Owners in Financial Distress Should Sell Home to Avoid Bankruptcy
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.â€
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.â€
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 "goodâ€ 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.â€