Homeowners Offer Free Mortgage Takeovers: The Underlying Causes Revealed
A phenomenon where homeowners offer to transfer their Mortgages (KPR) at very low prices, or even for free, is becoming increasingly common on social media. This situation arises when some debtors choose to relinquish their homes and transfer their monthly instalment obligations to others, despite having paid significant amounts over several years.
Syarifah Syaukat, Senior Research Advisor at Knight Frank Indonesia, stated that this phenomenon is closely linked to the ability of debtors to meet instalments after entering the floating interest rate period. Rising interest rates can make previously affordable instalments increasingly burdensome.
“The phenomenon of KPR takeovers, or switching banks, generally refers to the ability of consumers or debtors to repay the mortgage instalments agreed upon at the start. This is usually undertaken by KPR debtors who have entered the floating interest rate period. With uncertain or increasing interest rates, instalments during the floating period feel much heavier,” Syarifah told CNBC Indonesia.
In such conditions, transferring the mortgage to another bank becomes an option for debtors to consider. This scheme allows debtors to obtain a new interest rate period to alleviate instalment pressure, although the decision to switch banks requires thorough calculation.
“Switching KPR services to another banking institution will delay the floating interest period, which is likely to decrease in the future. Detailed calculations must be made to see the potential profit or loss, not just looking at the takeover costs alone,” she added.
The problem is that not all debtors are in a financial position to maintain a house until the credit term ends. As the residential property market remains stagnant, finding new buyers is not always easy, particularly for the lower-middle segment of society.
Syarifah noted that the economic condition of this group is a key consideration when owners decide to offer large discounts during the takeover process. In some cases, the requested value may even be lower than the amount the owner has already paid.
“With the residential property market currently stagnant and the challenging economic conditions of the lower-middle segment, these are among the reasons debtors offer discounts or even free transfers of KPR,” she said.
The profitability of a takeover also depends heavily on the interest rate structure of the old and new banks. The difference in interest rates can result in significant savings over the remaining credit term, but this cannot be calculated solely from monthly instalments.
“For example, a debtor performs a takeover because they have entered a floating rate period of up to 13%. At the new bank, the mortgage instalment might only be subject to a tiered interest rate starting at 5.75%. The difference can be measured by comparing the remaining principal and tenor against the different interest conditions,” Syarifah explained.
On the other hand, potential debtors interested in taking over a house must be cautious. The costs arising from the credit transfer process can alter the profitability calculation, meaning a seemingly cheap takeover price may not reflect the actual total cost.
“However, one must be careful, as calculations must also involve other costs such as penalties, life insurance, appraisal fees, transfer of title fees (AJB), bank notary fees, and so on,” Syarifah concluded.
Having Paid Rp 200 Million in Mortgages, Choosing a Free Takeover
The phenomenon of homeowners offering free mortgage takeovers has resurfaced. One such case involves ‘Banana’ (a pseudonym), a homeowner in Bekasi Regency who claims to have spent over Rp 200 million on mortgage instalments but has now chosen to transfer it without requesting any compensation.
Banana made this decision after his financial situation changed drastically. His business went bankrupt about two years ago, and his income has not yet stabilised.
“I am doing an over-credit because my business went bankrupt two years ago and my income dropped drastically. While I still have savings, my income remains very unstable,” Banana told CNBC Indonesia.
The decision to release the house for free is also related to intense competition in his residential area. Many similar units are offered for sale or rent, making it difficult to find a buyer despite marketing the house for a long time.
“I am offering a free takeover because there are many similar houses for sale or rent in this housing complex. I believe the competition here is very fierce, and in this difficult economy, it takes a long time to sell a house,” he said.
He has attempted to sell the house through conventional methods for two years. After considering his financial condition and credit risks, he assessed that a free takeover was a more sensible option than continuing to deplete his savings.
“After much calculation, it is more beneficial to transfer it for free rather than continuing to erode my savings or risking my credit reputation (BI checking),” he said.
Another issue arises regarding house prices and instalments. For potential buyers able to access bank financing, these houses must compete with new units offered by developers. Meanwhile, the instalment amounts are seen as a factor that limits the number of interested parties.