KUALA LUMPUR, Nov 9 — Want to know more about the country’s (and possibly world’s) first peer-to-peer home financing?
Here, Malay Mail summarises the key points from FundMyHome's portal including its FAQ section for you:
What is it in a nutshell?
Quite simply, FundMyHome allows a person to buy a home by paying an upfront 20 per cent of the house's price, with investors such as banks committing to fund the remaining 80 per cent in exchange for a share in future profits.
Under the scheme, the buyer does not have to make any monthly payments — unlike a housing loan — for five years. After the five years is up, the buyer can choose to take up a housing loan to buy the property or sell it off to make some profit. This is assuming the property has appreciated in value.
Do you qualify?
First up, you have to be a Malaysian aged above 18 years who is not bankrupt and who is a first-time homebuyer. You can even buy a house together with another person who is also buying a house for the first time.
According to FundMyHome, the scheme is not for those who just want to make quick profits or for those who don't plan to own the home for a minimum of five years.
How does it work exactly?
To start the process towards home ownership, a buyer will have to pay a 2 per cent booking fee to reserve a unit in the housing projects listed on FundMyHome’s portal, with the reservation on a first-come-first-served basis.
Houses offered on FundMyHome fall into two categories: “Fully Funded” and “Funding in Progress”, with those in the former category requiring the buyer to pay the 20 per cent and all fees to FundMyHome within at least 14 days.
As for the “Funding in Progress” category, the buyer will again have 14 days to make the same payments, if funding from investors that are typically banks meet the funding target of 80 per cent of the house price within 30 days.
But all funds will be refunded without interest if the funding target is not met within the one-month period.
If all goes well, the legal process for the home purchase from the developers will then take an estimated two to three weeks, according to the FundMyHome portal.
The ownership arrangements, according to FundMyHome’s terms and conditions, is that the buyer becomes a property owner after entering into a sales and purchase agreement (SPA) with the developer, and after other agreements are made.
Rights and obligations
So congratulations, you as a homebuyer under the FundMyHome scheme have become the legal owner of the property, albeit with your ownership rights subject to the banks' rights.
Here's what you can now do besides staying in the property: Rent the property out until the fifth year of the purchase subject to FundMyHome's terms and conditions; or renovate the house using your own money subject to the property development's house rules.
But you will also, as a homeowner, have to pay for all related fees such as management fees, quit rent, assessment tax, insurance, repairs and maintenance costs.
Taking good care of your home will also help boost the long-term value of the property.
What happens after five years?
The catch is that the house cannot be sold during the five-year period, with the buyer and banks also barred from exiting the scheme during this lock-in period.
About four years and three months from the date of purchase, FundMyHome will appoint an independent and qualified valuer, with the buyer then given two months to arrange for the property’s inspection by the valuer.
FundMyHome requires buyers to have the valuation completed six months before the end of the lock-in period at the buyers’ own cost.
At the end of the five years, the buyer will then have two options: To keep or sell the property.
Option 1: Stay on
The buyer can choose to be in the FundMyHome scheme for another five years, with the condition that the buyer tops up with additional money to fulfil the 20 per cent portion if the property’s value has gone up.
As for investors such as banks, they can choose to stay on or sell their 80 per cent share to other institutions. The buyer can alternatively use his/her own money or take out a bank loan to buy off the 80 per cent share from the investors.
Option 2: Sell
If the buyer chooses to sell the property, he/she has to leave the property and hand it over by the end of the fifth year, or pay rental based on a 5 per cent rental yield. The property will be advertised for at least three months, with FundMyHome cautioning that it is not guaranteed that the sale process will not be longer than the usual three to six months.
The homeowner will have to bear all third-party costs related to the sale, with the property sold to include developer-provided furniture and fittings in good condition subject to the usual wear-and-tear, while buyer-purchased furniture and fittings can be excluded.
And the catch?
The biggest downside would be the risk of the property depreciating in value at the end of five years, with FundMyHome noting that they could lose some or even all of their capital if the property price falls.
When the property is sold after the fifth year, the order of priority for the distribution of sales proceeds is: Investors or bank to receive their original capital first (80 per cent of purchase price), buyer to receive buyer’s original capital (20 per cent of purchase price).
As for the order of priority for the profits after the original capital is paid out, the investor receives a preferential share of the capital gain or profits (equivalent to 20 per cent of purchase price), while the remaining capital gain will be split to the investor at 80 per cent and the buyer at 20 per cent.
