If You're Buying Your First Home, Here's How This Government Scheme Can Help
The government has allocated RM200 million to people who are planning to own their first house.
By John Lim — 20 May 2016, 07:17 PM
According to Bank Negara's Annual Report in 2015, house prices in Malaysia are two times more than the ideal housing prices in key urban areas
House prices are deemed “seriously unaffordable”, while houses in Kuala Lumpur and Pulau Pinang take it a step further by being “severely unaffordable”.
In light of this, the government has pumped in a total of RM200 million into MyDeposit - a financial scheme that aims to help first time home owners
Announced on 23 October 2015, MyDeposit aims to provide financial aid to first-time homeowners, with an RM200 million allocation.
However, this scheme comes with conditions, given that it is targeted at a small target group of people. For starters, it would only help foot 10% of the downpayment.
The payment will go up to a maximum amount of RM30,000.
As for eligibility, only Malaysians over the age of 21 with a gross income of RM3,000 to RM10,000 a month
Applicants also have to be first-time property owners and able to receive financing from banks.
Aside from applicants, there are conditions set for the properties too
The price of the property has to be RM500,000 and below. It also must be sub sale. Applicants can only sell the property 10 years after the sales and purchase agreement date.
The property should not fall under any other category of government initiatives to encourage home ownership, such as 1Malaysia Civil Servants' Housing Programme (PPA1M) and 1Malaysia Housing Programme (PR1MA).
Lastly, sale and purchase agreement must be signed within 30 days upon receiving approval from MyDeposit.
MyDeposit is a good initiative that doesn't only benefit first-time home owners, it would benefit the government too!
With down payment being taken care of, home buyers can afford to buy a house without draining cash reserve, and keep cash, especially for future monthly loan payment.
As for the government, by giving out RM200 million to MyDeposit, the home buyers would potentially generate a total spending worth at least RM2 billion (assuming all properties are priced at RM300,000) in the property market. If this initiative is being rolled out regularly in the long term, it would provide a boost in domestic spending, and drive economic growth.
However, the scheme might pose some problems too, especially with the low average income and increasing government debt
According to Bank Negara, the middle-income class with an average income of RM5,662 can only afford a house worth approximately RM 240,000, assuming they do not have existing loans and use all residual income to pay mortgage loans without saving a single cent every month. Coupled with a stagnant economy and high property price, this may not be a good time to buy a house.
In conclusion, this is still a good initiative to help citizens who are really eager to own a house since property prices are pretty high at the moment
This article was first published on Loanstreet, an independent loan and credit card comparison website and loan application service. Visit Loanstreet to calculate your loan eligibility and apply for the best deals from leading banks.