Are you a first-time homebuyer or are you on your third (or more) property purchase? Your experience level will determine the strategy that fits best.
First-time buyer?
Understand the basics of the buying process with our Step-by-Step Guide.
Experienced buyer?
We can help you improve your asset portfolio with strategies like refinancing or joint loans.
First-Time Homebuyer Checklist
Buying your first property is an exciting milestone, but it also comes with a lot of moving parts. To ensure a smooth journey, here’s a step-by-step checklist to guide you through the process:
1. Assess Your Financial Readiness
Credit Score Check
Make sure your credit score is in good standing, as this will directly impact your loan eligibility and interest rate
Monthly Budget
Create a budget to ensure you can afford the monthly mortgage payments, including other related expenses like property taxes, insurance, and maintenance.
Down Payment Savings
Aim to save at least 10-20% of the property value as a down payment. The more you can put down, the better your loan terms will be. But in FAR Capital, we have ways for your to buy property without using down payment
2. Choose the Right Property Type
Determine whether you’re buying a property to live in, rent out, or invest in for long-term capital gains. This will influence your choice of location and type of property (e.g., apartment, landed house, or commercial space).
3. Get property deals that will not lose money
Research different neighborhoods and find areas with growth potential, accessibility, and future development projects. With FAR Capital we provide guide and criteria on how you can buy property without losing money.
4. Hire a Real Estate Agent
Engage a reputable real estate agent who knows the market and can guide you through the buying process. Or join community like us where you can buy property in bulk purchase with huge discounts
5. Inspect the Property Thoroughly
Don’t skip the property inspection. Ensure the house is in good condition, and if there are repairs needed, factor them into your offer. This will prevent unexpected costs later.
6. Understand the Legal Process
Familiarize yourself with the legal process, including signing the Sales and Purchase Agreement (SPA), ensuring the transfer of ownership is smooth, and knowing your rights and obligations as a buyer.
7. Plan for Additional Costs
Beyond the down payment, be prepared for other costs such as legal fees, stamp duty, agent commissions, and moving expenses. It’s essential to have a buffer of at least 10% of the property price for these.
8. Closing the Deal
Once your loan is approved and all the documents are in place, you can finalize the purchase. Celebrate your first step into property ownership!
Strategy for Buying a 2nd and 3rd Property: Leveraging Refinancing
As you build your property portfolio, buying your second or third property requires more advanced financial strategies to maximize your investment potential. Here’s how you can do it effectively:
1. Refinance to Unlock Equity
If you’ve already built up equity in your first property, refinancing can be a powerful tool to unlock that equity and use it as a down payment for your next investment. Here’s how it works:
What is Refinancing?
Refinancing is the process of replacing your existing mortgage with a new one, typically with better terms, lower interest rates, or a longer tenure. By refinancing, you can reduce your monthly repayments and free up cash.
Cash-Out Refinancing
This strategy allows you to tap into the increased equity of your property due to price appreciation or mortgage repayment. You essentially borrow against your home’s value, withdrawing the difference between your current mortgage balance and the home's current market value. The cash you receive can be used as a down payment for your next property, reducing your need for additional savings.
Example :-
If your first property’s market value is RM500,000 and your remaining mortgage balance is RM300,000, refinancing allows you to take out up to 80% of the property’s value, meaning you could potentially unlock RM100,000 to RM150,000 in cash.
2. Enhance Your Loan Eligibility
When purchasing your second or third property, banks will scrutinize your debt-to-income ratio even more. Here’s how you can improve your eligibility:
Joint Loan with a Partner
Applying for a joint loan with a spouse, partner, or family member can increase your borrowing power, as both incomes will be considered when calculating your loan eligibility. It also reduces the risk in the eyes of lenders.
Improve Debt-to-Income Ratio
Before applying for your next mortgage, pay off high-interest debts like credit cards or personal loans. This will improve your debt-to-income ratio, making it easier for you to qualify for larger loans.
3. Capitalize on Purchase Incentives
For seasoned buyers, developers often provide purchase incentives such as discounts, free legal fees, or furnishing packages for under-construction properties. These incentives can reduce your overall investment cost, making it easier to buy additional properties.
4. Maximize Rental Income Potential
When purchasing your second or third property, focus on locations with strong rental demand. This can help generate positive cash flow, ensuring your property not only appreciates over time but also contributes to your monthly income.
5. Long-Term Wealth Building
As you acquire more properties, your focus should shift toward long-term wealth building. This involves diversifying your property portfolio, targeting properties with strong capital appreciation potential, and ensuring you have a stable mix of income-generating assets and high-growth investments.
6. Plan for Taxes and Legal Considerations
Owning multiple properties may have tax implications, such as higher property taxes, stamp duty, or rental income tax. It’s crucial to consult with a tax advisor to understand how these additional investments affect your overall financial situation and how to best manage these expenses.
Final Thought
Building a property portfolio beyond your first home can be challenging, but with smart strategies like refinancing and joint loans, it’s entirely achievable. The key is to continually reassess your financial standing and make informed, strategic decisions to ensure your investments contribute to long-term wealth.
Ready to take the next step?
If you’re interested in learning more about refinancing or need help planning your next property purchase, contact us today for a free consultation.
