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By Jason Lim, REN 84424 · IQI Realty · Checked on 13 November 2026
This guide is for owners in Johor Bahru, Malaysian or foreign, whose best realistic sale price is below what they still owe on the home loan. The short answer: you can still sell, but your bank must receive the full redemption sum before it releases the title, so you need to cover the gap (the shortfall) in cash before completion or agree another arrangement with the bank in writing. Talk to the bank early, consider counselling from AKPK, the debt agency set up by Bank Negara Malaysia, and remember that a sale at a loss pays no real property gains tax (RPGT) but must still be reported to LHDN.
Quick answer
- Negative equity: the price, after selling costs, is less than the loan balance (the redemption sum).
- The bank is paid first: it releases the title and signs the discharge only when the whole redemption sum is paid, so the shortfall usually has to be in the lawyer’s hands before completion.
- Selling costs widen the gap: agent’s fee (official scale up to 3%), your lawyer’s scale fee, the RM400 discharge fee and any early settlement charge.
- Talk to the bank before you list: ask for a redemption statement, the lock-in terms and its options in writing.
- AKPK offers counselling and a debt management programme for loans from BNM-regulated lenders, and does not charge for it.
- RPGT on a loss: no tax to pay, but the CKHT 1A return is still due within 60 days of the disposal.
How the redemption sum works
When a home has its own individual or strata title, your bank holds a registered charge over it under the National Land Code. To sell, the charge must be discharged: the bank signs a discharge (Form 16N, section 278), which is registered with the transfer to your buyer. Where there is no separate title yet, the bank holds an assignment of your rights and reassigns them when paid. Either way:
- Your lawyer asks for a redemption statement. It shows the full sum to settle the loan on a stated date, with daily interest after that date.
- The buyer’s side pays your bank directly. The buyer’s bank or lawyer sends the redemption sum to your bank against its undertaking to release the title and discharge.
- You receive only what is left. After the bank, the RPGT retention and agreed costs, the balance goes to you.
With negative equity there is nothing left; the price does not even reach the redemption sum. A Bar Council conveyancing column described the usual protection for buyers: the SPA makes the seller pay any excess over the price before the buyer’s money moves. My guide to buying when the seller has a loan shows the same process from the buyer’s side.
Working out your shortfall
Count all the costs of selling, not just the loan. An illustration with made-up round figures for a Malaysian owner whose lock-in period has ended:
| Item | Amount | Notes |
|---|---|---|
| Agreed sale price | RM420,000 | Illustration |
| Agent’s fee at an agreed 2%, plus 8% service tax | RM9,072 | The official scale caps the fee at 3% (minimum RM1,000); the rate is agreed in writing |
| Your lawyer’s scale fee, plus 8% service tax | RM5,670 | 1.25% of the first RM500,000 under the Solicitors’ Remuneration Order 2023, before disbursements |
| Discharge of charge, plus 8% service tax | RM432 | RM400 scale fee for one title |
| Money available for the bank | RM404,826 | Price less the three costs above |
| Redemption sum on the statement | RM430,000 | Illustration; interest keeps running daily |
| Shortfall to fund | About RM25,200 | Plus apportioned bills and any arrears |
Two items can make it worse. If you settle inside your loan’s lock-in period, the bank can add an early settlement charge; Bank Negara Malaysia’s transparency rules require it to be disclosed, so check your letter of offer. And the buyer withholds an RPGT retention of 3% of the price (7% for foreign sellers) for LHDN unless a lower amount applies, as explained below. My guide to what sellers pay lists every cost.
Ways to cover the shortfall
- Savings or family help, paid to your lawyer’s client account before completion, so the redemption can go through in one step.
- Negotiate the selling costs, such as the agent’s rate within the scale, and time the sale after any lock-in period ends.
- Price it on evidence. A price set from recorded transactions sells faster than an optimistic one that later has to be cut; see checking recorded prices and independent valuations.
- Borrowing to cover it is possible but adds a new debt and affects your debt service ratio; compare the total cost first.
- EPF savings can be used for some housing purposes; check with KWSP whether any withdrawal fits your case before you rely on it (see using EPF for housing).
Talk to the bank early
Speak to the bank before you sign anything with a buyer, while your account is still up to date. Ask for:
- An up-to-date redemption statement and the daily interest figure.