FundMyHome provided an example based on an initial house price of RM300,000 where the buyer pays RM60,000 (20 per cent) and the investor or bank pays RM240,000 (80 per cent), with scenarios of the property value either going up, remaining the same or going down at the end of the five-year lock-in period.
Based on calculations, in the case of the sale price staying the same, the buyer and investor will get back the RM60,000 and RM240,000 that they had respectively paid.
If the property value goes up by 10 per cent (RM30,000) or 20 per cent (RM60,000) to RM330,000 or RM360,000 respectively, both the buyer and investor will get back the full capital of RM60,000 and RM240,000 which they had paid initially.
If the property value goes up by 30 per cent (RM90,000) to RM390,000, the buyer will receive RM66,000.
If the property value depreciates by 10 per cent to RM270,000, the buyer will only recover half at RM30,000 while the investor would recover the full capital.
A depreciation by 20 per cent to RM240,000 will see only the investor getting back RM240,000 with the buyer receiving none, while a depreciation by 30 per cent will also see only the investor receiving RM210,000 and also a total capital loss for the buyer.
Don't forget the new tax rate
Note: If for some reason, you decide at the end of the five-year period to sell the property instead of continuing to own it, there will no longer be zero tax on your profits from the sale.
In the recent Budget 2019 speech, the government said it will now impose a 5 per cent Real Property Gains Tax (RPGT) on profits from the sale of properties that were purchased more than five years ago, unless the property is valued at below RM200,000.
What's on the menu so far
FundMyHome has partnered with some industry heavyweights, namely EcoWorld Development Group Bhd, UEM Sunrise Berhad, Sunway Bhd, IJM Land Bhd, IOI Properties Group Bhd, Mah Sing Group Bhd, PKNS (Perbadanan Kemajuan Negeri Selangor), PNB Development Sdn Bhd, and Trinity Group Sdn Bhd.
Currently there are 1,016 units from 17 high-rise and landed housing projects by these nine developers listed on FundMyHome's portal, with the lowest starting payment to be made to own a home ranging from RM61,400 to RM100,000.
The starting prices for these homes range from RM307,000 to RM500,000, with only one of the projects categorised as “Fully Funded” at the time of writing.
The 17 housing projects are mainly in Selangor (nine projects), while there are four each in Negri Sembilan and Johor.
The houses under the FundMyHome scheme are already built or soon to be completed which allows buyers to move in quicker, with eight of these housing projects ready for moving in, while six will be completed within 2019, and one each to be completed in 2018, 2020 and 2023.
Not regulated yet
The FundMyHome platform, which was launched earlier this month and which is owned by The Edge Group’s subsidiary EdgeProp Sdn Bhd, does not currently come under any regulations yet.
On November 5, regulator Securities Commission (SC) said it will carry out consultations with stakeholders before issuing regulations for the property crowdfunding framework that is expected to take effect in the first quarter of 2019, adding that those who operate platforms for such alternative home ownership financing schemes will be required to register with the SC and fulfil certain requirements.
EdgeProp Sdn Bhd chairman Datuk Tong Kooi Ong has since said that the FundMyHome scheme currently does not need regulatory approval as it is only open to institutional investors now, and said the company will work with regulators to have approval for members of the public as investors by the first quarter of 2019.
But what's the difference between a mortgage, rent-to-own and a pay-to-own crowdfund?
The FundMyHome model actually shares some similarities with Malaysia's first bank-initiated rent-to-own scheme HouzKEY in terms of the five-year lock-in period and the aim to provide a faster and simpler way to own a home.
But Maybank Islamic Bhd's HouzKEY differs from FundMyHome in terms of features such as the lock-in of the property price and disallowing of renting out the property.
As for housing loans that typically see banks cover up to 90 per cent of the house's price depending on whether the buyer can fulfil requirements, a buyer usually has to fork out an initial 10 per cent down payment and pay off the rest of the loan for a maximum of 35 years.
Malay Mail previously wrote two stories explaining how the HouzKEY scheme works, click below to read:
Perhaps it is a case of which route to home ownership is best suited to a buyer’s needs and preferences, although the National House Buyers Association (HBA) has said that Malaysia needs to address its house prices that are unaffordable for many Malaysians instead of focusing on alternative financing methods.
Note: This story is based on the latest available information on the FundMyHome portal as of the time of writing, and is not meant to be an exhaustive list of information on the terms and conditions of the FundMyHome scheme.