A mortgage insurance policy frees the borrower’s dependents from any debt as it is designed to pay off the remaining debt on repayment mortgages in the event of death or TPD.
Which mortgage life insurance do I need?
In Malaysia, there are two types of mortgage life insurance available – Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA).
However, MRTA and MLTA are often misunderstood. Which do you need as a homeowner?
MRTA is a life insurance plan with decreasing sum assured over time, and it used just to cover your home loan owed to bank. This plan is usually offered by the bank you are getting the mortgage from, as it is used as protection for the bank in case of misfortunes that stop you from servicing the loan.
On the other hand, MLTA is a slight variation from MRTA and offers an alternative for a borrower who is looking for a life insurance which offers protection plus savings and in some policies returns on the premium. This is a personal plan that you purchase separately through an insurance broker or agency, where you and your dependents are financially protected when you are no longer around, or have lost the ability to generate income.
Why Buy Mortgage Reducing Term Assurance ( MRTA)?
The bank encouraged everyone to buy Mortgage Reducing Term Assurance ( MRTA ). Typically people buy it because of the attractive Home Loan interest rates offer.
If you buy a Mortgage Reducing Term Assurance ( MRTA ), the bank will offer lower Home Loan interest rates in comparison to someone who doesn’t.
The fact is most banks have a flexible policy on this. It is not compulsory and only optional.
However, when people buy Mortgage Reducing Term Assurance ( MRTA ), they want the coverage and protection for their family.
Mortgage Reducing Term Assurance ( MRTA ) Premium
Mortgage Reducing Term Assurance ( MRTA ) cost depends on the insured age, coverage amount, home loan interest rate, gender, and years of coverage.
Also, paying methods like paying with cash or finance in the loan will increase the Mortgage Reducing Term Assurance ( MRTA ) insurance premium. Usually, when you finance MRTA with the home loan, the premium tends to be pricier.
The Misconception Of Mortgage Reducing Term Assurance ( MRTA )
Everyone will think MRTA will cover the latest home loan outstanding balance.
But, the truth is. The statement is only partially real.
Mortgage Reducing Term Assurance ( MRTA ) Surrender Value
Surrender Value is when you no longer need the policy, and you surrender the insurance policy back to the insurance company.
Let said, you have pay RM18,841 premium, then you surrender it within the first year. So, you’ll get back RM14,262.00 from the premium you paid.
You will not get back the RM18,841, but the insurance company compensates you with RM14,262.00. The difference amount is RM4579. It’s going to be lesser from one year to another because the insurance company is giving you protection all over the years until you surrender the policy.
Is it worth having?
Most mortgage officers recommend mortgage life insurance (either MRTA or MLTA) when buying a new home. However, before committing to an insurance policy, it helps to do as much research as you can on the product.
Mortgage life insurance is aimed at providing security to your loved ones from being burdened by home loan repayments if you pass away or are afflicted by permanent disability. However, if you do not have anyone to leave your property to and money is tight, getting a mortgage life insurance may not be your highest priority. For those with dependents however, it’s worth considering.
What do you stand to lose if you do not have a MRTA or MLTA? If you are planning to pay off your mortgage within a few years, then an MRTA or MLTA may not be on the top of your list. However, if you are planning to service it for the next 30 to 35 years, and especially if you are co-buying with someone else, it will be best if you are protected.
For example, if you are purchasing a property with your spouse, and each will be paying 50% of the repayment every month, a death or permanent loss of income may be a huge blow on the couple’s finances. Having a mortgage life insurance will provide you the peace of mind that you will not lose your property even if the other person is unable to pay for the mortgage.
The MRTA is most suitable for those who have adequate standalone life and medical insurance, and do not have many financial dependents. This type of insurance will only take care of your home loan, if it is not fully repaid in the event of TPD or death. The sole beneficiary of the policy is the bank, not your family members. However, your family get to inherit the property without having any bank loan attached.