- The lock-in period, early settlement charge and notice required.
- Whether rescheduling (a longer tenure) or restructuring could make keeping the home workable instead.
- If you must sell and cannot fund the full gap, whether it would release the charge against the sale proceeds and agree a repayment plan for the rest. That is entirely the bank’s decision; get any agreement in writing before you sign the SPA.
Rescheduled and restructured loans are tagged in your CCRIS record, BNM’s central credit register, which future lenders read; see my CCRIS guide. If you have a dispute with your bank that its complaints unit does not resolve, the Financial Markets Ombudsman Service handles banking disputes of up to RM250,000 (BNM, January 2025).
AKPK: counselling from a BNM agency
Agensi Kaunseling dan Pengurusan Kredit (AKPK) was set up by Bank Negara Malaysia in 2006 and does not charge for its services. It gives advice and counselling, and through its Debt Management Programme can help eligible borrowers restructure debts with BNM-regulated lenders, including housing loans (BNM, April 2006). The finance ministry said in March 2025 that about 495,000 borrowers had been helped through the programme as at December 2024. It suits owners with several debts; go early, before legal action starts, and check current eligibility with AKPK.
Not sure whether a sale would cover your loan?
Send me the project, unit size and your rough loan balance. I’ll share recorded prices for similar units so you can see the likely gap before you talk to the bank.
WhatsApp JasonWhy stopping payment is the worst option
Some owners in negative equity stop paying and wait. That usually costs more:
- Arrears and recovery. BNM’s rules classify a loan more than 90 days past due as impaired, and recovery action usually follows. For titled property the bank serves a Form 16D notice (section 254 of the National Land Code) and applies for an order for sale.
- Auction price. At auction the price is set by bidding, often without viewings, and costs are added to your debt.
- The shortfall survives. If the auction does not cover the debt and costs, you still owe the rest and the bank can sue for it.
- Bankruptcy risk. A creditor can petition for bankruptcy for a debt of RM100,000 or more (Malaysian Department of Insolvency). In October 2026 the government said it plans to raise this to RM150,000, with no start date announced.
Selling yourself, with the bank informed, keeps you in control of price and timing. My guides to missed home loan payments and auction property in JB explain each stage.
RPGT when you sell at a loss
- No tax on a loss. LHDN treats a disposal price below the acquisition price as an allowable loss, so no RPGT is payable on that sale.
- The return is still due. Section 13 of the RPGT Act requires a return for every disposal of a chargeable asset, showing the gain or loss, within 60 days. You file CKHT 1A and the buyer files CKHT 2A online through e-CKHT, which has been compulsory since 1 January 2025.
- The retention. The buyer normally pays 3% of the price (7% for foreign sellers) to LHDN within 60 days. For disposals from the 2026 year of assessment, LHDN says the seller can notify the buyer of the deemed assessment amount before payment, and the buyer remits the lower of the two. Ask your tax agent to do this early, as it affects your cash at completion.
- Using the loss later. Section 7 of the Act lets an allowable loss be set against chargeable gains on later disposals, within the limits it sets.
Keep the purchase SPA, fee receipts and renovation invoices; they set your acquisition cost. My RPGT guide covers rates and exemptions. This is not tax advice.
Alternatives to selling now
| Option | When it can work | Watch out for |
|---|---|---|
| Rent it out | Rent covers much of the instalment while the loan balance falls | Vacancy, repairs, building rules and tax on rental income; see tenancy agreements and rental income tax |
| Keep paying and sell later | Your income is stable and you do not need the cash | No one can promise prices will recover; I make no price predictions |
| Reschedule or restructure | Income has dropped for a while | More interest overall and a CCRIS tag |
| Refinance | A lower rate or longer tenure helps cash flow | The new bank values the home; in negative equity the new loan may not cover the old one (see refinancing) |
| Sell and fund the shortfall | You need to move or cut costs now | Have the cash or the bank’s written agreement before you sign |
Foreign owners
Foreign sellers face a 7% retention and, in Johor, a smaller pool of buyers: foreigners can generally buy residential property only from RM1 million, and the New Straits Times reported in April 2026 that owners who bought below that level under special approval can resell only to Malaysians. Plan for exchange rates when funding a shortfall from abroad. See selling JB property as a foreigner.
