(There is an update to this article. Please click here to read it.)
HouzKEY (Link) is a rent-to-own scheme offered by Maybank. What is a rent-to-own scheme? In this kind of scheme, the tenant rents a home for a certain period, with the option to buy it in the future.
HouzKEY Review
HouzKEY allows its customers to rent a home for at least one year and gives the option to buy the house anytime at the pre-agreed price after the period. During this period, the tenant has to pay a monthly rental. The rental tenure can be extended up to 30 years.
Currently, HouzKEY only lists properties up to RM 1 million around Klang Valley. There are a lot of choices and the monthly rental starts from RM 1380 up to RM 5280. Moreover, HouzKEY also allows the customer to find other properties for the bank’s assessment. Once approved, it will be listed on the website and the customer can proceed with the next step.
Advantages of HouzKEY
The first advantage is its low entry cost. Instead of the conventional 10% down payment plus the transactional costs, you just have to pay three-month rental deposit which is refundable. Thus, you are paying around 2% of the property price as compared to around 15% with a traditional mortgage.
Its second advantage is that you can apply with up to three guarantors to improve your eligibility.
The third benefit is you can keep 100% profit from the sale of the property, if you choose to sell.
Eligibility
You must be a Malaysian citizen between 18 – 65 years old and have maximum one existing home financing only. The household gross income must be at least RM 5000. The scheme allows you to include up to 3 individual guarantors (must be from 18 to 65 years old) if the income criterion cannot be met by your own income alone. They must be your immediate family members (spouse, parents, siblings and children only).
How to start with HouzKEY?
After you have registered with HouzKEY, browse through its list of properties. Pick one that you want to own and follow the instructions. If your application is approved, you will need to pay three-month rental deposit. Bear in mind that though you do not have to pay the upfront costs such as legal fees, stamp duty and memorandum of transfer, these fees are absorbed into the financing amount and will be part of your monthly rental.
The monthly rental is like a mortgage instalment. It helps to reduce principal amount from the total obligation. The rental amount is calculated based on the Bank’s Islamic Base Rate and it might change if the rate changes.
Once you receive the key, you will start to pay the first rental. The rental invoice is issued on the 22nd of every month.
The contract period runs from a minimum of five years up to 30 years.
Tenant’s obligations
Once you receive the house, you need to pay all expenses and charges related to homeownership. These include taxes, takaful, quit rent, maintenance fees, utilities and others.
You also need to liaise with the developer personally if there is defect in the property.
You must maintain the house in a clean, good and tenantable condition, and inform the bank on any works done to repair defects or damages.
Fire insurance is compulsory and is charged as part of the monthly rental.
It is important to appoint a nominee for the house as your account will be terminated at the point of death. To ensure that the nominee can attain ownership, it is advisable to purchase a life insurance to cover the property purchase price.
What happens next?
After 12 months, you have two options.
1. Purchase the house
If you choose to own the house, you can either secure a mortgage or buy it with cash. I guess most people will take the mortgage. But if you are fortunate enough to have that much cash after one year, you can choose the second option. Since the price is locked in, even if the property price appreciates, you are still entitled to the pre-agreed price. You can choose to exercise this option anytime during the 5-year rental period. The rental will stay the same during this period.
2. Sell the house
HouzKEY allows the tenant to sell the house after one year. If there is any profit, you get to keep all of it, provided you settle all the remaining outstanding with Maybank. Nonetheless, you will need to pay Real Property Gains Tax on the profit.
What happens after five years?
You have two extra options in addition to the options above.
1. Continue to rent
You can continue to rent the house. However, the rental will increase by 2% annually and you need to top up security deposit. If you rent for the maximum tenure of 30 years, Maybank will sell the house to you for RM 1 at the end of the period. Nonetheless, this option will cost more in the long run. Thus, if you really want to own the house, you should consider to secure a mortgage after five years.
2. Walk away
You can choose to just terminate the tenancy without any penalty. But why don’t you sell it and gain some money?
Important issues
You are not allowed to transfer ownership during the first year.
If you choose to walk away before the 5-year period expires, you will need to pay the remaining of the minimum rental period.
Conclusion
Overall, HouzKEY represents an interesting alternative way to own a house, especially if you do not have a large sum of money. Nonetheless, the monthly rental can be high due to the absence of down payment. Furthermore, you cannot rent the property out. So, you have to decide if this is a suitable method for you to buy a house.
If you are interested in this programme, check out its website here.
There is another similar scheme known as FundMyHome operated EdgeProp. You can read my review here.
*UPDATE on 12 June 2021:
I have received a comment from Hazri which concurred with what Jo and Ong said regarding the rental being higher than mortgage. Hazri is a HouzKEY buyer, and he said that the rental rate remains the same for the first 5 years but increases gradually every 3 years. I have asked for more information regarding his comparison, so hopefully we will see the full picture soon. Thanks to Hazri for sharing his experience.
(There is an update to this article. Please click here to read it.)