FundMyHome Review

FundMyHome (Link) is an innovative platform for buying a house. This platform is operated by EdgeProp, a subsidiary of The Edge Group. How is it innovative? We only need to pay an upfront payment to move into the house, without the burden of monthly instalments. Does it sound too good to be true? There are obviously a few caveats.

FundMyHome review

First, what does this platform do? The platform links homebuyers and institutional property investors together. The homebuyer only needs to pay an upfront payment of 20% of the property price to gain access to the house. The remaining 80% would be contributed by institutional funders. The homebuyer must hold the property for five years.

After five years, the homebuyer can choose to stay on or sell the property.

There are both high-rise and landed residential properties on this platform. The developers include EcoWorld, IJM Land, IOI Properties, Mah Sing, PKNS, PNB Development, Sunway Property, Trinity Group and UEM Sunrise. Each development has its own quota for sale.

Benefits of FundMyHome

No monthly instalment is required during the five-year commitment period. Furthermore, the buyer would save on rent. Thus, the buyer can save towards full purchase of the home or spend on other things. Besides that, there is no restriction on renting out the property. By renting it out, the buyer can have extra income.

Eligibility

To qualify as a buyer, you must be a non-bankrupt Malaysian adult (at least 18 years old) who is buying house for the first time.

Buying process

First of all, you will have to register on the platform. Select a property that you wish to own. Click on ‘I Want to Reserve This Unit’. The reservation fee is 2% of the purchase price. According to the platform, reservations are done on a first-come-first served basis.

The properties are divided into ‘Fully Funded’ and ‘Funding in Progress’. For the Fully Funded home, it means that the financing is already in place and the platform gives you at least two weeks’ time to pay the balance of the purchase price and all fees. For the Funding in Progress property, the funding will commence for 30 days after you paid the reservation fee. If the funding target is not achieved, the fee will be refunded. You will only need to pay the balance of purchase price and all fees in 14 days when the funding target is met.

It will take at least another two to three weeks of legal process to receive the key after the payments are cleared.

FundMyHome allows joint purchase as long as both buyers are first-time home buyers.

Fees

Other than the 20% payment, the buyer needs to settle all transaction costs. These include legal fees, stamp duty and others. Overall, the amount will be around 1.5% (based on a RM 300000 house with no stamp duty). The percentage can be higher if the selling price is higher.

Does FundMyHome charge any fee? For now, it does not.

Owner’s rights

After everything is settled, you are the proud owner of the house. So, what rights do you have?

First, the owner is free to renovate the property. Nonetheless, the house rules of the development apply. Thus, do check with the developer before renovating. The cost is coming from your own pocket.

Second, you can rent the house out if you wish to. Just make sure the tenancy would not exceed five years from the date of purchase.

As long as you have not fully paid for the house, your rights will be subject to the rights of the institutions which provide 80% of the fund.

Owner’s obligations

You have to take care of the property and pay all fees related to homeownership including management fees, quit rents and assessments and the cost of any repairs or maintenance.

What happens after five years?

FundMyHome will assign an independent valuer to value the house in the six months before the fifth anniversary of homeownership. The cost of the valuation will be borne by the owner.

At this point, you can choose to sell or stay on.

Stay on

If you want to stay, you can either apply for a bank loan or refinance under FundMyHome. Based on the valuation price, you can buy out the 80% share held by institutions by using a bank loan. If you choose to refinance, you may need to top up some funds to maintain a 20% share if the house price increases.

Sell

FundMyHome will help you to advertise and sell the property on the open market for at least three months. The platform is obliged to act in the interests of institutions instead of yours. Nonetheless, since its aim is to maximize financial returns, you will benefit too. The process typically takes around three to six months, but it can be longer. You will need to vacate the house by the fifth year, even if the house is not sold yet. If you want to stay in the house, the platform will charge you a rental rate based on a 5% rental yield.

All furniture and fittings come with the house cannot be removed and must be in good condition, subject to normal wear and tear. These items will be included in the sale. You can take away your own furniture and fittings.

All the third-party costs related to the sale will need to be borne by the homeowner.

 

Proceeds from the sale

If the sale nets more than 20% profit, you will get a share of the return. You will only get your upfront payment back if the profit is less than this percentage because all the profit will be given to the institutions. If the house is sold at a loss, the institutions’ share will be prioritized. It means that your portion will be cut and they will get back their original investment whenever possible. However, the maximum amount that you will lose is the upfront payment only. I personally think that investing in property market seldom produces losses, unless you buy in a housing bubble. So, the chances of facing a loss scenario will be quite low.

Conclusion

In my opinion, this mode represents an alternative way for first-time house buyer to own a home. Essentially, you are renting the house without the monthly payment and have an option to take full ownership of the house after five years.

The only drawback is the high upfront payment, which might be hard without support from family. Although it requires a lump sum to begin, you do not need to worry about monthly repayment for five years. After five years, I assume that you would have the ability to get a housing loan. If you would like to upgrade to a better house, there is a chance for you to exit too.

As this is a new platform, it does not have a track record yet. All the above information is from its website. Furthermore, I am not qualified to take the plunge. Thus, it will take some time before we can determine if this is a better way to own a house. For the time being, I would say that this is a good innovation.