Nowadays, we heard there has been concern over rapidly escalating property price. The average terrace houses in Klang Valley can shoot up to RM400,000 to RM500,000. With all the increases in our commodity and interest rates, are we able to cope with this situation? While our incomes have not kept up with property prices at all. Yes, we have received annual increment, but it is substantial with the current cost of living?
Given the costly property prices and the huge amount of upfront capital involved, some people, especially first time homebuyers, may find co-ownership a more viable route to take. Of course when you are on the same wavelength, this can work out amicably.
Co-owning allows us to leverage on our co-owner’s income to qualify for housing loan. It also allows us to raise a higher down payment so that we are able to buy bigger or more sough-after property. Rather than putting your individual name on the property, a better way to co-own a property is to set up a company. However, it is preferable a Sdn Bhd company. You may want to consider other cost incurred by setting up a Sdn Bhd company such as secretarial and company fees and tax implications as well.
Ensure that your co-owner is somebody you know very well too. Banks are fickle about who you share your property with. You must have a close relationship with the person. They could be your siblings, spouse, children, mother and father. Banks rarely give out loans to friends because there are no ties. However, most banks still acceptable fiancé or fiancée relationship. Even though, there are cases in the past, when everything turn sour, the settlement can end badly.
One party not selling and paying for the installment, while another party keep paying to avoid property being auction or his/her name ended in bank’s poor record. According, to banks experience the obligation to service loan commitment weaker when someone co-owns properties with friends, girlfriends, boyfriends and business partners. It is less risky, if you co-own the property with immediate family members and if it is your own use because you are more obliged to assist each other.
Co-owner allows you to share the liabilities and ownership of the property equally. This mean, your liabilities towards the loans will be calculated partially. It will reduce the debt service ratio (DSR). DSR is use in banks for calculating customer total commitment with the new loan on board. It is very important for customer to remain within bank guidelines. If the DSR is too high, customer loan amount may be reduced or bank may suggest for co-borrower in the application.
Choose wisely when you are looking for co-owner because it can help you or vice versa.