With the overall cost of properties steadily increasing during this day and age, potential homeowners (particularly young adults and graduates) are finding it very difficult to afford a home anywhere, let alone one even remotely close to major cities in Malaysia. In an effort to help these people, the government has introduced the Malaysia My First Home Scheme.
What is the Malaysia My First Home Scheme?
The Malaysia My First Home Scheme (MFHS) was introduced in early 2011 by the government with the sole purpose of assisting young adults, who have joined the workforce and earning RM3,000 per month or less, to own their first home.
This scheme allows young adults to obtain 100 per cent financing from financial institutions (100% LTV / margin as opposed to the usual 90% offered by most banks), enabling them to own their first house without the need to pay a 10 per cent down payment.
Cagamas SRP Berhad will guarantee the banks on financing above 90% level i.e. if a borrower obtains 100% financing, Cagamas SRP will guarantee 10% (from 90% to 100%) of the financing.
Budget 2013 Update
During the recent announcement of the 2013 Budget, the government has gone ahead and increased the monthly income eligibility to RM5,000 for individuals (RM10,000 for couples) which definitely makes more economic sense. The RM3,000 monthly income limit seemed to be too low for amounts between RM220,000 – RM400,000.
Also, the requirement for a savings record equivalent to three months’ installment and minimum employment of six months has been abolished.
In addition to that, for first time house buyers, the current 50% stamp duty exemption on the purchase of first residential property will be extended to 31 December 2014 ( from December 31 2012), and the upper limit for eligible properties for this exemption was increased from RM350,000 to RM400,000.
To find out more about how the 2013 Budget affects your property purchase and other things, check out our Malaysia Budget 2013 article.
- Malaysian citizens only
- First time homebuyer
- Individuals up to age 35 years
- Single borrower gross income not exceeding RM 5,000 per month or combined gross income or RM10,000 for couples
Confirmed employee with minimum employment of 6 months with same employer.
- All outstanding debt repayment obligations from banks and non-banks (including those not covered by CCRIS) must not be more than 60% of monthly income after statutory deductions (ie. Tax, EPF, SOCSO) or maximum limit of the lending bank, whichever is lower.
- Minimum property value of RM100,000
- Maximum property value of RM400,000
- Residential properties only
- For lease hold, remaining lease ≥ 60 years
- Owner occupied
- Repayment options of up to 40 years or age 65, whichever is earlier
- Amortizing facilities only (no re-drawable features)
- Installments payable via monthly salary deductions or standing instruction
- Compulsory Insurance/Takaful
|Affin Bank Berhad||Affin Islamic Bank Berhad
|Alliance Bank Malaysia Berhad||Alliance Islamic Bank Malaysia Berhad
|AmBank Berhad||AmIslamic Bank Berhad
|CIMB Bank Berhad||CIMB Islamic Bank Berhad
|Hong Leong Bank Berhad||Hong Leong Islamic Bank Berhad
|Maybank Berhad||Maybank Islamic Bank Berhad
|OCBC Bank Malaysia Berhad||OCBC Al Amin Berhad
|Public Bank Berhad||Public Islamic Bank Berhad
|RHB Bank Berhad||RHB Islamic Bank Berhad
|Standard Chartered Bank Malaysia Berhad||Standard Chartered Saadiq Berhad
|United Overseas Bank Malaysia Berhad||Bank Muamalat Malaysia Berhad
|Bank Islam Malaysia Berhad
It is worth to note that a couple big banks, namely HSBC and Citibank are not participating and offering this scheme.
Tax relief from paying mortgage interest
What is tax relief ? In short, it is basically a way for you to reduce your chargeable income.
Say you earned RM25,000 from employment in 2010. Assuming that there were no tax rebates or reliefs, your chargeable income will thus be RM25,000 and tax for the year would have been RM825.
Now say the Government decides that all Residents of Malaysia should get a personal tax relief of up to RM9,000 per year. Your chargeable income will now be RM25,000 – RM9,000 = RM16,000 which means that your tax expense is now RM355, saving you a total of RM470 per year.
The good news is that the government does provide tax relief of up to RM10,000 on interest expended (whichever is lower) to finance the purchase of residential property (interest paid on mortgage). For example, say you pay an interest of RM15,000 per year on your mortgage. With the tax relief provided, RM10,000 is deducted off your chargeable income, which leads to you paying less tax overall at the end of the year.
With Cagamas SRP Berhad’s guarantee, does it mean borrowers/customers under the Scheme are only liable to the bank for 90% financing only?
No, the borrowers/customers are liable to the bank for the full financing amount (up to 100%). The guarantee only indemnifies the bank for any loss incurred as a result of financing above 90% level.
Do I have to pay a higher interest/profit rate or any fee to enjoy up to 100% financing under the Scheme?
No, the normal interest/profit rates of the respective banks shall apply and borrowers/customers do not have to pay for the Cagamas SRP Berhad’s guarantee.
I am self-employed and my average monthly income is RM2,000. Am I eligible for the Scheme?
No, the scheme is limited to employees in the private sectors only. Applicants must be confirmed employees with minimum employment period of 6 months with the same employer.
I am self-employed and my spouse works in a trading company earning RM2,000 per month. Are we eligible as joint applicants under the Scheme?
No, all applicants (including joint applicants) must meet the citizenship, first home, employment, age and income criteria.
My friend and I meet all the criteria. Can we jointly apply for financing under the Scheme?
No, joint applicants must be family members, i.e. husband and wife or siblings only, and they must all meet the criteria set.
Does the Scheme cover completed properties as well as those under development?
Yes, the Scheme covers both completed properties and those under development. The guarantee is effective upon full disbursement of the financing.
My spouse and I bought a property at RM220,000. Will we be entitled to RM220,000 financing if we meet the income criteria?
Valuation of the property is subject to the bank’s underwriting policy. Generally, banks will finance based on purchase price or valuation (open market value) from their panel valuer, which ever is lower.
My existing financing was taken up for the purchase of my first home. Am I eligible to refinance the loan under the Scheme?
No, the Scheme does not cover refinancing of an existing financing.
Are there any limitations on the type of residential properties or locations under the Scheme?
The type of residential properties and locations are subject to participating banks’ underwriting policies.
With up to 100% financing under the Scheme, does that mean I do not have to come up with any down payment?
The homebuyer would be required to pay a booking fee and/or deposit to the seller under the terms of the Sale and Purchase Agreement pending disbursement of the home financing by the bank. When financing documentation is completed, the homebuyer would be reimbursed from the disbursement of the financing by the bank. The homebuyer may try to make an arrangement with the seller for deferment of deposit payment pending disbursement by the bank. Such request is dependent on the seller’s willingness to accommodate.