to establish a screening process for the scheme based on the following eligibility criteria.
Image from German Embassy Colombo
Applicants for MyDeposit scheme must be:
- A Malaysian citizen
- 21 years old and above (No maximum age)
- First-time home buyer within one household family
- Earning a gross household income of below RM10,000 a month (This includes all income be it from employment, business, wage, commission, bonus and other allowances.)
- Purchasing a property priced at RM500,000 or less
- Eligible for a bank loan from any bank in Malaysia (credit worthy, not blacklisted, or bankrupt)
The supporting documents you need for the application are:
- A copy of your identity card
- A copy of your spouse’s identity card
- A copy of your child(ren) or dependent(s) identity card or birth certificate
- A copy of your marriage certificate/divorce certificate/death certificate
- Your latest salary slip
- Your spouse’s latest salary slip
- Your Employees Provident Fund (EPF) statement or income tax statement
- Your spouse’s Employees Provident Fund (EPF) statement or income tax statement
- Statutory declaration of your and your spouse’s total business income that is verified by the Commissioner of Oaths
- Employment confirmation letter from your employer stating your employment/service status, marital status, monthly salary and duration of service.
- Employment confirmation letter from your spouse’s employer stating your employment/service status, marital status, monthly salary and duration of service.
- Disability confirmation letter for you, spouse or dependent (if relevant).
How can I apply for MyDeposit?
If you fulfil the above application criteria, you can apply for the scheme online. Here’s a step-by-step guide on how to apply:
- Go to National Housing Department website (http://sprn.kpkt.gov.my/sprn/).
- Click on PERMOHONAN BARU on the top right corner of the webpage.
- Fill up the form with your full name, identity card number, email address and your desired password. Then click on PENDAFTARAN PERMOHONAN below the form.
- Once you have created your account, you will be logged in automatically. Hover over the MYDEPOSIT tab, and click on PERMOHONAN BARU in the drop-down menu.
- Once you are on BORANG PERMOHONAN MYDEPOSIT, you will need to fill in all your details, and upload a copy of your identity card.
- If you are married, you will need to upload a copy of your marriage certificate.
- Married applicants also have to fill up details about their spouse, and upload a copy of the spouse’s identity card.
- Complete all the tabs under the form which include information on income, dependents, preferable property, and lastly you will need to upload both your and your spouse’s CCRIS report.
Want to find out more about how to get your CCRIS report? Go here.
- Once you have completed the form with all the required documents uploaded, click on HANTAR to submit your application.
- You can check the status of your application by hovering over the MYDEPOSIT tab, and clicking on the SEMAKAN PERMOHONAN option in the drop-down menu.
- After the screening process, if your application is approved, the Ministry will issue an approval letter to the application with a condition that the Sale & Purchase Agreement must be signed within 30 days.
- Agreement to the MyDeposit scheme:
12a. For new licensed property project, the developer has to agree to deposit payment by the buyer through the MyDeposit scheme. At the same time, buyer has to apply for a home loan.
12b. For sub-sale property or property from the secondary market, seller has to agree to deposit payment by the buyer through the MyDeposit scheme. At the same time, buyer has to apply for a home loan.
- Buyer and seller sign the Sales & Purchase Agreement, and buyer also signs the Offer Letter for Approval of Home Loan.
- Buyer submit request for deposit payment from the Government. Submission must be supported with the following documents:
- Offer Letter issued by the National Housing Department.
- A complete and signed Letter of Acceptance of Offer
- A complete and signed Statutory declaration
- Sales & Purchase Agreement
- An acknowledged Letter of Offer for your housing loan
- Banking account details of the Housing Developer Account or the account of the buyer’s sales & purchase law firm
- Disbursement of deposit payment from MyDeposit scheme:
15a. For new licensed property project, deposit will be transferred to the Developer’s Account.
15b. For sub-sale property or property from the secondary market, deposit will be transferred to the Account of Seller’s Sale & Purchase Lawyer.
- The project will be monitored by the Ministry, and Moratorium will be effective and included in the Sales & Purchase agreement.
What are the restrictions to the property?
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To ensure that the MyDeposit scheme is not abused by property speculators looking for fast cash by flipping properties, there are some restrictions on the properties bought under the MyDeposit scheme.
- First of all, the property purchases applied for MyDeposit scheme must be from licensed development projects of residential properties.
- MyDeposit scheme also allows residential properties in the secondary market.
Find out what are the differences between development projects (under construction) and properties in the secondary market (sub-sale).
- Property price must be RM500,000 or below.
- Only applicable to private residential properties development that do not receive subsidy/incentive or Government funds.
- Properties bought with MyDeposit scheme cannot be sold for 10 years, from the date of the Sales & Purchase Agreement. This clause will be added in the Sales & Purchase Agreement.
Getting all your ducks in a row before the application is crucial to ensure no time is wasted by the time your scheme is approved. With about RM200 million allocated, there should be at least 6,666 applicants benefiting from the scheme. This is definitely a step towards the right direction.
