Monday, March 12, 2012

My First Home scheme faces reality check

Business Times: Mon, Mar 12
A HOUSING loan scheme to help lower income earners acquire a home in Malaysia has yet to get off the ground, as thus far, no applicants have been approved.

Indeed, bankers doubt targeted applicants can qualify for the My First Home scheme, given the stipulated terms and conditions, media reported last week. The seemingly generous scheme was launched last year in response to complaints that affordable houses are out of the reach of the average citizen - especially in populous areas such as Klang Valley and Penang Island. It offers young couples who jointly do not earn more than RM6,000 (S$2,480) a month, financing from selected banks for houses priced between RM100,000 and RM220,000, with a repayment period of up to 30 years. Following complaints that the range was unrealistic for properties in the Klang Valley (or Penang), the limit was raised to RM400,000.

While real estate within the new ceiling can be found in the Klang Valley after a determined search, it appears to have only recently hit home that the scheme is impractical. This is because those earning less than RM3,000 a month - a single borrower's gross income cannot exceed RM3,000 - do not fall within lending prudential limits on a RM400,000 loan.

The monthly repayment on a 30-year loan would amount to about RM1,780 based on an annual interest rate of 4.3 per cent, a financial planner told Chinese newspaper Sin Chew daily. This amount far exceeds what such applicants could reasonably be able to afford every month. With stricter lending guidelines now in place, borrowers need to demonstrate they have at least about a third of their net income - minus the usual deductions of pension fund payments, credit and car loans - available to service their home loan.

Even occupants of low-cost flats are vehicle owners, with some boasting two or three cars, despite the huge chunk that hire purchase payments takes out of their modest monthly pay-cheques, leaving them with barely enough for their daily necessities. Most applicants also require 100 per cent financing since they do not have the ability to come up with the down-payment...

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Team Marshe
Martin Koh/ Sherry Tang
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