MLTA is best for those who need an extra financial protection in the worst case scenario, as it also has a cash value at the end of the policy. This is best for those who have many financial dependents, for example young children and a stay-at-home spouse. However, MLTA is a normal life insurance policy that is not part of your housing loan and customers must ensure they understand the terms and conditions fully otherwise they may find themselves in a tight spot if the insurance company does not approve the claim and the bank loan remains unpaid while the dependents are left without any cash payout either.
CLTA is a relatively new product in the market. CLTA is also known as Credit Term Life Assurance. This product is only offered by limited Bank. CLTA is similar as MLTA as in the coverage will remain same. For other more details, please seek advice from the banker that offer CLTA.
Progressive Interest and Billing Explained
Buying a property that’s under construction is one of the best ways to get a great deal. It’s because when you buy a unit in an early phase of the project, you’ll get it at a great price! After the next phase is launched, the price of a home can increase by 10% to 30%.
Nonetheless, the loan process is a little more different than when buying a completed house - where your bank will have to release the full loan amount upfront. This is because the payment for a home that’s under construction is progressive, i.e. in stages. Such stages is shown in Schedule (as shown below). Some of the schedule will stated when is the expected claimable date and some dont.
Essentially, how it works is-
When the developer has completed a certain stage of the building process, your bank will release a bit of money to pay them. These stages and amounts are set by The Ministry of Housing and Local Government (KPKT).
For commercial title non HDA, it works differently, normally developer will claim and bank will release the portion of disbursement even when its not complete.
Progressive Interest is the interest you’ll need to pay on these stage-by-stage payments which have been released by the bank. Bear in mind that the payments you need to make before 100% of the loan are released are on interest only, but you do have the option of paying more right from the start! This means you get started reducing the original amount loaned, and the interest that is charged on top of it earlier!
If you have other financial obligations like the rent for your current home, however, it can help to take it slow as the payments begin in small amounts, so you won’t be overburdened at the start, but it’s still going to come down to managing your finances. At the end of the day, a home is a financial responsibility as much as it is an asset. So let’s give you a pat on the back!
As an EXAMPLE for calculation
(Shown as below) - Let’s assume your interest rate is 3%, and the bank has released RM100,000 out of the total RM500,000 (20% disbursement) you’ve borrowed for your new home.
Some extra tips include:
Why buy property now?
After Malaysia Government new announcement lately on the extension of HOC, Free MOT and even Mortgage Loan for 3rd Property is more than 70% LTV... here is why buy property now.
The market is slow and economy is slow as well. It is getting worse with MCO is excited for months. Once the 6 month moratorium is end, you could foresee there are many property under urgent sales and Below Market Price.
Becoming a landlord isn’t easy, especially in Malaysia, where policies are friendlier towards the tenant. And it is a rite of passage for every fledgeling landlord to experience, once in a while, a tenant from hell. It is a learning process, and ultimately, we master the art of weeding out such bad apples from our pool of prospective tenants. But why learn from painful experience when we can learn from the mistakes of others. Here are a few tips to consider when looking for a reliable tenant.
1. Ability To Pay
Your tenants can only pay their rent on time if they can afford it in the first place. Hence, their monthly salary is a good indication of their ability to be good paymasters. Ideally, your rental amount should never be more than half of your tenant’s monthly income. This is to ensure that they are capable of comfortably meeting their daily expenses while having the surplus to pay for the rent. Give priority to potential tenants who are capable of furnishing you with a salary slip, best if it is verified by the human resource department.
Be careful of tenants who are too keen to sign the tenancy agreement. Possibly, they are about to be evicted by their previous landlord, thus their urgency to find the next roof. On the other hand, quality tenants often take their time exploring the available opportunities. They may ask many questions as they are interested in renting for the long term. So be there to answer all their queries.
