In Real Estate Investment

What is the difference in buying a house by hard cash compared to taking a bank loan?

I talked to a property agent last two weeks, they are hired by the developer who built double storey house. The property price around RM500K to RM600K. They do come across a few buyer who preferred pay in full for the whole house purchase price and the developer agreed to give an additional discount of 2% of the house purchase price. This conversation was interesting as it drives my interest to ask, “why will property developer give a discount? they earn 2% lesser if the buyer paid in cash rather than taking up bank loan?”. I find out that bank usually offers 15 years or 30 years tenure loan, and based on today rates, a house of 500K with the interest of 4.35%, if you take up 90% loan, RM450K, after 30 years, your total payment is around RM800,000.

Reason 1: Buyer wants to save on the interest paid to the bank. If you work out the math, the amount money they safe is RM350K.

Maybank home loan calculator for RM500K, maximum loan 450K and monthly repayment at RM2240

Maybank home loan calculator for RM500K, maximum loan 450K and monthly repayment at RM2240

Reason 2: Buyer wanted to take the opportunity to convert their hard cash which idle in the bank account or they keep in their safety box and turn it into property investment.

Reason 3: The Closing cost of the deal is cheaper. A buyer does not need to pay fees charged by the bank, either the charges incurred such as monthly statement charges, or potential late fees or any other charges.

Reason 4: Buyer does not need to buy a MRTA or MLTA mortgage loan which I explained earlier. You may be interested to find their different here.

Reason 5: Property developer often gives an additional discount on the selling price when a buyer buys at full cash. Don’t ask me why the property developer give the discount. But it is the industrial practice in Malaysia.

In short, cash is king, if the buyer able to secure a property with the lowest cost and the property has good future value, it is a good inflation hedging method.

 

We hope the information above will able to give you some pointers about what to consider before buying a house in Malaysia. What do you think? Like, share & comment your thoughts. Subscribe for latest updates.

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