Q: What do you think of the 'My First Home Scheme' recently launched by the government?
HBA applauds the Government’s move to exempt first time house buyers with household income of less than RM3,000 from having to pay the standard 10% downpayment for properties costing RM220,000 and below. This category of house buyers will be very hard pressed to come out with a downpayment of RM22,000 (10% of the property price) and even their EPF may not have sufficient funds, especially for those who have only recently started working. As a result, this category of house buyers ends up renting for many years without a property under their own name resulting in being homeless when they get old/retire.
This is a good scheme to assist the lower and middle income household group to own houses which they can call HOME. Rightly, they should be the ones who deserve the Government’s incentives, not those who can afford to buy more expensive houses. The incentives will directly result in easier buying of houses that cost below RM220,000. This hopefully, should also serve as an incentive for Developers to build more houses that cost below RM220,000.
On the flip side: The Government is only treating the symptoms and not the cause of spiraling costs of owing a house. House prices have soared to exorbitant levels in major cities, even the middle classes cannot afford to own a house/ apartment, let alone the lower classes. Q: What do you think are the pitfalls of the scheme, if any?
Even with the Government’s move to assist this category of house buyers from having to pay the 10% downpayment, buying a house and being able to afford to pay the monthly installments are two different things. A higher Housing Loan translates to higher monthly repayments which will put further strain into the house buyer’s monthly expenses. Based on the current BLR of 6.30% and the ‘market rate’ of about BLR less 1.80%, the effective interest rate charged to the housebuyer is about 4.50% per annum. The repayment of the housebuyer for a 100% loan for a housing loan of RM220K at 4.5% ranging from 20 to 30 years is as follows:  Generally, banks practise a guideline where: - Any single loan repayment should not exceed 1/3 or 33% of the gross pay
- All loan repayments should not exceed 1/2 of the gross pay
This is to avoid a situation where the Borrower can no longer afford to pay his monthly loan obligations. As you can see, based on general guidelines, even for the max 30-year Housing Loan, the monthly repayment has exceeded 1/3 (or 33%) of the Gross Salary.
These Borrowers would be considered to be living dangerously if the Banks were to approve their housing loan. Also, this would mean that it would be impossible for these house buyers to take up any additional loan such as a Car loan. Q: Do you think people under the loan scheme will be burdened by costs or that many will default payment?
Just using the example above and just say for argument sake, the Banks approve the Loan with a tenure of 30 years at monthly repayment of RM1,115 which is actually higher than the 1/3 of the applicant’s Gross Salary.
 If you look at the list of expenses, most of it is quite reasonable. From the above example, the house buyer who earns less than RM3,000 ends up with only RM185 savings a month living like a hermit and praying that there is no personal emergency expenses.
Hence, they would be considered high risk as they have no safety net and will default on their loan obligations in the event of any personal emergency. Notice, I did not even put in things like childcare, wife expenses. This would drive the housebuyer into a deficit position. Q: Do you feel that because a down-payment is NOT necessary, people will not value the purchase of their first home?
Not necessarily, but it may give the false impression that he/she can afford to maintain the house, when they actually can’t based on the table of income vs expenses above.
This housing loan scheme is only suitable for fresh graduatates where there is a very high potential for their income to increase over time and hence, their monthly savings will be able to be increased over time. People buy in on the premise that economy is growing or alleged to be increasing. In the event of a downturn, it would trigger a snow ball effect.
Q: Do you know what the circumstances are if a person bought a home but sold it off, will s/he still be able to apply for the loan scheme?
The above says ‘My First Home ’. Hence, if the person has bought a home using a housing loan but sold and has repaid the loan, technically, this person would not qualify. You could clarify this with Bank Negara Malaysia. Q: Do you have anything else to add?
HBA further calls for further measures such as this category of house buyers be given a preferential interest rate of 3.0% (which is equivalent more or less to our official inflation rate) fixed throughout the Loan Tenure. Based on a loan amount of RM220,000 with interest rate of 3.0% and a loan tenure of 30 years, the monthly repayment is RM926 which is less than 1/3 of the gross household income.
The table will then look as follows:
 The monthly savings have almost doubled.
HBA also calls for more measures by the Government to impose quotas for developers to build homes costing less than RM350K (between the range of RM150K to RM350K) so that the lower and middle household income earner can buy it without stressing their lifestyle.
Passing remark:
Does the guarantee of 100% loan -'My First Home Scheme' come with a guarantee that those who buy in are guaranteed that they will not suffer the fate of abandoned housing projects?
The Government should effectively address the issue of ‘When one buys a house, they get the house completed within the stipulated time to do so’. Presently, we have a situation of “Protection not Guaranteed’.
The Government should put the needs of the house buyers first by ensuring a system of Build-Then-Sell where the house that one buys is completed before sale. What’s the use of having 100% loan availability when houses are risked abandoned midway? The National House Buyers Association (HBA) is a voluntary, non-governmental organization manned by unpaid volunteers. For more information, check out their website at http://www.hba.org.my E-Mail: info@hba.org.my NATIONAL HOUSE BUYERS ASSOCIATION [HBA] No. 31, Level 3, Jalan Barat, Off Jalan Imbi, 55100, Kuala Lumpur
Tel: 03-2142 2225 | 012- 334 5676 | Fax: 03-22601803
Email: info@hba.org.my | Web Site: www.hba.org.my | 
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