When it comes to buying property, the most obvious cost involved is the down payment. This is usually around 10% of the purchase price, which works out to be quite a sizeable amount.

Although the down payment is an important sum that home buyers need to prepare, there are other hidden costs to consider too. In fact, these costs can add up to thousands of Ringgit, so it’s best to be financially prepared for them.

Let’s start off with the costs related to legal agreements. When it comes to purchasing a house, there are two important legal agreements that you need to consider: Sales & Purchase Agreement (SPA), and housing loan agreement.

Each of these legal agreements will incur 3 types of costs, namely legal fees, disbursement fees, and stamp duty.

◉  Legal fees: This is the fee paid to your lawyer for helping you sort out legal matters such as preparing the SPA.

◉  Disbursement fees: This is the amount paid to your lawyer to compensate them for any expenses incurred in preparing your agreements such as travel, printing, courier and postage charges.

◉  Stamp duty: This is a tax paid to the government when legal documents such as SPA and loan agreement are stamped.

Here’s a breakdown of the costs involved for these legal agreements.

Sales & Purchase Agreement (SPA)

The SPA is a contract between a buyer and a seller that outlines the terms and conditions of a property purchase. Once this contract is signed by both parties, the process of transferring property ownership from the seller to the buyer begins.

Legal Fees

In Malaysia, the legal fees that can be charged by lawyers for assisting property buyers is regulated. The lawyer’s charges are based on the following scale:

For example, say you want to purchase a property at the price of RM 700,000.

The legal fees involved here would be around:

◉  For the first RM 500,000 x 1% = RM 5,000

◉  For the next RM 200,000 x 0.8% = RM 1,600

◉  Total legal fees = RM 6,600

Disbursement fees

This is usually a few hundred Ringgit.

Stamp duty

The stamp duty is RM 10 for each copy of the SPA. You’ll usually need around 4 copies, so the total stamp duty comes up to RM 40.

Loan Agreement

Usually, buyers apply for a housing loan in order to purchase a property. The loan agreement is a contract between a borrower (the property buyer) and a lender (the bank). This contract outlines the terms of the housing loan including the loan amount, interest charged on the loan, and repayment details.

Legal fees

Like before, the lawyer’s charges for a loan agreement are based on the following scale:

Let’s go back to the earlier example. You want to purchase your dream home for RM 700,000. You pay a down payment of 10% (RM 70,000) and apply for a housing loan to cover the remaining 90% (RM 630,000).

The legal fees involved for a loan amount of RM 630,000 would be around:

◉  For the first RM 500,000 x 1% = RM 5,000

◉  For the next RM 130,000 x 0.8% = RM 1,040

◉  Total legal fees = RM 6,040

Disbursement fees

This is usually a few hundred Ringgit.

Stamp duty

The stamp duty for a loan agreement is 0.5% of the loan amount. For an RM 630,000 loan, the stamp duty works out to be RM 630,000 x 0.5% = RM 3,150.

Your bank may also charge a processing fee for the housing loan. Depending on the bank, this fee could be anywhere from RM 50 to RM 200.

Instrument of Transfer

Another significant cost involved in buying property is the stamp duty for the instrument of transfer. An instrument of transfer is the document that transfers the ownership of a property from one person to another.

When the property in question has a title, the instrument that is used is Memorandum of Transfer (MOT). In cases where the property is without a title, a Deed of Assignment (DOA) is used instead.

Here’s a breakdown of the costs involved for the instrument of transfer.

Stamp duty

The stamp duty for MOT/DOA is what usually catches people off guard, as it can easily run into the tens of thousands of Ringgit. This is a pretty big sum, and if you’re not prepared, it can cause you a lot of financial stress.

The stamp duty is charged on an increasing scale as follows:

So for an RM 700,000 property, the stamp duty will be:

◉  For the first RM 100,000 x 1% = RM 1,000

◉  For the next RM 400,000 x 2% = RM 8,000

◉  For the next RM 200,000 x 3% = RM 6,000

◉  Total stamp duty = RM 15,000

Registration Fee

The fee for registering the transfer of ownership will be a few hundred Ringgit.

Now that we know the various hidden costs involved in buying property in Malaysia, let’s put them all together.

Here’s the estimated cost of buying a property priced at RM 700,000.

* Actual costs may vary.
** Lawyer’s fees are subject to 6% Sales & Service Tax (SST).

This breakdown of costs isn’t meant to scare you. When buying a property, it’s important to be financially prepared to avoid stress and difficulties down the road.

By knowing how much money you’ll need to cover the costs of buying a property, you can prepare accordingly to ensure the whole process is smooth sailing for you and your family.

We recommend saving the amount specified above and then some to cover the additional costs of home insurance, quit rent, property assessment tax, maintenance/security charges, and utility deposits for your new home.

Plan ahead and enjoy a stress-free home buying experience!

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