Planning your future home with your love ones

Planning your future home with your love ones

Most married couples would prefer having a home on their own. A home that belongs to the lovebirds. There are many lands for sale in Malaysia that people can check it out. However, with a stagnant monthly income and increasing cost of living in Malaysia, many couples are looking into earning passive incomes from property investments. This article will guide you through things that you need to consider if you are planning to dive into the property investment bandwagon.   

  1. Joint loan limits the margin of finance
Most couples apply for joint mortgage loan as it shows a higher combined income and higher repayment capacity. Therefore, it increases the chances of getting a higher loan amount. However, it will limit the margin of finance for your property investment if you plan to invest in property.

Furthermore, Bank Negara Malaysia (BNM) has since implemented new rule stating that each individual will get a 90% financing for the first 2 residential properties. As for individuals who already have two mortgage loans and planning to apply for the third mortgage loan, they are only qualified for a 70% financing for their third property.

Therefore, if your partner and you are planning to buy more properties for investment purpose, having a joint loan will most likely limit the loan amount you are eligible in the future.

By taking up an individual loan, your partner and you will be able to get as many as 4 90% home loans if you plan to buy residential property, whereas for joint home loans, you are only eligible for 2 90% joint home loans. After the second residential property, your property financing will then reduced to 70%. That being said, you will then need to pay the 30% down payment on your own instead of the normal 10% down payment.

No doubt that combining resources will make it easier to qualify for a higher loan amount, it is important to know that it brings its disadvantages as well as it will affect the credit history of all the applicants.

2.                  Effect of individual financial rating
Do bear in mind that your credit score plays an important role in taking up a joint loan. In addition, your financial rating is linked to your partner’s credit score as well. That being said, if your spouse has a good credit history but you do not, your chances of getting a joint mortgage loan might be affected. It might also work the other way round where your spouse’s good credit history will help you in securing a joint mortgage loan. Even if you manage to get approval for a joint mortgage loan, the loan amount might be lower than expected due to your bad credit history.

If you want to get the maximum loan amount, it is best to clear your debt and improve your financial score before you apply for a joint mortgage loan. Settle your personal loan, car loan and credit card loans to be eligible for a mortgage loan. You could improve your credit history by paying your bills on time to prove that you are capable in managing your finances effectively. In addition, try not to apply for new credit cards as well as it will lower your capability of mortgage repayment. If you really need to, make sure you settle all outstanding debt before applying for new credit card. You could also opt for a debt consolidation plan if you really need to.

3.                  Real Estate Property Gains Tax exemption benefits
In the Budget 2014, it is announced that the Real Estate Property Gains Tax (RPGT) is increased to 30% for the first 3 years, followed by 20%, and 15% for the fourth year and fifth year when you dispose a property. From the 6th year onwards, disposal of property will be tax free.
Every individual is given one chance on the exemption of chargeable gain from the disposal of the first residential property. However, if the property is combined, your spouse and you are only entitled to one exemption instead of two if you invest in properties separately.

In conclusion, do your research and plan ahead. A joint home loan can be helpful if you want to increase your chances of eligibility for higher loan amount. However, if you plan to invest in more properties, getting individual loan will be a better choice if your monthly income is qualified for the home loan. You should also look into different types of property you prefer, target market, and location before you decide on which property to buy. Property investment can definitely be rewarding and satisfying if done right. It is also a good way to establish your retirement savings or your children’s education fund. Make sure you communicate with your partner so you understand the effect of your decision on your finance. Most importantly, do make sure you stay within your budget to prevent yourself from getting into a financial debt. After all, property investment requires a huge sum of money. 

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