Loan repayments 2 01
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The joys of owning a home can quickly turn to anxiety when experiencing overly taxing mortgage payments. Young homeowners and first-time buyers are especially feeling the pinch as living costs rise in Malaysia.

If this is you, don’t throw in the towel just yet. Try these golden tips and continue to relish the joy of owning your own home:


1. RESTRUCTURE YOUR DEBT

If you are experiencing difficulty to cover mortgage payments for three or more months, then you might be over-extended on your financial commitments.

The first step to resolving affordability issues would be to inform the lending bank about your current financial predicament and request leeway as you sort your money issues.

More importantly, talk to your bank about restructuring your loan affordability to improve.

Be sure to discuss:

- Extending your loan tenure. Check with your bank if it is possible to add more years to your loan in order to reduce the size of monthly instalments.

This will increase your total interest costs and repayments overall, but it might be worth the excess fees if it can increase affordability.

- Negotiating a lower interest rate.
As time passes, market forces and central bank policies may change the course of interest rates from when you first took out your home loan.

Thus, do consult your bank for opportunities to adjust interest rates to reflect such changes and reduce your monthly instalments.

- Refinancing your loan.
Essentially, you will be borrowing more to cover your current loan, but refinancing can offer you better interest rates as well as help modify your loan type (fixed to flexible) and term.

Moreover, if you’ve built equity on your property, you may even be able to pull cash out of it to keep you afloat in the time being.


2. USE EPF SAVINGS TO REDUCE BORROWED AMOUNT

If you have been employed for some time, you may have built up a nice in sum in your EPF account. The good news is that EPF allows withdrawals to be made from your ‘Account 2’ to pay down your home loan.

With enough funds in the account, you can choose to completely clear the loan. Alternatively, you can opt to withdraw just enough to reduce the borrowed amount. This way you will bring down your monthly repayments for better affordability and still maintain retirement savings. In addition, you may also withdraw to help your spouse pay off the home mortgage.


3. RENT A ROOM OUT

You could collect up to 30% of your loan instalment if you have a well-maintained home and let out the most attractive room in your home, usually the master bedroom with attached bathroom.

Furthermore, you would be justified to charge a higher rent if you live in a major city or town, are located near a college or office building and if you can provide extra in-house amenities like a water-heater, air-conditioning and washing machine.

It’s a good solution if have a spare room but remember to stay safe by performing your due diligence especially if renting to a complete stranger.

To reduce the risk, try reaching out to friends or family when looking for tenants. Alternatively, if your tenant is a stranger, do conduct a background check by asking for references, employment details, and perform a basic research of them online.



4. MANAGE SHORT-TERM CASH FLOW PROBLEMS

When dealing with a shortage of funds, it’s quite possible that you are simply living above your means. You can improve money matters by striping down to the bare minimum. Here are some examples to help you trim redundancies and get a hold of cash flow issues:

- Cut unnecessary utilities such as cable and satellite TV subscriptions.

- Downgrade your internet and telephone services.

- Consider switching to prepaid plans and reduce monthly allocations altogether.


In addition to minimising overall expenses, look for more ways to bring in cash by:

- Selling off belongings that are still in good condition but barely see any use. Clothes, books and appliances can fetch a handsome sum to help sustain your financial needs in the short-term.

- Finding a part-time job or utilising your special skills to earn more.


5. CONSIDER SELLING THE PROPERTY

If all else fails, you may need to consider selling your home to limit the effects of defaulting on your loan. If you’ve been making payments for more than five years, hopefully some equity has been built on the home to enable a reduction in the owed amount as well as to avoid Real Property Gains Tax costs (if you are making profits of over 10% or RM10,000, whichever the lesser).

It’s not necessarily a bad thing to sell the property – perhaps you just aimed for too much too soon, so don’t fret! By selling your home and possibly gaining from it, you are placing yourself in a strong position to buy again at a later time when you are more ready and able. 



Being Proactive with Your Finances

When you can no longer afford your monthly home loan repayments, it’s time to take a long hard look at your financial state.

If the reason you fell into this hardship was outside of your control, then you can consider your predicament less severe, in that a basic lifestyle readjustment may be all that is needed to accommodate your current situation.

However, if you are over-committing on your loans and constantly spending more than you make – then this may be a sign of poor money management, which in the long run could lead to more debt accumulation.


Worse still, repeated loan defaults will negatively affect your future homeownership plans.

Thus, it is important to take stock of ALL your expenses before circumstances are dire and work out a realistic budget. Being proactive instead of reactive ideally means that you will need to get into damage–control mode early on. Simply recognising the signs can make the difference between saving your home and losing it altogether.

(Written by: Desiree Nair, 30th November 2015)

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if you are still single, get a partner or spouse to help pay the installment ... 