When renting to a family unit, you may want to prioritize couples with dual-income as their purchasing power is stronger. Unemployment is a tragic but likely prospect in the current economic state. If a spouse happens to lose his or her employment, the other can serve as a backup. The same cannot be said to a household propped by a singular breadwinner. All the eggs are in a basket, and the monthly income may just be enough for the family to get by.
If you are renting to a college or university student, give priority to those who are studying full time, especially if their finances are being backed by their parents. Strangely, students who juggle work and education usually make bad paymasters. Possibly, their family is financially constrained, hence the need to pick up a vocation while studying. (This is merely a general guideline. Circumstances and factors, both internal and external, need to be taken into consideration.)
4. Get Their Referrals
Reliable tenants should have no trouble preparing a list of referrals that you can call for a background check. But then again, bad tenants are equally capable of handing you a referral list, complete with bogus individuals to exhort about their virtues. To get them at their own game, ask detailed information about their rental period with the so-called referral as well as the address of the previously rented property. Then, call up the referral and ask him the same question. If the information provided is contradictory, it is a red flag indication.
Greenhorn landlords may assume that relatives are more “reliable” when it comes to coughing up that monthly rent. They are in for a rude awakening as the opposite is often true. Relatives, especially, are notorious at not paying up on time due to the “relative factor” and they make you feel guilty for chasing them for the rent.
You can’t evict them either, not without causing a strain to the relationship, if not outright enmity. Opportunistic individuals are like a package deal, and they typically come with backstabbing tendencies too. They may inform the whole village and all your kin about the suffering that they endured (real or imagined) in your cruel hands, effectively ruining your reputation.
Placing the linchpin on this point is the fact that you have to meet them on festive seasons, exchanging fake smiles across the reunion table. To make matters worse, they usually demand unnecessary rental discounts on the reasoning of having similar genes with you, regardless of how watered down it is. Maintain a good relationship with your relatives by telling them that your properties are fully rented.
Articles refer from starproperty.com
Whether Property Prices Are Going Up Or Stagnating, These Home Updates Will Help You Achieve The Maximum Resale Value For Your Home
Even if you don’t intend to sell or rent your property out in the near future, these upgrades can benefit you and your family with a safer and more comfortable home environment. Here are some tips and tricks to help you maximise your property’s resale value.
Replace the Front Gate
First impressions count – especially when it comes to getting the maximum value for your property. Since the first impression is likely made when potential buyers arrive at your front gate, why not upgrade it? Get that manual front gate automated to get bonus points for convenience and to alleviate security concerns, and in the event of extensive corrosion, you could spend some time repainting it or go as far as replacing the gate entirely to achieve maximum allure
Refresh the Kitchen
You never know what a coat of fresh paint can do for your kitchen, especially when it has the ability to revive and brighten up a tired space. Choosing neutral colours such as beige, white, or light brown are universally appealing, enhancing your interiors while making your kitchen look polished. Another great way to make sure your kitchen stays relevant is by updating your kitchen cabinets or by replacing the countertops to give your kitchen a fresh new look. Additionally, you may also consider adding a kitchen island for more working space.
Replace the Bathroom Fixtures
Thanks to our humid weather, chromed items like towel racks, shower mixers, and toilet paper holders tend to look tarnished or dulled over time. Replacing these fixtures is one of the easiest ways to add sparkle to your property while working with a tight budget.
Update the Curtains
As practical and stylish decorative additions to any home, curtains are a great way of ensuring privacy. But after some time, the fabrics may present stains and signs of discolouration. Replacing old curtains with new materials and updated designs will give your home a fresh look at a minimal cost.
Add Some Storage
Extra storage is always appreciated. Whether you intend to expand your storage solutions to the kitchen, bedroom, or living room, try adding built-in cabinets. Make them ceiling-height for maximum storage, and include doors that complement the existing décor to do more than just keep the space looking spacious and clutter-free. Storage also benefits your home by imbuing every nook and cranny with functionality.