Where to look if you are moving to a smaller home
- Skudai, Tampoi and Kempas: mature estates with a wide range of prices.
- Kulai and Senai: landed homes near the airport and industrial areas.
- Bukit Indah and Gelang Patah: the west side, towards the Second Link.
- Tebrau, Setia Indah and Molek: established neighbourhoods near malls.
Compare them on my JB property map and test a new instalment with the home loan calculator.
More Johor living guides: What sellers pay · Selling without an agent · Sell first or buy first · Downsizing in JB
Frequently asked questions
Can I sell my house for less than I owe the bank in Malaysia?
Yes, but the bank must receive the full redemption sum before it releases the title. You pay the shortfall before completion, or get the bank’s written agreement to another arrangement before you sign the SPA.
What is a redemption statement?
A letter from your bank showing the full amount needed to settle the loan on a stated date, with daily interest after that. Your lawyer uses it to work out what the buyer’s side pays your bank directly at completion.
Do I pay RPGT if I sell at a loss?
No RPGT is payable on a loss, but you must still file the CKHT 1A return through e-CKHT within 60 days of the disposal. For 2026 disposals you can notify the buyer of the deemed assessment amount so that a lower retention is remitted.
Can AKPK help if my house is worth less than my loan?
AKPK, set up by Bank Negara Malaysia, gives counselling and can help eligible borrowers restructure debts with BNM-regulated lenders, including housing loans, through its Debt Management Programme. It does not charge for its services. Go before legal action starts.
What happens if the bank auctions my house for less than the loan?
The proceeds pay the bank first, and you still owe any shortfall plus costs. The bank can sue for it, and a creditor can petition for bankruptcy for debts of RM100,000 or more, a threshold the government plans to raise to RM150,000.
Is renting out better than selling in negative equity?
It can be, if the rent covers much of the instalment and you can handle vacancies and repairs. Check the building’s rules and tax on rental income, and compare it with selling and funding the shortfall now.
Thinking of selling below your loan?
Tell me the project, the unit and your rough loan balance. I will show you recorded prices for similar units, estimate your selling costs and help you plan the sale with your lawyer and bank, or compare it with renting out. You can also book an appointment, or a Zoom consultation if you live abroad.
Sources: Attorney General’s Chambers, Laws of Malaysia: National Land Code (Act 828), sections 254 and 278, and Real Property Gains Tax Act 1976 (Act 169), checked November 2026; LHDN, Real Property Gains Tax Act 1976, online version as at 1 January 2026 (sections 7 and 13); LHDN, responsibilities of the disposer and acquirer (CKHT 1A, 60 days, e-CKHT), updated 26 June 2026; LHDN, retention and remittance by the acquirer (deemed assessment amount from YA 2026), updated 25 May 2026; LHDN, determination of chargeable gain or allowable loss, checked November 2026; Bank Negara Malaysia, “Agensi Kaunseling dan Pengurusan Kredit commences operations”, 17 April 2006; Ministry of Finance, press citation on AKPK figures as at December 2024, 12 March 2025; Bank Negara Malaysia, Classification and Impairment Provisions for Loans/Financing, 6 April 2015; Bank Negara Malaysia, Product Transparency and Disclosure policy document, 2 December 2024; Bank Negara Malaysia, CCRIS, checked November 2026; Bank Negara Malaysia, launch of the Financial Markets Ombudsman Service, 17 January 2025; Malaysian Department of Insolvency, minimum debt for bankruptcy, checked November 2026; The Star, “Bankruptcy benchmark to be raised from RM100,000 to RM150,000”, 27 October 2026; LPPEH (Board of Valuers, Appraisers, Estate Agents and Property Managers), scale of fees, checked November 2026; Bar Council, Circular No. 185/2023, Solicitors’ Remuneration Order 2023, 13 July 2023; Bar Council Conveyancing Practice Committee column, “Understanding an SPA (Part 1)”, 8 December 2006, National House Buyers Association copy; New Straits Times, “Foreigners hit Johor property resale wall”, 20 April 2026
Jason Lim, REN 84424, IQI Realty Sdn. Bhd. E (1) 1584/6. General information checked on 13 November 2026, not financial, legal or tax advice. Your loan documents, your bank and LHDN decide the figures; speak to your bank, your lawyer and a tax agent before you sign or stop paying.