
As housing prices increase, many Malaysians are choosing to buy property together with family or friends through joint home loans to make it more affordable. This approach helps share financial responsibilities and makes it easier to get a loan in today’s challenging market. But is buying property together with a joint home loan the best option? Future problems, like ongoing disagreements and difficulties, show why it’s important to think carefully before committing. It’s crucial to consider both the pros and cons before deciding on joint property ownership with a home joint loan.
When you buy a house together, you also share the cost and mortgage, reducing the financial load even if the property is more expensive. Plus, with the extra savings, you can spend on decorating the house, making it more attractive. This can increase the home’s value over time, leading to higher rental income and capital gains.
Additionally, using funds from a housing provident fund to boost the down payment can further reduce the loan amount and might lower the interest rate. With these advantages, homebuyers can get better loan terms and make future repayments easier.
If you go for joint ownership with a 90% loan, you lose the chance to qualify for the same loan percentage individually. This rule also applies to your co-buyers. For example, if two people could each get a 90% loan for two properties before, now they can only get this for a total of two properties between them. If you plan to buy a third property, you can only apply for a maximum of a 70% loan from then on.
However, if both you and your partner are first-time homebuyers, only one of you can receive the first-time homebuyer discount. For example, if you and another first-time buyer both have the opportunity to buy an affordable home, you can each buy one property if you purchase separately, meaning you’ll own two homes.
But if you decide to combine your resources and buy a property together, you will only be able to buy one affordable home. This means that whether you buy together or separately, you will miss out on these benefits when buying additional properties in the future.
If you co-own a property, both owners can use this exemption when selling. However, if you buy separately, each person can use their own exemption when selling.
The credit ratings of both parties closely connected
Getting a joint loan can improve your chances of loan approval, but all borrowers must have a good credit history. If your co-signer has a poor history of paying debts on time, it could affect your home loan approval, even if your credit is good.
Before applying for a joint mortgage, make sure to check both parties’ credit scores, debt levels, repayment history, and other financial obligations. If you fully understand your loan agreement, you’ll be less worried about the other person not repaying the mortgage in the future.
For example, a young couple might break up after buying a house together. They then have to figure out what to do with the mortgage and the house. One person might want to sell the house, while the other doesn’t, leading to disagreements that can be tough to resolve. These issues make an already stressful situation even harder to handle.
To do this, you will need to follow a process similar to selling a second-hand home. Both you and the other party will need to sign these agreements:
Sale and Purchase Agreement:
This document will state that you are selling half of your property rights to the other party, including the sale conditions and price.
Loan Agreement:
If the buyer needs a loan to pay for the property, this agreement ensures the transaction is legal and protects both parties.
However, the bank may hesitate to approve your loan since it originally considered both of your credit histories when granting the loan. But don’t worry, refinancing is the solution. Refinancing is like giving your loan a fresh start. You’ll get a new loan with updated terms, and it will pay off your old loan entirely.
When you apply for refinancing, the bank will review your credit again and approve it if they’re confident you can manage the mortgage on your own. The best part? The other person’s name will be removed from the loan automatically. It’s a good idea to consult a real estate lawyer before signing any contracts to protect your rights and understand the legal and financial responsibilities.
Buying a home is exciting, but it’s important not to overlook any potential issues. Remember, purchasing a home is a big decision. Take the time to consider your options carefully to avoid regrets later on. Before signing any contract, it’s a good idea to talk to a real estate lawyer. They can help protect your rights, ensure you understand your responsibilities, and guide you through the legal and financial aspects of the deal.
Level 32, Johor Bahru City Square (Office Tower), Jalan Wong Ah Fook, 80888 Ibrahim International Business District, Johor Bahru, Johor, Malaysia.
T: +607-221 1989
F: +607-222 1989
E: sales-enquiry@berinda.com
#01-01 Pangsapuri Molek Pulai,
Jalan Persiaran Molek,
Taman Molek,
81100 Johor Bahru, Johor
T: +607-364 1770
Level 32, Johor Bahru City Square (Office Tower), Jalan Wong Ah Fook, 80888 Ibrahim International Business District, Johor Bahru, Johor, Malaysia.
T: +607-221 1989
F: +607-222 1989
E: sales-enquiry@berinda.com
#01-01 Pangsapuri Molek Pulai,
Jalan Persiaran Molek,
Taman Molek,
81100 Johor Bahru, Johor
T: +607-364 1770