Repair any Cracks, Broken Seals, or Mould
Over time, walls can develop unsightly superficial cracks – sometimes stemming directly from the weather, holes made for hanging pictures, or even peeling paint exposing the wall's internal structure to the elements. Apply putty filler on exterior walls or Plaster of Paris over the cracks on interior walls and apply a fresh coat of paint to restore your walls to their former glory.
You should also check the sealant in bathrooms and kitchens as there could be mould growing and chipped wooden skirtings due to wear and tear. You can easily repair these with wood or plastic filler and replace the sealant to make everything good as new.
Replace the Electrical Switch Plates
A simple solution to modernising your home is to change up your switch plates. To enhance the lighting in your home, you could also choose to add dimmer switches to the dining area and hallways for additional lighting options during various times of the day.
To make your home ready for the most discerning of tenants or buyers, consider smart switches that will make the automation of the home's appliances a mere matter of plug-and-play.
Repaint the Interior and Exterior Surfaces
After all the upgrades and repairs, put on a fresh coat of paint! It’s an excellent way to refresh an outdated space while making your home look clean and welcoming. By painting the interior and exterior walls of your home, you can also cover permanent marks and stains.
Improve the Landscaping
A beautifully landscaped lawn can make a world of difference to the overall setting of your home – so try to belay the impulse to pave over or tile your garden. Even if gardening is not your forte, all you really need is a gardener to remove the weeds and tidy up the plants once a week. A modest garden boosts curb appeal and helps to make a good first impression. If you want to give your exterior a fresh new look, consider getting a professional landscaper to help you out.
Updates the Doors and Windows
You’ll never find a better return on your investment than updating your doors and windows. You could repaint the window frames and doors, replace worn hinges, or just replace door handles and doorknobs with shiny new ones. Also, doors with multipoint locks are harder to break into than those that use a singular lock.
This article originally appeared on Recommend.my - Malaysia’s #1 Home Improvement Services Platform.
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Found the property of your dreams? What can you do to ensure that the property particulars are what you are told they are? In Malaysia, under the Torrens system, the person named as proprietor on the title of the property is deemed the legal owner. It is advisable that you conduct a title search at the land registry or land office to verify the particulars of the title of the property before you pay any money or commit to a purchase.
A lawyer can assist you to do so or you can conduct the search yourself. When you are satisfied that there is no impediment to the vendor transferring ownership of the property to you, you can then pay and proceed to secure the purchase.A word of caution, though. Before you do that, you should inspect the crucial terms of the offer to purchase, which you will be asked to sign when paying an earnest deposit. If you are uncertain what they mean, you should consult a lawyer before signing or making payment.
Official search or private search?
Previously, a register was maintained in the land office (or registry). Lawyers would conduct a manual search of the title, presentation book or correction note book maintained by the land office. The person conducting the search will note down details contained in those books.
Today, most land offices have computerised their system and printed title search results can be obtained upon payment of a fee. An official search certified by the registrar costs more than a private search. It may or may not be more accurate or reveal more particulars. It also affords a claim for compensation under the National Land Code for loss due to an error or omission in the certificate.
What does a search report reveal?
> Ownership and title detailsFirstly, the title search should reveal who the registered owner is.
If the owner is an executor, administrator or trustee you can then make provisions to ensure that that he has the authority to enter into the transaction. Particulars derived from the title search such as the title number, mukim and district can be verified against the information provided by the vendor.
The title search will also show whether the property is subject to restrictions in interest i.e. whether there are limitations endorsed on the title. A property which is subject to restrictions in interest will be endorsed with words like the land cannot be transferred, leased or charged without the consent of the State Authority. If there is such a restriction in interest, the vendor must obtain the consent to transfer in favour of the buyer.
> Status and tenure
The search result will also reveal the status of the title i.e., whether it is freehold or leasehold. A freehold title is a title in perpetuity whereas a leasehold title is for a specific tenure (eg 99 years).
