By Joseph Wong
Most home owners, especially first-time buyers, would cheer when they finally receive the keys to their dream homes. However, many are unprepared for the concealed expenses that often accompany new homeownership. While it is common knowledge that banks swiftly initiate the full loan instalment following the delivery of vacant possession (VP), there are several other overlooked costs that homeowners must be aware of.
The more astute individuals may have set aside savings to address these supplementary expenses but there are buyers who may have already stretched their budgets to the limit, leaving them susceptible to unexpected financial challenges.
Before settling into their new abodes, it is crucial to note that some developers take a proactive approach by prompting owners to apply for various utilities even when the property is nearing completion and VP is on the horizon. On the flip side, other developers might defer this requirement until after the VP has been finalised, even to the point of leaving them to arrange for the utility connections themselves. This means that some home owners are left with no electricity or water, delaying their shift to their much-awaited homes.
Utility costs
These utilities applications include electricity supply where owners need a new account application with Tenaga Nasional Bhd (TNB); water supply via Syabas (if in KL, Selangor or Putrajaya); and Internet via the various telecommunication providers.
To initiate electricity services from TNB, customers are obligated to make upfront payments encompassing essential charges such as connection fees, stamp duty, and a security deposit. The connection charges are subject to variance, with TNB engineers furnishing estimates based on individual circumstances. Stamp duty stands at RM10, while the security deposit hinges on the dwelling type.
The deposit calculation takes into account the property type and the requested supply phase (one, two, or three-phase). Opting for a higher phase configuration promises improved electrical stability but entails a higher deposit. Deposit ranges span from RM170 for flats or traditional village houses to a maximum of RM1,600 for multi-storey bungalows.
It's worth noting that water and Internet charges, while varying among providers, generally fall within the hundreds of ringgit range. However, these charges typically do not scale as high as those imposed by TNB.
MOT and Assessment Rates
In almost all cases, the sales and purchase agreement and legal fees would have been paid during the initial purchasing period. The bigger sum is the fee for the Memorandum of Transfer (MOT), which is calculated based on the purchase price of the property. But fret not, not all buyers need to pay for this hefty sum as the affordable homes are usually exempted from the MOT by the government.
Yet another significant expense that looms post Vacant Possession (VP) is the council's assessment rate, determined by the property's value. Councils typically issue an initial assessment letter showcasing proposed rates, providing homeowners with a chance to engage with their respective councils if they find the rates exorbitant. To seek a reduction, homeowners must submit a written request to the council, outlining the reasons for the proposed reduction. Acquiring knowledge about the assessment rates paid by neighbouring homes can be instrumental in negotiating for a more favourable rate.
Renovation cost
Dealing with a new property presents a considerable challenge, primarily due to the prevalence of bare units. The costs associated with renovations become contingent on the owner's financial capacity and willingness to invest. Many buyers choose to address unit defects before initiating renovations, as certain developers might attribute defects to the renovation process. Additionally, there's the time cost to consider. Those looking to move in or lease their properties must patiently await the completion of defect rectification and renovation works.
Recent property and home exhibitions and fairs have featured enticing deals, with some offering renovation packages for smaller units ranging from RM18,000 to RM24,000. In contrast, personal anecdotes reveal instances where individuals spent over RM60,000 to renovate and furnish three-bedroom units. Owners are advised to allocate approximately 6% to 8% of their property's value as a benchmark for budgeting. It's crucial to recognise that even seemingly minor expenses can accumulate significantly.
Following the exhaustive process of renovations, many homeowners find themselves too fatigued to undertake the task of cleaning their homes personally. Although opting to clean the unit themselves may offer a slight cost-saving advantage, for numerous owners, this final bill signifies the completion of the home preparation journey.
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