How To Mitigate The Biggest Risks You May Face As A Home Owner
Owning a home is a dream that many of us have. Instead of helping someone else own a home by paying high rent every month, why not use that money to get a roof over your head and call it your own.
Sounds simple enough, but buying a home is definitely not as easy as paying rent every month. It is a huge financial commitment, and would likely be the most expensive purchase in your lifetime.
Home loans in Malaysia can stretch up to a maximum of 35 years, which means, if you purchase your home at 30 years old, you will only pay off your mortgage when you are 65 years old – five years past the national retirement age!
It’s really not surprising if you are hesitant to buy a home, even with the recent rate cut because in 35 years, anything can happen. Even unfortunate events that can render you unable to fulfil your financial commitments, such as paying your mortgage.
However, there are ways you can plan and prepare for any eventualities to protect yourself, your home, and most importantly, your loved ones from losing their home.
The risk of losing your ability to pay your mortgage
If you are responsible for paying the mortgage, anything that can threaten your ability to earn an income is a huge risk to you and your family.
By just defaulting your mortgage repayment for four months, the bank has the right to start foreclosure proceedings against you. If your foreclosure is finalised, you and your family will be left homeless.
Death or accidents that results in total permanent disability (TPD) can be devastating to your family, emotionally, physically and financially. This will be the time when they need financial support the most, and having burdened with mortgage payment may just ruin the family financially.
One way to protect your family against the risk of losing the home in such difficult time is by protecting your mortgage with Mortgage Level Term Asssurance (MLTA) or Mortgage Reducing Term Assurance (MRTA). These policies cover the mortgage or the homeowner in the event of death or total permanent disability (TPD). The policy frees the borrower’s dependents from any mortgage debt as it is designed to pay off the remaining debt on mortgage.
This will alleviate the financial burden off your family, so they won’t have to worry about mortgage payment and can just focus on rebuilding their lives. However, this isn’t really the only risk you’ll face when paying your mortgage over those 35 years…
The bigger risk that you may be ignoring
Though death and TPD are likely risks every one of us faces, and accidents can happen when you least expect it, there are bigger immediate risks out there that we have completely failed to prepare for. The risk of losing your income due to reasons out of your control – retrenchment.
While it may seem like a remote worry, it’s becoming frequent enough that we should consider ways to protect against it. This is why we always advocate contingency funds but if you could find more ways to protect yourself, do it.
A contingency fund alone is not enough
If you lose your job, you and your family risk serious financial hardship, especially if you are the main or sole breadwinner in the family. Even if you have a nest egg, a long stint of not replenishing your eggs will see yourself run out of money soon enough.
In today’s job market, it may take more than three months to get back on your feet, and during your down time, you really don’t want to put yourself in the red. The added pressure also makes landing a good follow up job even harder.
How about other financial commitments that need your monthly payment such as insurance premiums, car loan and credit card? You cannot afford to skip any of these payments just to make payment on your mortgage every month.
The solution to this is to look for a protection product to complement your existing mortgage life insurance, which will cover your mortgage against involuntary job loss*. This will provide you the peace of mind when the going gets tough.
This never existed… till today!
HomeTIPS to close the protection gap
Malaysians now can get additional home insurance to complement their existing mortgage life insurance for FREE from IJM Land that covers more than just MLTA – it covers your loan in the event of unemployment.
It’s the first of its kind, the HomeTIPS (Triple Insurance Protection Scheme) underwritten by Allianz, is available for IJM property buyers when they purchase any property from their participating projects.
Some of the participating projects in the central region are Pantai Sentral Park in Bukit Kerinchi, Bandar Rimbayu Township near Kota Kemuning and Shah Alam 2 Township in Puncak Alam.
Here’s what it covers:
Other than the standard personal accident and term life insurance coverage to complement your MRTA or MLTA protection, HomeTIPS also covers your mortgage interest payment in the event of layoff.
Having HomeTIPS as a buffer for your property loan will give you more time to look for a new job, so you won’t be pressured into taking up any job that comes your way. With the current sluggish economy, it may take you a while before you can settle on a new job, depending on the industry and position you were in. So having your home loan (which is likely to be your largest financial commitment) covered will take a lot of pressure off you.
The unemployment benefit is designed to do one thing – keep you from losing your home if you temporarily lose your main source of income. In today’s uncertain employment market, we can’t take our jobs for granted. Why leave things to chance when you can close that protection gap with a complimentary protection?
If you find yourself wondering what would happen to your family and your home if you were to lose your job or become disabled, then it’s time to be proactive. With an additional insurance policy, you don’t have to stress and you’ll know that your payments will be made, if you are unable to. Plus, it’s a complimentary scheme when you purchase an IJM Land property so there’s really no reason to not have this.
Life may throw you curveballs every once in a while, but there are always ways to pick yourself up if you are well-prepared.
* Applicable only for involuntary unemployment – Unemployment due to economic reasons afflicting the employer, and does not include unemployment due to disciplinary or non-performance of the individual.