From James, a viewer who wrote in by email
James is 35 and has held a first property for more than eight years. It is worth about RM430,000, with about RM270,000 left on the loan and an instalment of RM1,330, and rents for RM2,100 a month. James also owns a second property, and over the years has run up about RM70,000 in credit card and personal loan debt, without ever paying late.
Should James refinance the unit to clear the debts, or sell it to clear them and free a 90% loan slot for another purchase?
“personally I prefer refinancing”
Refinancing is better than selling a unit that pays its way every month, but under the newer cash-out rules a conventional refinance may release only about RM30,000, and the existing debts may also hold back approval. So check every route, and settle the high-interest debt quickly even if that means selling.
Why
The debts cost four times the mortgage
Credit cards charge about 15% to 18% a year and personal loans roughly 5% to 10%, against about 4% for a housing loan. Swapping one for the other saves a lot, which is why refinancing appeals.
Refinancing now releases less
Banks lend up to 80% of value, here about RM344,000, which once meant roughly RM74,000 in cash. Now the cash-out portion is assessed over 10 years rather than 35, so only about a third, around RM30,000, may be available; the existing debts also weigh on the debt service ratio.
Selling gives up a good asset
A quick sale at about RM400,000 would leave about RM130,000 after the loan, enough to clear the debts with RM60,000 to spare. But the unit has risen about 35% in eight years and the tenant pays more than the instalment.
This is good debt against bad
Housing loans are hard to get because they buy assets; cards and personal loans are easy because banks profit from them, and they are the leading cause of bankruptcy among young Malaysians.
What to do
- Look up current rates for credit cards, personal loans, fixed deposits and housing loans.
- Ask your bank how much a refinance would actually release under the new cash-out rules.
- Compare a mortgage refinance from an insurer-linked lender, which may assess income more leniently but costs more.
- Settle the card and personal loan debts first, even by selling if no refinance works.
- Find out what caused the debts before buying another property.
Editorial Note: Summarised from Sean Tan's full episode. The quoted answer is in his own words; the rest is our paraphrase. Figures reflect the recording date, so check current rates and rules before acting on them.
ASKING SEAN #270 | SELLING PROPERTY TO SETTLE PERSONAL DEBTS
Sources & Verification Data
Summarised from Sean's full English captions for Asking Sean #270. The quoted line is verbatim; everything else is paraphrased. Figures are as stated in December 2024. Sean refers the viewer to a friend who arranges insurer-linked home loans. The episode is sponsored by The Makeover Guys, a renovation company.