It is prudent to ascertain the expiry date of the leasehold term, particularly if you intend to obtain a loan as banks are reluctant to finance properties that have a short lease of, say, 40 years or less.
The margin of financing as well as the tenure of the loan may be significantly reduced.
> Encumbrances including caveats
If the vendor previously obtained a loan on the security of the property, the title will most likely be encumbered by way of a charge to the bank. A search will reveal if the property is charged to a bank. A search will also reveal if a caveat has been entered. A caveat is a form of notice entered by a person who has an interest in the property. It gives notice to the world that the caveator has an interest in the property. If you are buying free of encumbrances, you would want to investigate why the caveat was entered and to insist that the vendor gets the caveat removed.
> Other information
A title search will also reveal the area of the land, whether there are conditions affecting the use of the property, whether anyone has taken a lease of part of the property or, whether anyone a registered right of way across the property.
Where a separate title has not been issued, a search will be conducted on the master title. But, this search will not show who owns the property or whether there are any encumbrances on the property. To ascertain this information, one would have to write to the developer of the property to obtain the information. In conclusion, it is crucial that a proper title search be conducted and the particulars be verified before you commit to purchase a property.
The writer, Susan Joseph, a lawyer practising at Messrs Azman Joseph & Associates, is a member of the Conveyancing Practice Committee, Bar Council, Malaysia. This column is for your information only. It does not constitute legal advice.
The article is refer from starproperty.
"Freehold is definitely GOOD and Leasehold no need to consider"
It quite norm that elder generation property buyer frequently preferred "Freehold good, Leasehold bad."
This have been quite a debate for many years, is Freehold the main concern and the must factor to be considered?
Here, whether a piece of property is freehold or leasehold may or may not matter depends on why you’re buying the property for.
Freehold vs Leasehold: The Fundamentals
Freehold means that you have the ownership of that property forever, and you can pass it on to whoever you want.
On the other hand, if your property is leasehold, the tenure is limited – usually by (the maximum) 99 years if you bought your property from the developer, and much less unless you’re getting an extension.
For the lease is approaching the end or owner want to get extension of lease, the owner will need to apply to the state government for an extension of the lease. If the application is approved, a premium is payable depending on the prevailing market value of the land.
There have been argument that leasehold properties capital appreciation is must lesser than freehold properties.
Actually, there’s evidence that values of both freehold and leasehold properties appreciate at a similar rate for the first 20+ years.
However, nearing the end of its tenure, the value of a piece of leasehold property predictably stops going up. In this respect, freehold properties win in the longer run, as far as value appreciation is concerned.
Additionally, older leasehold properties are also harder to sell because of the uncertainty in the renewal of the lease (which is under complete discretion of the local authorities).
Also, bank loans are harder to come by for leasehold properties with shorter tenures. Even if you manage to get a loan, the margin of financing may be comparatively lower to that of freehold properties.
As with everything else, prices of property are determined by the sacrosanct law of supply and demand, and if freehold properties are more popular, naturally, they will fetch higher prices, both in the short run and the long run.
Location remains the biggest driver of demand in real estate, and you’ll see that some of the best locations in the Klang Valley are leasehold – for example: Bandar Sunway, (large swathes of) Petaling Jaya old town, Tropicana (near the golf course) and the Seputeh area in KL.
There is no doubt that the freehold status is a strong selling point for new projects. As such, developers understand the need to “make up” for the leasehold status of a new project that they want to launch. Therefore, for new projects at least, leasehold properties often give a better bang for the buck in terms of features, design, and concept when compared to freehold properties.
Finally, understand that freehold properties are limited in availability, and so the question of freehold vs leasehold will most probably be moot sometime in the future – simply because the buyers won’t get much of a choice. Actually as long as the whole area is same tenure leasehold, that shall not be an issue, unless the property you looking is the only limited leasehold in the freehold area, then that will be disadvantage on investment point of view.
So in the end, does it matter whether its Leasehold or Freehold?
