Should I get the dream bungalow

This is a nice read - "Should I get the dream bungalow - Head or Tail?"

The writer faces a dilemma.
You are approaching 40, with wife n 2 kids.
You have found the perfect home, a 1.6m bungalow in a perfect location.
You know you can afford, but barely. Meaning, savings need to be cut down, overseas vacations will be limited & instead driving a 5 series beemer, u have to settle for a 3 series.
Is it worth it?

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Personally i think overseas vacations & luxury cars are the 'wants' in life. Things that we can live without but nice to have.
Retirement savings, kids education, insurance are the ones that need to be factored in. If you earn 10k, and your dream home requires a monthly commitment of 4k - ideally you need to have the comfort of allocating at least 1k for savings & if possible, 1k for your parents (Yes, its top of my priority list). Then, the balance 3k can be used to pay off bills, groceries & other misc stuff - including cars. Car is a wasteful liability. Try not to overspend on it. Unless, you got a really good bargain like I had :)

With that being said, the decision is not quite straight forward. I had the same dilemma before. Based on what I need - a standard 2-storey terrace will do me & my family of four just fine. But paying more than a half-million ringgit on a landed property without land?? Hmmmmmmm

Lets consider a 2-storey house in Bandar Utama. The built-up is 2000sf. The current market price is RM700K. So, the price is RM700000/2000 = RM350psf.
The cost of building a bungalow house with basic finishing = RM150psf (Few contractors even quoted me RM100psf - RM120psf).
Meaning - the land value for the Bandar Utama house must be somewhere around RM200psf.

I bought my land for RM465K (RM50psf x 9300sf)and that was 2 yrs back. The market value now is RM665K (RM70 x 9500sf).
The house will cost me another RM500K (its just a small bungalow around 3500-4000sf). So, in total my cost will be RM465K + RM500K + RM35K (Architect fees) = 1 Mill.
My total loan will then be 80% of initial land cost + house cost = RM370K + RM500K = RM870K. Assuming that I'm eligible to apply for a 1.2 million loan, I will get a total cashback of 1.2M - 870K = 330K!
Yes, i need to pay RM5000 for the next 40 years. But in return, i will have my dream bungalow & RM300K++ cash!
Imagine this - in 5 yrs time, if i'm able to sell it off for 2 Mill. That's an additional 800K cash in hand!

So, in my case - is it worth it? Time will tell :)

Loan for Bungalow Land

The major obstacle that deprives the average joe from buying bungalow lots = limited financing options.

Last time i scouted 2 years back, the best margin that i got was 80% with 20 years tenure. Its from EON bank. The interest follows Islamic rate of 2.5% (1st year), 5% (2nd year) and 7.5% from 3rd year onwards.
The second best was Bank Rakyat with MOF of 70% and 15 years tenure.
Others, Maybank, Alliance, Hong Leong - the margin max to 50-60%.

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Summary (2008):
EON Bank - MOF 80%, Tenure 20 yrs, Rate 2.5%(1st), 5%(2nd), 7% (3rd onwards)
Bank Rakyat - MOF 70%, Tenure 15 years, Rate 2.5%(1st), 5%(2nd), 7% (3rd onwards)
Maybank & most banks - MOF 50-60%, Tenure 10-15 years, Rate (i didnt even bother to ask)
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So, clearly EON bank was the way to go. The mathematics works like this:
Land price - RM50psf x 9300sf = RM465000.
Loan amount (MOF - 80%) - RM465000 x 80% = RM372000.
The rough monthly installment - RM2400 (1st yr), RM2800 (2nd yr), RM3000 (3rd yr).

Back then, the EON broker told me that the cost of house construction can be merged later into 1 single package with the benefits of normal housing loan package. Buttt somehowwww, this year they had a change in policy & the single package offer is no longer valid. Meaning, i need to apply another home loan, on top of the inital loan for the land. Warghhhhh.

Again, i began scouting but this time for land refinancing + home loan. Alhamdulillah. I managed to get a good package from CIMB. For land + house, they can offer MOF of 90% out of the total current land value and house construction cost. The tenure can stretch up to 40 years, with maximum age till 70 years. The rate? Uses conventional rate of BLR-1.9.
I love CIMB!! haha. And your total monthly commitment must not exceed 85%, which i think should be alrite for me. Even for bungalow land financing, CIMB can offer MOF up to 85% with max tenure of 30 years.

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CIMB Package (Land + House) - MOF 90%, Tenure 40 yrs, Rate BLR-1.9
CIMB Package (Land only) - MOF 85%, Tenure 30 yrs, Rate BLR-1.9 or -1.8
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Now, i just need to finalize the layout plan with my architect and the architect will have it submitted & approved by MBPJ. Then only i can send all the required docs to CIMB. Hopefully, there won't be any catch like 'a change in policy'.