Buying your first property in Malaysia is an exhilarating step towards homeownership, but it often comes with unexpected financial hurdles.
While you might have your mortgage approval in hand and a picturesque neighborhood picked out, less-discussed costs like the Sale and Purchase Agreement (SPA) fees, tenancy agreement stamp duty, and legal fees can throw a wrench in your plans.
This article will delve into these essential expenses to help you prepare a comprehensive budget for buying property in Malaysia in 2024.
Essential Costs of Buying Your First Property in Malaysia: A 2024 Guide
A Sale and Purchase Agreement (SPA) is a legally binding agreement between a seller and a buyer. It outlines the details of the transaction, such as terms and conditions, the price of the property, and all the important details the seller should know.
The SPA is a mutual agreement between both parties. Hence, it cannot be further negotiated or amended, and canceling it will result in a 10% penalty on the purchase price. Always make sure you fully understand it before signing on the dotted line!
The SPA also contains other details, such as the manner of payment, defect liability period, house/unit plan, vacant possession, and various clauses.
Stamp duty is also known as a transactional tax, or fee, for stamping transactional documents such as loan agreements, tenancy agreements, and records pertaining to property transfer, including the SPA!
It’s also a legal requirement that it be stamped within 30 days of the signing of the SPA. Otherwise, you will need to pay a penalty of 5%- 20% of the deficient duty.
Infographic on the sale and purchase agreement, stamp duty, and legal fees for purchasing a property in Malaysia 2020.
For Instrument of Transfer – Memorandum of Transfer (MOT) or Deed of Assignment (DOA):
| Price of Property | Percentage |
|---|---|
| First RM100,000 | 1% |
| RM100,001 – RM500,000 | 2% |
| RM500,001 – RM1,000,000 | 3% |
| Above RM1,000,001 | 4% |
For example, the purchase of a property worth RM500,000 would put you in the first two tiers, hence, 1% of RM100,000 and 2% of RM400,000.
The stamp duty for a Sale and Purchase Agreement is often mistaken for the stamp duty for an Instrument of Transfer. The stamp duty for the SPA is only RM10 per copy, while the stamp duty for MOT and DOA is calculated according to a fee structure of 1% to 4%.
Stamp duty also applies to loan agreements, but it is capped at a maximum rate of 0.5% of the full value of the loan.
By purchasing an RM500,000 property with a 90% loan (since 10% of it will be the down payment), the loan amount would be RM450,000.
Legal fees are part of the SPA and are a charge for engaging legal assistance for the purchase of a property. Typically, the solicitor will be assigned by the seller, but should the buyer choose to pick their representative, it is allowed.
At times, developers may also choose to absorb the legal fees to reduce the buyer’s financial worries.
The new legal fees has been implemented on 15th July, 2023 as below.
| Consideration / Loan Value | SRO 2023 |
|---|---|
| Scale of fees for SPA and Loan Agreement | |
| First RM500,000 | 1.25% (subject to minimum of RM500) |
| For the next RM7,000,000 | 1.00% |
| Where the consideration / loan sum is in excess of RM7,500,000 | Subject to negotiation on the excess but shall not exceed 1% of such excess |
| Discount eligible for SPA / Loan Agreement under the Housing Development (Control & Licensing) Act (‘HDA’) | |
| RM500, if consideration / loan is RM50,000 or below | |
| 75% of the applicable fee if consideration / loan is more than RM50,000 but less than RM250,000 | |
| 70% of the applicable fee if consideration / loan is more than RM250,000 but less than RM500,000 | |
| 65% of the applicable fee if consideration / loan is more than RM500,000 but less than RM1,000,000 | |
| 50% of the applicable fee if consideration / loan is more than RM1,000,000 |
Check here for the Legal and Valuation Fees Calculator helps you estimate these expenses, allowing for more accurate financial planning.
During the tabling of Budget 2023, the Malaysian government announced stamp duty exemptions for first-time homebuyers!
The full stamp duty exemption will be given to both instruments of transfer and loan agreement for the purchase of a first home worth RM500,000 and below until 2025.
Yup, that means it’s a full exemption for the stamp duty on both the instrument of transfer and loan agreement if your property price is RM500,000 and below!
That’s a maximum of RM11,250 savings! The detailed calculation is as follows:
Stamp duty for instrument of transfer + Stamp duty on loan agreement = Total stamp duty to be paid
[(First RM100,000 x 1%) + (Next RM400,000 x 2%)] + 0.5% of the loan amount, assuming 90% of property price (RM450,000)
= (RM1,000 + RM8,000) + (0.5% x RM450,000)
= RM9,000 + RM2,250
= RM11,250
In summary, purchasing property can involve various hidden costs, including legal fees and stamp duty. These costs can disrupt your budget if not accounted for.
Understanding these potential expenses is crucial and should be integrated into your budget plan. The good news is that the Malaysian government offers stamp duty exemptions for first-time homebuyers, leading to significant savings.
By staying informed and prepared, you can navigate the home-buying process more efficiently and make your dream of owning a home come true.
For a deeper dive into ensuring you get the best mortgage rates and understanding how these fit into the broader financial landscape, refer back to our article: Top tips for getting a best home loan interest rate in Malaysia.
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