Latest stamp duty charges

& 6 other costs to

consider before buying a
house in 2019
First-time homebuyers need to be aware of the closing costs involved when
acquiring a residential property. Latest stamp duty and RPGT rates included!

© ibnjaafar | 123rf

Hunting for a dream home is an experience that a first-time home buyer is not likely to
forget. However, you might overlook certain critical elements in calculating the total
expenditure of acquiring your home.

First-time home buyers scouting around at various locations, either by visiting the
development or by browsing online, are likely to focus only on the biggest expenditure
involved – the selling prices of units. You might be further enticed by promotions,
discounts and rebates by developers. However, it is not just the down payments and
progress billings that will make up your total costs.

There are other important costs in the home purchasing process that you need to factor
in, especially towards the end of the transaction. These are variable, third-party fees
that are often referred to as closing costs. Ignore them and you may risk financial
setbacks and disappointment in realising your dreams of owning a home.

READ: 5 things homebuyers should know about the Home Ownership Campaign (HOC)
2019

Below are a few significant closing costs that you need to include in your property
budget planning:

#1 Stamp duty

An unavoidable cost in property purchases, stamp duty is the tax placed on your
property documents during the sale or transfer of the property. This includes stamp duty
on the Sale and Purchase Agreements (SPA) of your property and stamp duty for the
Memorandum of Transfer (MOT), both of which are calculated based on the purchase
price. You will also need to pay the stamp duty on your loan agreement based on a flat
rate of 0.5% of the total loan.

In the recent Budget 2019, the government announced a stamp duty hike for properties
costing more than RM1 million, where the rate was increased from 3% to 4% (refer to
the table below). Hence, the latest stamp duty rates (on the SPA & MOT) are calculated
on a tier basis as below.

PRICE TIER STAMP DUTY (% of property price)

First RM100,000 1%

Next 400,000 (RM101,000 – RM500,000) 2%

The following amount up to RM1 mil (RM500,001 – RM 1 million) 3%

Thereafter (> RM 1 million) 4%

For instance, when purchasing a property which costs RM750,000, you will have to pay
a total of:

{(First RM100,000 X 1%) + (Next RM400,000 X 2%) + (Remaining RM250,000 X 3%) }

+ 0.5% of loan amount (90% of RM750,000)
= {RM1,000 + RM8,000 + RM7,500} + 0.5% X (RM675,000)
= RM16,500 + RM3,375
=RM19,875

Do take note, however, that the new government has

introduced special exemptions for first-time homebuyers,
including a stamp duty waiver for the purchase of new launch
properties priced between RM300,000 and RM1 million, in
the first half of 2019.

Details of the available stamp duty waivers are as below:

Property Purchase Price Terms

PPP ≤ RM300,000 1) SPA Date: 1 Jan’19 – 31 Dec’20

F
2) Purchase 1 residential property (a house, condo unit, an apartment, a
lo
flat)
3) Malaysian citizen & first time home buyer

RM300,000 < PPP ≤ RM500,000 1) SPA Date: 1 Jul’19 – 31 Dec’20

2) Purchase 1 residential property (house, condo unit, apartment, flat)
e
3) Malaysian citizen & first time home buyer

1) SPA Date: 1 Jan’19 – 30 Jun’19 (primary property only

F
2) Purchase 1 residential property (a house, condo unit, an apartment, a
RM300,000 < PPP ≤ RM1 million
flat)
3) Malaysian citizen & first time home buyer

1) SPA Date: 1 Jan’19 – 30 Jun’19

PPP ≤ RM2.5 million 2) Transfer instrument (14A/DOA) shall be stamped on or before 30 June
“
2019

© Information courtesy of Chur Associates

#2 Legal fees
© bee32 | 123rf

Unless you have a legal background and possess some of the required expertise and
knowledge, you are most likely to engage in legal assistance for your property
purchase. Your appointed solicitor will prepare all the necessary documents and
contracts to facilitate the transfer of the property.

The legal fees for preparation of the Sale and Purchase Agreement are calculated as a
percentage of the purchase price, varying from 0.25% up to 1% depending on the value
of the homes.

