The idea of paying interest to banks for years might not resonate with many. As a result, some Purchasers tend to fall on the idea of purchasing their house in cash. Similar to the two sides a coin has, there are different faces in doing this.
Ca-ching, ca-ching! If you are loaded and wish to buy one of the many Properties in CASH, here are the good and not-so-good main points:-
Pros | Its Explanations |
Seller-Friendly | Quick access to the full amount of money. Moreover, the seller would not have to be worried about the potential buyer getting his loan application rejected. |
Saves a Ton! | A majority of the monthly payment goes towards the interests. By opting to not take a housing loan, a Purchaser could save a substantial amount on interest payments. |
Quicker Process | The whole process would take much faster as there is no necessity to wait for loan application processes or loan approvals. Once the seller and buyer are on the same page about the purchase price, the process can be considered to be done. |
Cons | Its Explanation |
"House Poor" | Liquidity refers to the ability to convert one’s assets to money quickly such as stocks and bonds. Your house is not one of such assets. Hence, when faced with an emergency it would be difficult to get your hands on cash quickly, limiting your liquidity. |
Missed Governments Exemptions | Choosing to purchase your house with cash might come at the cost of missing out on some exemptions that the government comes up with for first-time home buyers. The 2024 Stamp Duty Exemption is a perfect example.
First-time home buyers who purchase at the price of RM500,000 and below would be eligible for a full stamp duty exemption until the end of 2025. |
Income Tax Scrutiny | The income Tax department gets alerted the moment you pay the full amount in cash for your house. They will start enquiring about the sources of your income and check if the evidence you provide to prove that your income does come from legal sources checks out. |
Swipe that loan and make it your own! If you're thinking of FINANCING YOUR PROPERTY WITH A MORTGAGE, here’s the sweet and not-so-sweet side of it:-
Pros | Its Explanations |
Government Home financing Options | The Malaysian Government provides various housing schemes to make the dream of owning a house become a reality. Rumah Selangorku Scheme (RSKU), Residensi Wilayah Keluarga Malaysia (RUMAWAIP), Rent-to-own (RTO) Scheme, Home Ownership Campaign (HOC), Housing Credit Guarantee Scheme (HCGS) are some of the schemes available. |
Financial Flexibility | You would have more cash in your hand which can come in handy in difficult times. |
Other Investment Opportunities | With the extra money in hand, you can invest in other assets like gold, and shares, potentially increasing your overall wealth and financial security. |
Cons | Its Explanation |
Long Term | A housing loan is a long-term commitment which can go up to 30 years. |
High Interests | By the time you have finished paying off the loan, you will come to realize just how much money has gone into paying off the principal amount and interest (which would be more than the cost of the house). |
Taking a loan is not a bad idea and it certainly does not mean more payments going for interest, if one has the financial privilege to even consider purchasing a house in cash, it is advised to take a loan but with a larger down payment and/or a shorter tenure.
Various home loan calculators are available on the internet to help you understand your potential financial commitments. One credible option for home loan calculators in Malaysia is provided by iMoney -https://www.imoney.my/home-loan
In conclusion, when deciding whether to purchase a house with cash or take a loan, it's important to consider both the financial and personal significance. Each option has its advantages and disadvantages, and the best choice depends on your circumstances. By thoroughly evaluating your options and perhaps consulting with a financial advisor, you can make a well-informed decision that aligns with your long-term goals.
For more information about the Sale and Purchase Agreement and to request a free quotation for a Sale and Purchase (or anything related to Property) legal fees from us today, please feel free to click this link: https://wa.me/60182886525 or contact us below:-
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Legal Disclaimer
We trust that you have gained some information from this article. If you have any specific questions related to this article, please contact us at askdwc@dwc.com.my.
The article posted is for general information purposes only and should not be construed as legal advice. Facts and circumstances differ from case to case. Please consult your lawyer for specific legal advice and action to be taken.
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