Property downpayment – own stay (updated)

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When a colleague and I had lunch recently, she said she is saving money for a property. I asked her, what kind of property. She said, I am not sure yet. Once I have enough savings I will then look. I asked her how much is enough. She said she has yet to identify. Actually, if you are saving for a property, always determine the purpose. If it is for your own stay, try to save as fast as you can. My personal opinion. Your savings may increase by 10% or more per year and property prices may only increase 3% per year but your 10% is very little compared to 3% of the overall property price!

As long as your finance is healthy and you are buying the property for your own stay, buy it as soon as you can and not when you think you have saved enough. If you are paying a rental of RM600 per month, that’s RM7,200 per year. Do you know how much savings you need to earn RM7,200 in interest? Based on current FD rate of 3%, you will need to save RM240,000.  If you have RM240,000 cash, would you even be renting?

There are some who have started to advocate that since property prices are so high, you might as well rent. Let me tell you that the time is not now. There would be a time in the future, when Malaysia becomes a fully developed nation. There will be a time when ageing population becomes a norm in Malaysia. At that time, maybe this argument has some valid points. As of now, no. It is better to buy than to rent except for very special circumstances such as there is you are only going to be there for less than one year.

Paying for mortgage is totally different from paying for rental even if mortgage payments are typically higher because at the end of the day, the place is YOURS. If you can’t afford a big place, why not start with a smaller one? Rent one room out if you must. There are lots of websites that you can use to rent it out. One example or If you are looking to buy and compare, there’s and which are two prominent property sites in Malaysia today.

written on 29 nov 2013

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