The answer is yes. The housing loan will not automatically cease upon your death. It is the duties of your executor to call in assets. Once your executor had called in assets, he shall continue to make repayment of the housing loan using the assets you left behind.
Does Mortgage Reducing Term Assurance (MRTA) covers housing loan?
MRTA is an insurance policy that provides financial protection against the loan in the event of the chargee’s death or total disability.
In the event that the borrower (chargor) died, the bank will pursue MRTA (if any) to make the full repayment of the remaining balance. However, if MRTA is inapplicable, your executor shall continue to make payment using your estate.
What if your Executor failed to settle the housing loan?
It would become an amounts due to be bank (chargee). The bank will foreclose the property by applying to the court for an order for sale. An order for sale is a legal process wherein the chargee will holds the property i.e. the house as security and sells it off to settle any existing debt that the chargor failed to pay.
Prior to the order for sale, the chargee will issue a statutory demand/statutory notice and serve it to the chargor whereby it requires the chargor to settle the amount due within 30 days on which the notice is served.
If your Executor failed to remedy within the stipulated timeframe, be it in a lump sum basis or by instalment. The bank will apply either to the High Court or land administrator for an order for sale to settle the debts.
The chargee will put the chargor’s property (i.e. house) through an auction and a successful bidder will obtain the title of the property provided that the successful bidder is in compliance with the procedural requirements as stated in the National Land Code 1965.
The Executor can apply to set aside an order for sale where the Executor has to satisfy the Court there is a cause to the contrary. In Low Lee Lian v Ban Hin Lee Bank  1 MLJ 77, the Federal Court held that there are 3 grounds to set aside an order for sale inter alia as follows: –
- There was fraud or misrepresentation.
- The chargee failed to comply with the prerequisites and procedural requirement in accordance with Order 83 of Rules of Court 2012.
- The court is satisfied that the granting of such an order would contrary to some rule of law or equity.
Can your Executor redeem the property before the conclusion of the Order for Sale?
Yes. As per S266 of National Land Code 1965 where it states as follows-
“266(1) Any chargor against whom an order for sale has been made under this Chapter may, at any time before the conclusion of the sale, tender the amounts specified in subsection (2) to the Registrar of the Court or, as the case may be, Land Administrator (or, if the tender is made on the day fixed for the sale, to the officer having the direction thereof), and the order shall thereupon cease to have effect.”
Your Executor can redeem the property at any time before the chargee auctioned off the property. Therefore, it is crucial for your Executor to settle the housing loan after grant of probate has been granted by the court. It would otherwise become a debt if there is no repayment towards the housing loan from your (the deceased) estate.
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