The uncertainty and tons of job losses during this pandemic have taken a huge toll on the economic sectors. Some are predicting that the Covid-19 crisis has led the real estate bubble in Malaysia on the brink of bursting.
It is clear as we can see from the view of the property sector, many households reported struggling to make mortgage payments or keep missing the rent. Even though the moratorium programs have helped to keep the foreclosure rates low for some time, things would get difficult as these programs expire especially to those who are affected by retrenchment and low-income groups.
As the unemployment rate and difficult financial decisions remain at historic highs, many households are reconsidering their housing needs. But still, because of the pandemic, stay-at-home orders have become a crucial thing for many people for the sake of everyone's health and safety concerns.
So even if the inclinations during the Covid-19 pandemic do permanently change certain factors on properties, the quick economic uncertainty would keep some prospective buyers on the sidelines for some time as their homes have become the proxies for their work-from-home offices, their kid's schools (online classes), restaurants, and personal staycation.
Some of these people are still looking for a new place to be called home because the realization to actually live in this new normal era has shifted from time to time. If you are planning to buy a house during this pandemic, there are some important things you need to consider before making a decision on house buying.
Buying a house is a long-term and big investment as it contributes as the largest asset for many households. It can be the most rewarding financial decisions in life but yet, the most stressful commitments you will ever bear in your life.
So, before you start to commit to such a big toll, here are some things you should do before getting a new property especially during this Covid-19 pandemic.
Identify The Purpose of Buying
This is the basic thing to reflect on when you are planning to buy something, especially for such a big-ticket item. By doing this, you are actually setting a clear goal for your own property investment and it's one of the good financial management steps.
Each people surely has different home purchase intentions but most first-time homebuyers, they are likely to look out for a place to stay or settle in. If you're buying a house for your own or your family to stay in, make sure you love the environment where the house is located because it contributes a lot to your emotions and mental well-being of living there for a long time ahead.
But if you can't afford to buy a house on your own but still need a place to stay, just rent!
I know that some of us may have the mindset that buying a house is automatically a better choice because instead of paying a landlord, it's better to pay off the bank as the property will eventually grow to your own personal assets over time. But, think of all the amount of money you will need if you are buying a house:
- down-payment
- closing cost
- mortgage payments
- mortgage insurance
- property taxes
- maintenance fees
- hazard insurance
- stamp duty
- legal cost
- valuation fees
- renovation fees
That's quite a lot, right? If you are physically and mentally prepared to bear all these costs of owning your own house to stay and determine to settle in at one place, then you can proceed to the decision making of buying a house. But if you are still can't afford it or you don't like being stuck at the same place for a long period of time, it's safer to just rent.
When you are planning to find a place to stay in, buying your own house is great. But, renting a house is also GREAT!
Set A Proper Financial Planning
Without proper financial goals and planning, you may trigger impulsive buying habits and eventually being stuck in excessive debt due to insufficient amounts for your monthly home installment, loan interests, bills, repairs, maintenance, etc.
Normally, it is recommended that monthly mortgage payments should not exceed 30% of your monthly gross income. If you are still tempted to go beyond 30%, it will leave you a smaller cushion to take care of other commitments especially your basic needs.
Here are some tips you can apply to set your own financial plan when buying a house:
- Find out how much money you will continuously need for the house | You can calculate your specific amount of the monthly house installment using a mortgage calculator that includes the interest, taxes, principal, and insurance. You will get the picture of the graph of loan repayment along with monthly and yearly amortization tables.
- Put a large down payment | If you can save up a large amount of money for the down payment in some time, it would be great as you will have less risk to the bank and the lesser amount of principal loan you will need to borrow from them.
- Take care of your credit score | Credit score plays a big role whether you qualify for a loan and banks usually will evaluate your credit score to indicate your creditworthiness for the loan terms and interest rates.
Do A Lot of Research
Most certainly, doing a lot of necessary research before purchasing a house is common among home-buyers as it will be assessed with their financial standing. You will need to take into consideration the market value of the property, the bank loan rates, and every other aspect related to keeping yourself from being swayed by misleading information.
Before committing to a big-ticket purchase, you need to always keep yourself grounded with facts. Nobody wants to make a big purchase that later will cause a big regret.
Firstly first, analyze the developers and compare each of their property offerings and locations. Also, you will need to consider the age of the property as it matters significantly to your perspective. It may look beautiful and impressive on the outside but you do not know if the house has been consistently going through maintenance over the years.
Then, it all depends on your preferences. The number of squares footage you need for long-term comfort, your expectation of the floor plan, the potential for customization of interior design or renovation, etc.
You can get all this information from the property website and news, or you can directly be engaged with a real estate agent who mastered the area of your property interest. As the real estate agents are always in the market, they can give you a hands-on analysis and the real picture of the local scene that you are interested in.
Since there are so many overhang residential properties for sale in Malaysia, you can take your time as much as you need to browse all the information that you may need until it meets your preferences requirements and also your financial capability.
I wish you all the best!
