Slow growth in household income paired with soaring house price makes it almost impossible to get a decent residential property in the city, hampering home purchase for many especially those in the B40 and M40 groups. Forking up the 10% house down payment can be hefty for some and it is one of the biggest off-putting factors in the pursuit of owning a home.
To address this issue, Bank Negara Malaysia (BNM) has established a RM1 billion Fund for Affordable Homes to help home buyers from the lower income group nationwide to finance the purchase of their first homes. Starting 1 September 2019, the fund is now upgraded to allow more home buyers to benefit from it – maximum monthly household income is increased to RM4,360 and the maximum property price is increased to RM300,000.
Previously, the maximum household income and property price were capped at RM2,300 and RM150,000 respectively.
During the tabling of Budget 2020 recently, Finance Minister YAB Lim Guan Eng mentioned that as at September 2019, a total of 2,840 applications amounting to RM472.7 million were received. The approval rate is 77.9%, with 982 total applications worth RM156.2 million being approved.
BNM Fund for Affordable Homes Criteria and Eligibility
If you are a Malaysian citizen, have not purchased any properties in the past and your household income does not exceed RM4,360 per month, you can try asking the participating banks for this scheme. You’ll find the list of banks at the end of this article, so read on, you’ll get there. 😉
You can either apply as a single borrower or do a joint loan with your spouse or family member.
Your loan application will have to be supplemented by a healthy credit score. Credit score is calculated based on your punctuality in paying monthly bills or other loan repayment such as telco, credit card, student loan, car loan and such within the past 12 months. To check beforehand, generate a CCRIS report which can be done for free via eCCRIS here.
Also take into account your Debt-Service Ratio (DSR) as banks will use this to calculate whether or not you can afford the loan you’re applying for. DSR will be calculated based on your monthly net income and the amount of fixed debt you’re committed to monthly (student loan, car loan, etc.). This is essential to increase the possibility of getting your loan approved. Ideally, you should keep your DSR within the 30% – 40% range. The lower your DSR, the better.
How much can I borrow from banks under BNM Fund for Affordable Homes?
The best part of this fund is that you can get a home loan of up to 110%, which will cover for your downpayment and insurance or takaful.
The upfront fees for purchasing a house can burn a gigantic hole in your pocket. The common 90% home loan requires you to fork out 10% hard cold cash of the house value. A house priced RM300,000 will require RM30,000 downpayment, and not many can afford this.
Another big catch is the super low interest rate, which is set at only 3.5% per annum. At time of writing, for property priced RM300,000 and below will usually get interest rates of around 4.2% to 4.6% per annum.
This financing scheme also offers financing tenure of up to 40 years, where the standard tenure set for home loan is actually 35 years. This will help lower the monthly repayment as the loan is spread out even further.
What type of house can I get under BNM Fund for Affordable Homes?
As of now, the residential properties eligible to be purchased under this scheme are only developer’s unit or from the primary market. You will not be able to purchase homes from the secondary market using this type of loan.
The house must be priced below RM300,000 and the moratorium period is set at 5 years. This means that you are not allowed to sell or dispose of this property before you reach the 5th year of ownership.
One small detail: There’s an online mandatory financial education module provided by Agensi Kaunseling dan Pengurusan Kredit (AKPK) to assist potential borrowers understand their financial commitments prior to purchasing a home. The module can be accessed from AKPK’s RumahKu portal at learn.akpk.org.my
I believe I’ve met all of the criteria and I have found a house I like priced below RM300,000. What should I do now?
Visit any of the participating banks to get your home loan and this is the time to ask for this scheme. Also inquire if the loan will cover for legal fees, stamp duty and the insurance. Some developers may cover legal fees and stamp duty in their package. The bank will process your application and once you get the green light, it’s time to pack up and get ready for a new life at a new house you can call your own.
Remember to select a property that is within your budget. A RM300,000 house will cost you about RM1,300 in monthly repayment, and this is excluding maintenance fee if your house is a strata development (usually condo or apartment).
Check and calculate your monthly commitment (home loan repayment + maintenance fee, if any + utility bills, etc.) and then select the price range that you are most comfortable with.
Use our mortgage calculator https://propertyadvisor.my/mortgage
While you’re at it, try looking at the price growth of the area you’re interested in. Property Advisor provides you useful market insights where you can see the price trend and growth in a certain area based on actual transacted data.
Since you’re moving into a new neighborhood, might as well see how much your neighbor paid for his/her house in the past, or see the market trend of the area to understand its performance. The information could be useful for negotiations and future investment plans.
More useful info down below from BNM website, call and inquire from the participating banks!
- AmBank (M) Berhad (AmBank) 03-2178 8888
- Bank Simpanan Nasional (BSN) 1-300 88 1900
- CIMB Bank Berhad (CIMB) 03-6204 7788
- Malayan Banking Berhad (Maybank) 1-300 88 6688
- RHB Bank Berhad (RHB) 03-9206 8118 (West Malaysia); 082-276118 (East Malaysia)
The public may also contact BNMTELELINK at 1-300-88-5465 (LINK).
Alright, GOOD LUCK! Follow Property Advisor on Facebook and feel free to drop us a comment on our BNM Fund for Affordable Homes infographic album. You can share your home-buying success stories with us, we’d like to know! See you there! 😀