If there is a comparison within same area, you should always opt for properties with freehold status. However, whether a property is freehold and leasehold should be secondary compared to other factors like different location, developer reputation, concept, amenities and upside opportunity.
Now with the price of houses being the biggest concern especially among first-time buyers, it’s a question of whether a piece of property is affordable and worthy, tenure like freehold or leasehold is no longer the main concern.
Also, freehold properties now is getting lesser and lesser. For developer properties, the sales package also take into the consideration as some giving more rebates and cash back. Some Guru have been teaching on multiple submission and cash out ideas which affect buyers view on the properties.
The extension of leasehold land is provided for under sections 76(a), 204B & 197 of the National Land Code (NLC) 1965. Section 76 (a) deals with alienation; section 197 details the procedures for a proprietor to surrender his/ her title to the State Authority and section 204B provides for certain powers to the State Authority to approve surrender and realienation.
Under the latest amendments to the NLC, which is yet to be enforced, there is a new provision under section 90A which specifically provides for the extension of leasehold land.
It is advisable for the owner to apply for the extension of lease before the expiry of the same. If the owner does not renew the lease and the lease expires, the land shall revert to the state government. The land is then available to any other persons who wishes to apply for ownership.
For Selangor, the formula for calculating the premium for the extension of leasehold land can be found in the Selangor Land Rules 2003 & Selangor Quarry Rules 2003.
The two options given by the Selangor government in their Guideline issued by the Selangor Department of Land and Mines (PTG Selangor), dated June 2011, for private residential ownership scheme are as follows:
In Selangor, the premium for lease extension for residential property is:
F: (1/4) x (1/100) x (Market Value of land) x (lease period – years remaining on the lease) x (land area). *Leases are usually renewed for a 99-year period.
As an example, let’s say you have a bungalow land with a land size of 7,000 sq ft in Petaling Jaya with about 45 years remaining on the lease. The premium that you would have to pay shall be as follows:
(1/4) x (1/100) x (220) x (99 – 45) x (7,000) = RM 207,900. After deducting the 30% rebate, it comes to RM 145,530 and this is what you would have to pay.
The above example is based on the assumption that the government has valued the land at RM 220 per sq ft.
The formula for the extension of lease for commercial and industrial land in Selangor is as follows:
F: (3/4) x (1/100) x (value of the land) x (term of new lease minus the balance of the existing lease)
For Kuala Lumpur
For Kuala Lumpur, the formula for calculating the premium for the extension of leasehold land can be found in the Federal Territory of Kuala Lumpur Land Rules 1995.
The formula for calculating the premium for the extension of lease for all categories of land use in Kuala Lumpur is as follows:
F: (1/4) x (category of land use) x (value of the land) x (1/99) x (term of new lease minus balance of the existing lease).
Renewal of lease for properties with strata titles (non-landed properties)
For the renewal of properties with strata titles such as condominiums and apartments, there is a new provision for this under the newly created section 90A(8) of the NLC, whereby the application may be made by the management corporation on the authority of an unanimous resolution, and such application shall be regarded as an application in respect of the alienated land and provisional block.
This basically means that the master title (that the condominium sits on) as well as all the strata titles of the individual units in that particular condominium must be renewed at the same time and the application shall be done by the management corporation concerned.
This article is refer from www.starproperty.my. Written by Christopher Chan.
Christopher Chan is an Associate Director and Registered Estate Agent with Hartamas Real Estate Group. He holds a Bachelor of Arts (Victoria University of Wellington, New Zealand), Post Graduate Certified Diploma in Accounting & Finance (CDipAF) (The Association of Chartered Certified Accountants (ACCA), UK), Master of Business Administration (MBA) (Edinburgh Business School, Heriot Watt University, Scotland) and is a Certified Residential Specialist (The National Association of Realtors, USA) and is a member of the Malaysian Institute of Estate Agents (MMIEA). He was an adjunct lecturer at UCSI University.
He can be reached at email@example.com.