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(Written by: Desiree Nair, 30th December 2015) >> are u sure? today is 8th Dec 2015 !!


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@carmenfoong, it's supposed to be 30th November 2015. It's typo error. Just amended it. Thanks a lot for informing :)

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Hopefully, we will not have to come to this stage :)

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Talk to AKPK 1800-88-2575 ( Agensi Kaunseling Dan Pengurusan Kredit ) to perform DMP, they will be the best person to assist you on debt restructuring.

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sell.. and get rid of the liability

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Renting out the room(s) is good idea. Co-sharing with family members to reduce the burden is another way too. 


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If it is a commercial property unit? Can't rent out "rooms".

Recently there is this idea of converting shoplots into Confinement Homes or Shared Office spaces for rent (cubicles).


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build rooms or spaces to rent out then. or start the business

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I would suggest to at least hold until the bank loan locking period expire and until RPGT does not apply anymore before selling it . To minimise the "losses" 

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What if the property is an uncompleted development? What is the solution if can't continue paying for monthly mortgage any longer?

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@ Kate_Chew... you may try to sell it during construction stage, if the area is high in demand... even with RPGT, you will still be able to leverage on the capital appreciation.

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Dominic, can sell ka during construction??? 

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@James Bob... why not? it will probably incur a high RPGT. And probably the early settlement penalty (loan lockin period) for the property loan?

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last time read the property book said it is not allow to transfer during construction period, for condo. not sure about landed. 

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if strate titled property... need to process the MOT after VP... and then only the property is under your name and not the developer...

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Ya I'm sure it's not legal to sell your property when it's not completed yet. No?

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@james_bob 

My property lawyer told me... is it possible to sell before MOT transfer name from developer to owner...

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Really not sure about that, But is it possible to do so? Will the bank queries and all. Is RPGT take into action?

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@james_bob i believe developer will restrict to buyer to re-sell to other owner during develop stage, the developer may have vacant unit yet to sell also.

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@JohnL 

As a long as not under Loan lock in period... i don't think the bank will mind the owner selling the unit.

RGPT ofcourse will still apply up to a certain %, ONLY if the seller makes a profit from the property sales.

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@domng not about bank mind or not, is about developer not allowed to transfer,

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@6011_3531_5354 

If all the developer units are sold out even before complete with VP... still not allowed to transfer? In other words, it is stated in the SnP when we buy first hand from developer?

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@domng no idea. we need lawyer or expert to answer your question :)

what i know is without developer consent you cant sell during construction period.

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I have a friend who bought Setia Eco Village in Johor... SnP stated cannot rent out the landed strata titled property... in other words the unit must be for self stay or left vacant?

But a lot of owner still rent out, as the self occupancy rate is very low.

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Lelong???? Let's hope not.

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@ Veron. If really reach the stage of lelong, it is not a good sight.

Speaking of which, can the person who default on the loan still "buy back" his property... maybe from last minute personal family loan or strike big lottery?

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@domng sometimes lelong price cant go higher than sub sales price due to over whelming of the buyer...

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@6011_3531_5354 

You mean there is a "virtual" ceiling price to the lelong price... a maximum threshold which the potential auctioneer is willing to pay? 

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Nic Ngoi, I am always under the impression that auction properties will always be below market price. If it's the same as subsale and yet I can't view, then I might as well buy subsale to be save?

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@james_bob for hot area the price wont go too lower, unless few round auction still no buyer then every time the reserve price will reduced 10%. or bank will keep the unit first and wait for good chance to dispose again

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@6011_3531_5354 

hi Nic, can you please briefly explain how properties are being auctioned off by banks?

I am really curious to know, as the only auction i have seen so far is in the movies. :^)

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@domng the bank will normally advertise on newspaper for Proclamation of Sales or they will at times appoint Auction Realtors or Auction Companies to perform the transaction. On top of that, there are also proclamation of sales directly being done on the Court.

All auction would require a bank draft of 10% of the reserved price (and also bring your extra cash to top up if you happened to won the property at the spot) 

On top of that the buyer have the responsibility to check properly on whether the auctioned property would require the new buyer to pay up the previous outstanding such as: assessment, tax, management fee, etc etc. (you need to know this up front) as not all auction property comes with all previous outstanding will be paid up to the auctioned date for successful buyer.

(the whole process will be somewhat reverse, you need to know what is the bank valuation amount, which bank allowed you to borrow loan etc etc, as you are running on a tight schedule; unlike normal SnP, refund will be given should your bank loan is rejected, Auction property does not refund your deposit should your bank loan is rejected)

well the process is relatively long to write it out... do approach any of the real estate negotiators that is focusing on auction property ... 

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"Auction property does not refund your deposit should your bank loan is rejected"

If this is true, really need to think thrice, just in case you have 2nd thoughts... deposit will be forfeited. Ouch!