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First-time home buyers need PR1MA RTO to be successful

Heard of PR1MA RTO yet?

There are many reasons why first-time home buyers could not become first-time home owners. One super major reason is because they simply could NOT save enough downpayment for that 10% of the home price. If we look at a RM350,000 property, the typical downpayment alone would be RM35,000. This is not a small amount and usually would need lots of discipline from the first-time home buyer over a period of many years. Yeah, it’s really tough for someone who earns RM5,000 per month to save RM500 per month just for a home for 6 years continuously.

RM500 x 12 (months) x 5 years = RM30,000

There was the announcement that PR1MA’s rent-to-own (RTO) scheme will be launched in June 2021. It’s part of the solution under the Budget 2021 to help first-time home buyers become first-time home owners. June is only 2.5 months away. I personally think this is very important for the first-time home buyers and thus, the Housing and Local Government ministry MUST ensure this is successful. If this is not successful, it will be very hard to help all these potential first-time home buyers. Why do I say so? Do read the news first and my views would be right after.

Article in themalaysianreserve.com. Housing and Local Government Minister (KPKT) Datuk Zuraida Kamaruddin said that the rent-to-own (RTO) housing scheme as announced under Budget 2021 involving PR1MA homes nationwide is expected to be launched this June. She said, “The RTO has yet to be implemented because we are waiting (for results of discussions) on the mechanism to be adopted.Once the scheme is finalised, we will offer the PR1MA houses that have been approved and we are trying to do this by June.” Article in themalaysianreserve.com.

A typical RM350,000 home would need 10% downpayment and the repayment per month using a 30-year repayment is as follows:

Anyone earning RM5,000 per month could definitely afford to pay 27% of their monthly salary on a home. In fact, even someone earning RM4,000 would still be able to afford this home if they are willing to do so. RM1,362 / RM4,000 = 34% of their monthly pay. They just could not afford the downpayment because they were not able to save it up remember?

What happens 5 years down the road for this RTO is that the renter (first-time home buyer) would have paid enough of the “rental” for this rental to now become a downpayment. Without the need to be disciplined to save the downpayment over a period of 5 years, the RTO scheme has helped the first-time home buyer to save the downpayment over a period of 5 years. the banks would also have a record of this renter who and would be persuaded to approve the home loan easily too from the track record.

Hopefully, we get more details soon and I do hope first-time home buyers take this seriously because this may be the best chance to own a home.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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