WHAT’ S REALISTIC?
Scenario 1
HOT TOPIC
WHAT’ S REALISTIC?
Millennials( those born between 1980s to 2000s) are considered the“ homeless generation” because stagnant wages and skyrocketing property prices render it almost impossible for them to afford a down payment much less qualify for a home loan.
Looking at the soaring property prices in Malaysia, many young people can’ t help but complain. Past generations were luckier, as houses and land were more affordable to buy. For the younger generation today, buying a house doesn’ t seem as easy as it once was.
Banks look at your Debt Service Ratio( DSR) and generally would not approve a loan if the monthly instalment exceeds 60 % of the borrowers’ monthly income and this is assuming the best-case scenario where the individual can fork out RM25,000 up front and possesses a good credit history. How many 20-somethings do you know would fit these criterions without receiving financial aid from their families?
Scenario 1
John is a 27-year-old, working in an executive position. His take home salary is RM2,600 and he is still living comfortably with his parents.
Despite having a healthy social life, John manages to live reasonably debt free, aside from his RM400 a month car loan. After factoring in his expenses on food, transportation, entertainment, and mobile phone bills, he can set aside RM315 as savings. John lives a relatively comfortable life but he also realises that he cannot stay with his parents forever and would one day need to buy a property of his own. However, given the rising costs of property in urban Malaysia, owning a house seems more like an impossible dream unless John wins the lottery tomorrow.
Going by current market prices and bank rates, here is a rough breakdown on what it would cost to finance a RM250,000, 3 bedrooms, 2 bathrooms, 860sqft apartment in Penampang today.
Property price
Down payment( 10 %)
RM250,000
RM25,000
Maximum loan( 90 %)
Tenure
RM225,000
35 years
Interest rate 4.65 %( estimated)
MONTHLY INSTALMENT RM1,085
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