Potential risk of being a home owner and what can you do about it?
Are you planning to buy a house on your own? However, with the recent hike in property’s price over the years, it has become financially unaffordable for you to buy a house on your own, especially for young working adults. You start calculating the mortgage repayment by using a Malaysia home loan calculator. You certainly do not want to get into a financial burden as well. In addition, being a homeowner comes with potential risks as well. Buying a home is not the same as paying rent monthly. It is a major financial commitment that you will have to deal for decades, depending on your loan tenure. This article will guide you through the potential risk of being a homeowner and what you can do about them.
- Risk of not being able to pay for mortgage loan
If you ever one day lost your job, and as a sole breadwinner in your family, you will then lose the ability to pay for your home loan, or mortgage loan. If a case of any uneventful situations where death happens or accidents that cause you total permanent disability, you will then lose the ability to earn any income. This can be physically, emotionally, and financially burdening. Anything that threatens you from earning an income is a risk to your family and yourself.
If you failed to pay for your mortgage loan for 4 months, the bank will have the right to start a foreclosure proceeding against you. And if the worst happen – finalised foreclosure, your family and you will then be homeless.
Foreclosure is the repossesion of the home due to non-payment. It is usually caused by increase in expenses or unexpected decrease in income. Normally, the decrease in income is caused by unexpected events, such as accident, unexpected illness that causes disability, or loss of job. As for increase in expenses, it is usually casued by medical bills or divorce. The risk of foreclosure and bankruptcy will be the added risks for home ownership. The consequence or ultimate risk as a result of getting a foreclosure is having to declare bankruptcy, which is a result of a foreclosure because you are unable to pay your home loan.
Therefore, you can consider protecting your property with the the Mortgage Reducing Term Assurance (MRTA) or Mortgage Level Term Assurance (MLTA), These policies will cover the property or homeowner in case of any uneventful situations such as total permanent disability or death. These policies will also mitigate financial burden from your family so you do not have to worry about the mortgage payment.
- Bigger risk
Life is unpredictable. We cannot predict the future and will never know what is going to happen next. Every individual face the risk of death and total permanent disability as accidents are unpredictable. Therefore, it is advisable to always have a reserve of fund or contingency fund to help you through some unpredictable events. But if your financial allows, do go for more protections to protect your home, family and yourself.
- Contingency fund is insufficient
If you are the sole breadwinner in your family, losing your job will put your family and yourself into serious financial issue. Even if you have savings or contingency fund, it will still run out sooner or later. Not forgetting other financial commitments that you have, such as car loan, credit card and insurance. You cannot afford to not pay these payments just to fund your mortgage loan. Therefore, it is recommended to look at extra protection for your home and yourself.
Fret not, there are ways to close the protection gap. First of all, Malaysian are able to get an additional home insurance on top of their mortgage life insurance from the IJM Land for free. This additional home insurance will cover more than MLTA as it will also cover the loan in case of unemployment.
This HomeTIPS (Triple Insurance Protection Scheme) is written by Allianz and is available for property buyers that bought any properties from participating projects from IJM Land. This protection scheme will cover personal accident, term life and unemployment benefit.
The unemployment benefit is to help you through if you ever lost your job. It helps you to keep your home when you temporarily lose your job and source of income.
In conclusion, there will naturally be risks when it comes to being a home owner. However, these risks can be handled easily if you get yourself enough protection to protect yourself and your home. There are many things that you could do to ensure a smooth sailing home ownership experience. The risks of having a home ownership can be easily overcome by doing your planning early. Be well prepared and do your research before making a big decision in buying a house so you do not regret in the future.
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