More than just covering your housing loan
MRTA vs MLTA.
If you arrived here by Googling the above, you are probably expecting to get straight and easy to understand the comparison between the two. In all honesty, mortgage protection has already evolved beyond just settling your home loan when the unfortunate happens. A cookie-cutter solution could no longer cut it anymore.
When someone passes away unexpectedly, the mortgage debt left behind is not the only financial burden that their next-of-kin are going to face. Of course, it would definitely be the biggest amount to be settled but the other hidden costs are no slouch either. Below are some of the potential costs that might be incurred in the process of passing on a property to next-of-kin.
Stamp Duties & Legal Fees
To ensure the ownership of property is transferred correctly, you have to engage a lawyer. The required knowledge to ensure a smooth transfer is certainly beyond the comprehension of many of us hence the need for a lawyer. The two most common associated fees here when it comes to ownership transfer is stamp duty (payable to the government) and legal fees (payable to the lawyer for their services). Stamp duty is exempted for some scenarios but legal fees are definitely not. These two combined could rack up to five figures in RM, depending on the property value.
Real Property Gain Tax
Most people are not aware that RPGT is not exempted for your beneficiaries if they sell it off right after the ownership transfer is completed. Your beneficiaries might have to sell off the transferred property due to various reasons e.g. moving to smaller spaces, moving to other states, emotional reasons, etc. When this happens, the RPGT levied on your beneficiaries can also rack up to thousands of ringgit.
Early Settlement Penalty
This is one of the potential financial damages that not many people would have even think about. If you decide/are forced to settle your mortgage early, the bank will charge an early settlement penalty of up to 2% on the outstanding balance. Depending on the bank’s prerogative, next-of-kin may be expected to pay off this fee in the event that you pass away in the early years of the mortgage. Cold as it seems, never forget the facts that banks are a business entity and not a charity.
What Should I Do?
First and foremost, the question you need to ask yourself is; what do I want to leave behind?
Do you want to leave behind an asset that requires your beneficiaries to figure out the various hidden costs associated with it?
Or would you like to leave behind an asset with no strings attached?
If your answer is the latter, I would more than glad to assist you in developing a mortgage protection solution which suits your needs. Click below to find out more.