So you\u2019ve 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.<\/p>\n
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.<\/p>\n
Here are some top expenses homeowners will need to look out for before settling in.<\/p>\n
Property assessment tax or c<\/i>ukai <\/i>p<\/i>intu<\/i>, 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.<\/p>\nHow is this tax calculated?<\/h4>\n
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.<\/p>\n
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).<\/p>\n
Let’s say a residential property\u2019s annual rental value amounts to RM12,000 per annum (RM1,000 per month). If the assessment tax rate is at 4%, the tax\u00a0 will amount to RM480 in a year.<\/p>\n
Annual rental value of a property varies according to factors such as market rate, location and condition of the property.<\/p>\n
Besides the assessment tax, the other main cost associated with property and land ownership in Malaysia is quit rent or c<\/i>ukai <\/i>t<\/i>anah.<\/i> It is a form of land tax collected by State Governments and is imposed on owners of freehold or leased land.<\/p>\n 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.<\/p>\n 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).<\/p>\n 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.<\/p>\n Home insurance\u00a0 is also referred to as homeowner insurance, householder insurance or houseowner insurance.\u00a0 It provides coverage for a homeowner from damages caused by theft, natural disasters, accidents, vandalism and other risks.<\/p>\n There are three main types of home insurance policies in Malaysia to protect homeowners, their property and household goods:<\/p>\n 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.<\/p>\n 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.<\/p>\n 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.<\/p>\n\n 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.<\/p>\n 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.<\/p>\n In Malaysia, there are two types of mortgage insurance available \u2013 Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA).<\/p>\n 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.<\/p>\n 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.<\/p>\n The table below shows the difference between MRTA and MLTA:<\/p>\n\nHow do you pay cukai tanah<\/em>?<\/h4>\n
How is cukai tanah<\/em> calculated?<\/h4>\n
<\/span>3.\u00a0<\/b>Home <\/b>i<\/b>nsurance<\/b><\/span><\/h2>\n
a)\u00a0\u00a0\u00a0 Homeowners fire insurance policy<\/h4>\n
b)\u00a0\u00a0\u00a0 Homeowners insurance policy<\/h4>\n
c)\u00a0\u00a0\u00a0 Householders insurance policy<\/h4>\n
\n\n
\n\t Cover\/Types<\/td> \n\t Damage caused by fire, lightning and explosion (caused by gas used for domestic purposes)<\/td> \n\t 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<\/td> \n\t Theft with forced entry <\/td> \n\t Loss of rental<\/td> \n\t Liability to third parties\u2019 accidents <\/td> \n\t Death compensation for the insured<\/td> \n\t Subsidence and landslide*<\/td> \n\t Riot, strike and malicious damage*<\/td> <\/span>4.\u00a0<\/b>Mortgage insurance<\/b><\/span><\/h2>\n
\n\n
\n\t <\/td> MRTA<\/td> MLTA<\/td>\n<\/tr>\n \n\t Purpose<\/td> Protection<\/td> Protection, saving & cash value<\/td>\n<\/tr>\n \n\t Protection<\/td> Sum insured reduces according to loan tenure.<\/td> Sum insured remains the same on a fixed level sum assured basis.<\/td>\n<\/tr>\n \n\t Transferable<\/td> No<\/td> Yes<\/td>\n<\/tr>\n \n\t Nomination<\/td> Beneficiary is bank.<\/td> Beneficiary can be anyone.<\/td>\n<\/tr>\n \n\t Financing<\/td> Usually financed into home loan. <\/td> Usually self-financed.<\/td>\n<\/tr>\n \n\t Payment<\/td> Lump sum<\/td> Periodic (monthly, quarterly, semi-annually or annually)<\/td>\n<\/tr>\n \n\t Premium<\/td> Low<\/td> High<\/td>\n<\/tr>\n \n\t Cash value<\/td> None. It has a reducing cash value, which drops to RM0 at the end of the loan tenure. <\/td> Yes. It has a fixed cash value (guaranteed) throughout the loan tenure. <\/td>\n<\/tr>\n \n\t Claim<\/td> Insurance company will pay the loan balance to the bank & the beneficiary will receive the home. <\/td> Insurance company will pay the loan balance to the bank & beneficiary will receive the home plus cash. <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n How much premium you need to pay for your MRTA or MLTA?<\/h4>\n