Finance Minister Lim Guan Eng during his tabling of the Budget 2020, announced the introduction of a Rent-To-Own (RTO) financing scheme.
Under this scheme, financing of up to RM10 billion will help prospective first-time homebuyers who are unable to afford the initial 10% deposit or the financing for the purchase of a home under RTO schemes.
What is the R-T-O Scheme?
A new concept in Malaysia, it operates based on a ‘lease-purchase contract’ between the potential buyer and developer. By a lease-purchase contract, buyers will first rent the home that they are interested in purchasing for a set amount of time, usually 20 – 30 years.
This financing scheme will assist in reducing the total amount the buyer has to pay when it comes time to purchase the house, with benefits such as;
- Up to RM10 billion will be provided by financial institutions
- Rent-To-Own is supported by the government via a 30% or RM3 billion guarantee
- Purchase of a first home priced up to RM500,000
- Applicants are able to rent the property up to 5 years
- After the first year, tenants will have the option to purchase the house based on the price fixed at the time the tenancy agreement is signed
- The government will also provide stamp duty exemptions on the instruments of transfer between the developer and financial institutions, and between financial institutions and the prospective buyer
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Who is the Rent-To-Own Scheme for?
| First-time homebuyers who don’t have enough funds to pay the 10% down payment |
| First-time homebuyers still building their credit score |
| Allows potential buyers have time to save up and practice good financial habits |
| Allows them to lock in the price based on the current market value in the event they do decide to purchase it |
| They won’t be affected by an increase in the property’s price (capital appreciation) over the years |
By living in these houses under the Rent-To-Own scheme, first-time homebuyers for a while will they get to:
- Learn about any issues with the house and the neighbourhood
- Determine whether the house is a perfect fit for them and their family
The Rent-To-Own scheme will also offer a 10 percent loan guarantee through Cagamas to enable borrowers of full financing and RM200 monthly installment assistance for the first two years limited to 10,000 home units.
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