Owners in Financial Distress Should Sell Home to Avoid Bankruptcy

Pavither 24 Aug 2017

 

Given the plummeting property prices and rising cost of living, homeowners struggling to repay their housing loans should consider selling their properties even at a loss to avoid bankruptcy, said a property expert.

“My advice is that if you feel you are unable to sustain your monthly housing loan repayments, try to sell it even if you end up making a loss, which is highly likely,” Ernest Cheong told Free Malaysia Today.

“Forget sentiments or profit that could’ve been. Cutting losses is better than the worst-case scenario which could end in bankruptcy.”

He noted that property prices have been falling since 2016, with prices in the Klang Valley declining by around 30 percent on average.

“If you took a RM700,000 loan for a RM800,000 property, for the first three years, you’re only paying the interest. You still owe the bank the RM700,000 principal amount.”

As such, he should consider himself lucky if he receives an offer of RM800,000.

While a person, who managed to sell his house at less than the acquisition price, still owe the bank the difference between the outstanding loan and the selling price. Such owner can request the bank to convert the difference into a personal loan that is repayable over 10 or 20 years.

According to Cheong, that was a relatively “good” outcome than to default on the loan and have the bank foreclose and auction off the property.

And if after the property has been auctioned the homeowner was still unable to settle his outstanding payments, then the bank may have him declared bankrupt.

“If you bit off more than you can chew, take this experience as a lesson. It’s okay to cut your losses and start again,” said Cheong.

“There’s nothing wrong with selling your home and renting a house. It’s better than being declared bankrupt.”

 

Image sourced from ballenvegas

 
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my
 

For the latest property news, trends, resources and expert opinions, visit our Property News section. Home buyers, sellers or property renters looking for Malaysian Properties, may like to visit the New Launches or Project Reviews page.

Gursharan Singh
Aug 24, 2017
Owning a house or any property or investment should based on availability of own funds and not on borrowings which cannot be financed from earnings. Objective of house is to have shelter and if this can be done by affordable rent then it may be foolish or even stupid to buy with unseviceable borrowings. It may be wiser to rent in current property market as there may be little posdibility of property prices rising substantially in forseeable future. COMPARE COSTS OVER A TEN YEARS PERIOD AND THEN CHOSE 'BUY OR RENT'.
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