Renting is OK too

BUYING a house is not the same as owning it. Focus on strengthening your financial capacity first, advices Bank Negara.

It’s acceptable to rent when owning isn’t an option. Malaysians, the central bank says, needn’t feel compelled to own or embarrassed to rent.

In many advanced countries like Germany, renting is very common. It allows households to better cope with higher living expenses, saving them from excessive mortgage debts.

According to Bank Negara, some of the reasons given by Gen Y-ers on why they prefer renting include: their income growth doesn’t match house prices; competition for the limited supply of affordable houses from those older and with stronger financial muscles; cannot afford a housing loan; labour mobility; and delay in starting a family.

To maintain ownership over time – or at least throughout the housing loan tenure – one must ask:

> Do I have enough for up-front costs (eg downpayment, stamp duty, legal fees, fire and mortgage insurance)?

> Over 25 to 35 years, can I afford to pay the monthly loan instalment and maintenance costs? If I lose my income, how long can I sustain such payments?

> Can I still save for emergencies and retirement?

Consider the Credit Counselling and Debt Management Agency’s practical training programmes that help prospective first time buyers improve their ability to qualify for housing loans by reviewing their cash flow. The agency also advices borrowers on ways to enhance net disposable income to meet debt repayments and develop savings plans to help borrowers save for the upfront down payment.

Stressing that limits are only specified for financing tenures, and maximum financing amount encourages speculative activity, Bank Negara says easing lending conditions is not on the cards. Current regulations are aimed at ensuring people avoid borrowing beyond their means and addressing speculation in the housing market.

“These principle-based measures aren’t situation-dependent. They encourage individuals to realistically consider how much borrowing they can afford given their current income, expenditures and financial obligations. It’s to save individuals from financial hardship resulting from over-borrowing and the lack of good financial discipline and management.”