How to buy RM600K property with nett income at RM4000?

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“Buying a home right now will be the best opportunity in your lifetime”

~Warren Buffet

Indeed, majority of the people will buy a house once a lifetime. A house is an asset, a place for shelter and a money-making platform. Whether it’s to buy for your own stay or used as an investment, it will be one of a milestone in anyone’s life.

The mentality behind “I want to wait until the price drop, it will be the perfect time to buy” may not be the wisest decision. You should have a target location and find something within the budget that you have. It’s all about negotiating the right prices. 

The economy has a peak and trough. The same goes for the property market. And even on a soft market, property prices are going up especially properties listed on the secondary market.

We’ll show you how you can afford an RM600,000 property if you’re earning nett RM4,000 (after EPF/Socso) income a month.

Did you know?

According to Lim Guan Eng, there is an overhang supply of condominiums and apartments that amounted to RM8.3bil. That’s also why government had to take procure action reducing threshold for foreigners, which is from RM1Mil to RM600K. 

Read about what Budget 2020 has in stall for property buyers here:

The calculation below will show, by having a minimum Nett Salary of RM4000 a month, you would be able to afford a RM600,000 property.

1. First of all, you will need to know your total nett income.

Nett income can be calculated by using the formula below:

Nett income = Gross Income – Deductions (KWSP, SOCSO, Income Tax)

For example:

Mr. Lee is a marketing executive. His salary is RM4700 per month.

Nett salary = RM4700 – RM687.95 (KWSP, SOCSO, EIS, Income Tax)

Nett salary = RM4012.5

2. Calculate your DSR 

The debt service ratio is a calculation of your total monthly installment. If you have a car loan or personal loan, this will be calculated in DSR.

Average for the bank, the maximum DSR that you can have is 70%.

As for Mr. Lee, as he does not have debts or a car, his DSR will be approximately there.

70% X RM4012.5 = RM2808.75

So, the RM2808.75 should be your monthly commitment towards the housing loan.

So, with the RM2808.75 monthly commitment, what is the price of a property that you can afford to buy?

3. According to Loan Street, with the monthly installment at RM2808.75, property that you can afford to buy is RM613,406.17

Monthly Installment Plan Based On Nett Income at RM4012.5. By LoanStreet Calculator.

Before you choose which to property to buy, you should find out how much you can afford the loan. This step is especially important, so that morning you will not waste your time looking for a property that will not match your affordability.

Check with your preferred bank or you can check at Loan Calculator for the exact amount that you can afford.

For first time home buyers, the Government introduced a few schemes that will help people buying their first property.

Normally, 10% of the price of the property was required to pay the stamp duty and legal fee. In addition, you also need additional thousands of ringgit to pay the unexpected such as renovation and overdue bills.

With the government schemes, don’t worry about upfront. The government gives up to 110% to help people own the property.

Below are the schemes that will be big advantages for first time home buyers.

1. BSN MyHome (Program Perumahan Rakyat)

BSN MyHome (Program Perumahan Rakyat) is designed to help those who are self-employed or with irregular income to own a home. They provided financing up to RM300K.

Get the full detail by visiting the nearest branch or visit BSN MyHome (Program Perumahan Rakyat)

2. Skim Pembiayaan Deposit Rumah Pertama (MyDeposit)

The scheme is opened since 6 April 2016. It’s meant to help M40 group own first property by providing the deposit payment. The financing provided up to RM500,000.

Get the full details by visiting Skim Pembiayaan Rumah Pertama (MyDeposit)

3. Skim Rumah Pertamaku (SRP) – My First Home Scheme

Skim Rumah Pertamaku (SRP) – My First Home Scheme is a homeownership initiative that was first announced in the 2011 Budget by the Government of Malaysia.

It meant to assist first-time house buyers earning a gross monthly household income of up to RM10,000 (subject to RM5,000 per applicant) to purchase their first home.

Get the full detail here Skim Rumah Pertamaku (SRP) – My First Home Scheme

To summarize, know yourself first by understanding your affordability. Always consult a good banker to help you calculate your loan affordability. It might turn out that you can afford more than you thought.

In addition, seek out the various schemes introduced by the government to help first time home buyers.

Let us know in the comments if you’d like us to cover more about the said schemes above, we’ll put it out in the pipeline coming next on TheRoofTalks.

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