The legal fee rates in Malaysia are as below:

PRICE TIER LEGAL FEE (% of property price)

First RM500,000 1%

Next 500,000 (RM500,001 – RM 1 million) 0.8%

Following RM2,000,000 (RM1,000,001 – RM 3 million) 0.7%

Next RM2,000,000 (RM3,000,001 – RM 5 million) 0.6%

Thereafter (> RM 5 million) 0.5%

Say for instance you are purchasing a property which costs RM750,000, you will have
to pay a total of:

(First RM500,000 X 1%) + (Next RM250,000 X 0.8%)

= RM5,000 + RM2,000
= RM7,000

Note that some developers may absorb the legal fees but you will always need to pay
the stamp duty yourself as a buyer.

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5 things a lawyer can do for you when purchasing a house
#3 Real Property Gains Tax

Andriy Popov | 123rf

A buyer with long term planning, beyond owning a first home, should also look ahead to
the possibility of eventually selling the property in the future.

This might be for a number of reasons. For example, you might want to upgrade, leave
the area for a new job, find a home better suited to your preference or just sell it for
financial purposes because the market is booming. Regardless, disposing your home to
a new buyer will also entail paying real property gains tax (RPGT) if you are profiting
from the transaction.

Doing advance research on RPGT could help you sell your property at the right time
and save you a lot of money!
In Malaysia’s Budget 2019 tabled last November, it was announced that RPGT rates
are to be revised starting next year. Malaysian individuals who sell off their property in
the sixth (and subsequent) years of ownership will now have to pay a 5% RPGT (no
charges were applied before). Meanwhile, those who dispose of their home after less
than 3 years will be charged 30% RPGT; 20% in year 4 and 15% in year 5.

Related Stories

What is Real Property Gains Tax (RPGT) in Malaysia & How to calculate

it?

Bear in mind that there RPGT exemptions for the following conditions:

1) An exemption of 10% of profits or RM10,000 per transaction (whichever is higher) for

these 2 scenarios:

Citizens & Permanent Residents

a) If an asset is transferred as a gift by a donor who is a Malaysian citizen and the
acquirers are either husband and wife, parent and children or grandparents and
grandchildren. This exemption is not applicable for transfers between siblings.
b) Once in a lifetime exemption on the chargeable gain on disposal of 1 private
residence by a Malaysian citizen or Permanent Resident (PR).
2) Homeowners who own low or medium cost housing priced below RM200,000 are
exempted from RPGT when disposing of their property.

#4 Agent fees

© 123rf

If you engage property or real estate agents, especially in securing property in the
secondary market, their fees will be an additional cost on top of the price you pay for
your home. Although most buyers nowadays are aware of this, there are some who do
not factor agent fees in the total cost. This could be a setback, especially if you are on a
tight budget.
The maximum fee chargeable on services provided by agents on the sale of any land
and building is normally 3%, although many brokers and agents charge less than that
on a case-to-case basis.

As a buyer, make sure that you negotiate and confirm your agent fees before officially
engaging them to represent you in any property transactions. This will help when
calculating your total cost in advance.

Related Stories

What is the difference between property agents and real estate

negotiators?

#5 Valuation fees

Unless you’re paying for the property in cash, you’re likely to be looking for a housing
loan from banks to fund the purchase. Financial institutions will usually require a
valuation of the property before approving the loan, and most banks will charge a fee for
these valuations.

Similar to the legal fees, the valuation fee is calculated as a percentage of the purchase
price:
For the first RM100,000 =0.25%
Next residue up to RM2 million = 0.2%

#6 Insurance

© Getty Images

Most banks will require buyers to purchase insurance on their homes as part of the
housing loan package to protect the value of the property. This type of insurance is
usually referred to as the Mortgage Reducing Term Assurance (MRTA) and its costs are
dependent on the age of the borrower (usually the older the borrower, the higher the
MRTA) and the total mortgage on the property (usually estimated at 3% to 5% of the
total mortgage).

The MRTA isn’t the only option, however, homeowners can also consider Mortgage
Level Term Assurance (MRTA), which offers the repayment of your outstanding home
loan as well as a guaranteed cash value back at the end of the scheme.

Related Stories

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#7 Renovations

For example, after you have completed the purchase of the house, you might want to
change wall colours, doors, floorings, windows, fences, roofing, rooms and other
elements of the house to suit your preferences. These could easily add up to your total
costs, depending on whether the renovations involved are major or minor.

Here’s a tip: Most experts recommend not spending more than 10% of your home value
on renovations.