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5 Must Know Costs When Buying a Property in Malaysia

Whenever a buyer is ready to commit to a property, the buyer would usually ask, “Is there any additional costs I should prepare for?” When buying a property, it is not just about the booking fee (be it RM500, RM1,000, or more), or the earnest deposit (2% or 3% of the purchase price).

What is often overlooked are the additional costs which you need to or may want to know. So, if it’s your first time buying a property or not, make sure to set aside some dough for these other expenses.

1. Legal Fees

Lawyers charge legal fees to prepare the Sales & Purchase Agreement (SPA) and Loan Agreement which will entail the handling of the necessary documents. Please take note that the legal fees are regulated by a prescribed scale rate under the Solicitors Remuneration Order, based on the purchase price set in the SPA.

An example of the legal fees calculation is tabulated in the table below:

For the first RM500,000 (price of the property) – 1.0% (rate)
For the next RM500,000 – 0.8%
For the next RM2,000,000 – 0.7%
For the next RM2,000,000 – 0.6%
For the next RM2,500,000 – 0.5%

In addition to the legal fees, there may be additional charges such as for the disbursements, Deed of Assignment (DOA), CKHT (Real Property Gains Tax), Borang 14A, bankruptcy search, land search, private caveat, registration fees, state consent (if leasehold), etc. These are just some examples.

2. Memorandum of Transfer and Loan Agreement Stamp Duty

The Memorandum of Transfer – a transfer instrument of ownership from the seller to the buyer after the signing of the SPA and only applicable for transfer of property of which the individual title had been issued. If the individual title or strata title has not been released, and the property is still under the Master title at the time of purchase, a Deed of Assignment (DOA) will be issued as a temporary transfer of ownership.

Being one of the most important documents in the property purchase process, the MOT comes with a stamp duty charge. The stamp duty is payable once the deed has been transfered from the seller to the buyer. 

Here’s a breakdown of the stamp duty fees on the MOT due when purchasing a property. 

House priceStamp duty fee
First RM100,0001%
The next RM400,000:
RM100,001 – RM500,000
2%
RM500,001 – RM1,000,0003%
RM1,000,001+4%

For example, let’s say you’re going to purchase a property at RM500,000. What will be the stamp duty charge imposed on you, the buyer?

For the first RM100,000 = RM100,000 x 1% = RM1,000
For the next RM400,000 = RM400,000 x 2% = RM8,000
Total stamp duty imposed: RM1,000 + RM8,000 = RM9,000

In this case, you’ve to pay RM9,000 for the stamp duty on the MOT. 

In addition to the stamp duty on the MOT, there is also a stamp duty charge on the loan agreement. The stamp duty on the loan agreement is a fixed 0.50% on the loan amount.

For example, let’s say you’ve been approved for a 90% loan on the RM500,000 purchase price. The loan amount is RM450,000.

What will be the stamp duty charge imposed on you, the buyer? Here’s how to calculate the stamp duty on the loan agreement:
RM450,000 x 0.50% = RM2,250

In this case, you’ve to pay RM2,250 for the stamp duty on the loan agreement. 

Currently, the government introduced stamp duty exemptions to help first-time home buyers get on the property ladder and to own their first home. You can watch on YouTube below about the exemptions.

3. Mortgage Insurance

There are two kinds of mortgage insurance available in the market:

  • Mortgage Reducing Term Assurance (MRTA) / Mortgage Decreasing Term Assurance (MDTA)
  • Mortgage Level Term Assurance (MLTA)

MRTA is an insurance plan with decreasing sum assured overtime to cover your outstanding home loan or mortgage owed to the bank. The bank usually offers this plan you are getting the mortgage from, as it is used as protection for the bank in the event of death or total permanent disability (TPD) that stop you from servicing the loan.

On the contrary, MLTA is a slight variation from MRTA. It is an option for a borrower looking for life insurance that offers extra security plus savings and, in some policies, returns on the premium.

When you are no longer around or do not have the ability to generate income, a mortgage insurance policy frees the borrower’s dependents from any debt. The insurance company will pay off the remaining debt on repayment of mortgages.

Thus, allowing your spouse or beneficiaries to continue staying in the property debt-free without having to worry about settling the house loan.

4. Assessment Tax (Cukai Pintu)

The assessment tax or also commonly known as cukai pintu or cukai taksiran, is a local land tax collected by the local council for the construction and maintenance of public infrastructure under its area of jurisdiction such as upgrading works, road repairs and cleaning services. 

Here’s an example of an assessment tax bill:

Assessment rates are calculated based on the estimated annual rental value of your property.

Once that figure is assessed, you are charged a set percentage rate of that amount by the relevant local authorities.

The payment is made in two instalments annually between January 1 to Feb 28 and July 1 to Aug 31 every year.

Depending on which state you’re in, there are several methods to pay your assessment rates (cukai pintu or cukai taksiran).

  1. Offline and in-person
    – Local district council
    – Post offices
  2. Online
    – Pos Online
    – Online banking platforms such as Maybank2u, CIMB Clicks, and AmOnline

5. Quit rent (Cukai Tanah)

Quit Rent or also known as cukai tanah, is a form of tax paid once a year to the relevant land office by May 31 annually. 

Quit rent is imposed on owners of any landed property in Malaysia, which includes both freehold and leasehold land. As long as you own the property, you will have to pay quit rent every year, whether it’s vacant or occupied.

Quit rent also applies to strata buildings and usually refers to apartments and condominiums, but some types of landed properties may fall into this category too, such as townhouses. Quit rent for strata buildings are also known as cukai petak.

The quit rent amount to be paid, varies by state. Quit rent is assessed as a chargeable rate related to the total amount of land included as part of a property. In other words – it is assessed based on the per square foot (psf) of landed property.

If you’re looking for a guideline figure – a landed property in Kuala Lumpur has historically been charged at a rate of RM0.035 psf.

Here’s how to calculate quit rent:
Square foot of property x Price per square foot = Quit rent
1,500 sq ft x RM0.035 psf = RM52.50

So a 1,500 sq ft property would have a chargeable quit rent of RM52.50.

Here’s an example of a quit rent bill (cukai tanah):

Here’s an example of a parcel rent bill (cukai petak):

Depending on which state you’re in, there are several methods to pay your quit rent (cukai tanah) and parcel rent (cukai petak).

  1. Offline and in-person
    – Land Registry Office
    – Post offices
  2. Online
    – Pos Online
    – Online banking platforms such as Maybank2u, CIMB Clicks, and AmOnline
    – The Land Registry Office’s official online platform (for certain states)

If you’re paying online, do note that each Land Registry Office only accepts payments from selected banks. The best way would be to check the list of accepted banks on their websites.

Credits to:

https://www.iqiglobal.com/blog/7-necessary-costs-when-buying-your-dream-home/ 
https://www.iqiglobal.com/blog/the-differences-between-mrta-vs-mlta-which-should-i-get/ 
https://www.propertyguru.com.my/property-guides/guide-to-quit-rent-parcel-rent-assessment-rates-15151 

Stay tuned for more real estate, investment, and home tips

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