Understanding My First Home Scheme

There had been a lot of controversial when it comes to the My First Home Scheme which was announced in early March 2011 as part of the country's measure to help first time home owners.

Regulations for the buyer

There are a few rules when it comes to the My First Home Scheme. The basic criteria for the scheme includes:

1. Household income not more than RM3,000.

2. House purahse price from RM100,000 to RM220,000.

3. Maximum repayment period at 30 years tenure.

4. First time house buyer.

5. Below 35 years old.

6. You are a Malaysian citizen.

Besides these few basic criteria, the home should also be occupied by the buyer who undertakes this scheme. To protect the interest of banks and also the buyer, the buyer will need to be employed by the same company for a minimum employment period of six months. By six months, most of us would have been confirmed, permanent staff of a company, and logically, you will not want to stay in a company that does not confirm your employment even after six months. Neither will you want to burden yourself with the purchase of a new house and getting loans if your employment status is not stable. For some banks, they may actually set a criteria for remaining leasehold tenure if the property purchase is a leasehold property.

If you qualify the above and if you are really comfortable with the idea, do read on to see what else is in store. Always remember to do your calculations before committing, because it is not going to be an easy scheme. In fact, in reality, the purchase of a house at RM220,000 is not possible unless you have a salary of RM3,300 with the current rates and loan tenure of 30 years, either that or a deposit payment. At most, you probably can only get a house of maximum RM200,000.

In fact, if you are not taking the scheme and you are buying the same value property under the normal scheme, you are actually paying lesser each month because you have already paid the deposit for the house. Since you are able to come up with the deposit of the house, it may very well mean to lessen your financial burden from the bank loan that follows.

Support by the Government

Under this scheme, you will not need to cough out a 10 percent deposit. The 10 percent is guaranteed by the Government via Cagamas Berhad. This is very unlike other house purchase where there is a need for a minimum deposit, some 5 percent while others 10 percent, depending on the developer's partnership with banks on bank loans.

However, it must be noted that buyer will still need to pay for the booking fee and a deposit to the seller under the Sale and Purchase Agreement, and be reimbursed later by the financial institution upon loan approval. There may be some arrangements between the buyer and seller, such as deferment of deposit payment while waiting for the disbursement when the loan gets approved, as long as the seller is willing to accept it, that is.

Banks Support

The Government had also appointed several financial instittutions in support of this scheme. There are, in total, 26 such institutions: Affin Bank Bhd, Affin Islamic Bank Bhd, Alliance Bank Malaysia Bhd, Allianace Islamic Bank Malaysia Bhd, AmBank Bhd, AmIslamic Bank Bhd, Bank Islam Malaysia Bhd, Bank Muamalat Malaysia Bhd, CIMB Bank Bhd, CIMB Islamic Bank Bhd, EON Bank Bhd, EONCAP Islamic Bank Bhd, Hong Leong Bank Bhd, Hong Leong Islamic Bank Bhd, Maybank Bhd, Maybank Islamic Bank Bhd, OCBC Bank Malaysia Bhd, OCBC Al Amin Bhd, Public Bank Bhd, Public Islamic Bank Bhd, RHB Bank Bhd, RHB Islamic Bank Bhd, United Overseas Bank Malaysia Bhd, Standard Charted Malaysia Bhd, Standard Chartered Saadiq Bhd, and of course, Cagamas Bhd.

What is the support about?

Under the scheme, the financial repayment amount each month cannot be more than one third of the buyer's gross monthly income, which should be below RM3,000 for the whole household. Gross monthly income does not yet take into consideration your EPF and SOCSO or any other deductions.

The scheme covers both completed properties and those under construction. However, the scheme is not meant for the refinancing of an existing loan. There is no limitations to the location or the types of residential property under this scheme, but this may be dependent on the policies of the banks. Some banks may have limitations about certain locations as part of their policies to protect themselves against losses.

Under this scheme, the bank interest rates for the loan will be same as other residential property loan in the banks. Are you buying the idea yet?