Why we should apply for 30 years housing loan tenure?

A Lot of my people I met are very much concern over the 30 years loan tenure. I can understand their concern over the interest paid for over 30 years, which is substantial.

You may be right if you have the ability or are very confident that your loan will be settled in very short loan tenure. Else I would advise you to opt for 30-year mortgage. What I emphasize here is that we wanted a safety net. By applying for the loan package with flexibility in repayment, you can make extra payment on your mortgage loan every month. This would mean that you are settling your loan in a shorter tenure, and yet still taking a longer loan tenure so that you had a cushion if something happened. This is important to you as banks has all the rights to increase the interest rate if you failed in the repayment.

You may ask yourself by now what the actual different between the two approach? Note that the calculation for repayment amount below does not include other cost charged by banks & house owner insurance (if applicable).

Scenario 1: 30 year mortgage repayment without any sort of acceleration
Loan amount: RM200K
Interest rate: 4%*
Tenure: 30 year
Repayment amount: RM955.00
Total interest paid: RM143,739.38

Scenario 2: 15-year mortgage repayment without any sort of acceleration.
Loan amount: RM200K
Interest rate: 4%*
Tenure: 15 year
Repayment amount: RM 1,479.50
Total interest paid: RM 66,288.00

Clearly, being every thing remained unchanged, a 15-year mortgage is a better option, However in this case it would cost you the additional repayment of RM524.50 every month.

Let’s study Scenario 3, 30 year mortgage repayment with accelerated payments:
Loan amount: RM200K
Interest rate: 4%*
Tenure: 30 year
Repayment amount: RM955.00
Extra repayment: RM545.00
Total interest paid: RM64,945.00
Actual Tenure: 14 years & 9 months

In this case the total interest paid & loan tenure are the same as if you were applied for 15 years mortgage. You save about $78,795.00 and loan tenure shorten by 15 years by making the extra payments.

By now you may be thinking of getting 15 years loan with accelerated repayment. Based on the calculation you are right, however it made more sense for us to take a 30 year loan with the maximised & planned acceleration repayments if the interest rate for both 15 and 30 year are the same or not significant.

I could understand that different person have different risk profile toward their own investments. What choice would you have made and why? At the end of the day it is still your own choice & decision. Only time will tell if you have made the poor decision at that time.

Amanah Saham - April 2009

Prime Minister Datuk Seri Najib Tun Razak announced additional units for two PNB-managed funds including an additional 2.22 billion units for Amanah Saham Malaysia beginning Tuesday, April 21 and two billion units of Amanah Saham Wawasan 2020 from April 27.
The maximum allowed per investor is 20,000 units, he said.

Najib said that PNB had a total of 9.3 million unit holders, with a total investment of RM87bil.
He also noted that PNB’s investment strength in a wide range of strategic sectors opened up and created job opportunities on a large scale.

“PNB can be depended upon to provide job opportunities for our unemployed graduates,” he said, adding that PNB had to date employed 100,000 people in and outside the country.
The Prime Minister also advised the rakyat (people) to invest their savings wisely and avoid getting fooled by get-rich-quick schemes, as that would lead them to financial ruin.

He said it was important that the public be financially savvy and wary of schemes that promised them instant riches.

Sukuk Simpanan Rakyat 2009 (validity: 14 April to 13 May 2009)

Ministry of Finance wishes to announce the issuance of Sukuk Simpanan Rakyat 01/2009 amounting to RM2.5 billion on 14 May 2009. This is the first issue of the two series of 3-year RM2.5 billion sukuk each in 2009. Bank Negara Malaysia has been appointed to issue the sukuk on behalf of the Government.

The sukuk, which will be scripless and based on Shariah principles, is an additional investment instrument for Malaysian citizens who are 21 years and above. The RM2.5 billion sukuk, which has a 3-year tenure, offers a return of 5% per annum and provides the flexibility for early redemption before the maturity date.

Those wishing to subscribe may apply for Sukuk Simpanan Rakyat 01/2009 during the sales period, commencing from 14 April to 13 May 2009. The minimum investment in Sukuk Simpanan Rakyat 01/2009 is RM1,000 with a maximum of RM50,000 per investor. The maximum aggregate holdings per investor for the two series of Sukuk Simpanan Rakyat 2009 is RM50,000. Sukuk Simpanan Rakyat 01/2009 can be subscribed at all commercial banks, including Islamic banks, Bank Kerjasama Rakyat Malaysia Berhad, Bank Simpanan Nasional and Agrobank. The allocation of Sukuk Simpanan Rakyat 01/2009 is based on a first-come first-served basis. Successful applicants will be notified by their agent banks. Profit payments will be made on a quarterly basis through the sukuk holders' accounts with their agent banks.

Source: http://www.bnm.gov.my/index.php?ch=226&pg=731&ac=671

"Nothing is more honorable than a grateful heart." Seneca

I read a book "The present: The gift that makes you happy and successful at work and in life" by Spencer Johnson M. D. these few days.

I am grad to have read the book. I am a bit lost last week. I just having the feeling that all my efforts are not getting me anyway or any closer to my goal. I am losing my motivations. I realised that I am overloaded with tasks and yet working/worrying too much on my future. I am not really focusing on the present moment. I would like to thank you Mr. Spencer for the little gift that you give me.

The Present

Three ways to use your present moments

Be in the present

when you want to be happy and succesful

Focus on what is right now.

Use you purpose to respond

To what is important now.

Learn from the past

When you want to make the present better than the past

Look at what happended in the past.

Learn something valuable from it.

Do Things differently in the present.

Plan for the future

When you want to make the future better than the present

See what a wonderful future would look like.

Make plans to help it happen.

Put your plan into action in the present.

Over here I would like to take this opportunity to thank you all my friends, mentors, leaders, bosses, colleague and all others who have help me all this while. Thank you very much for your knowledge & guidance.

How to acquire debts and still stay wealthy and happy? Part II

If you have outstanding in your credit cards, my advise to you is to stop using all your credit cards service and focus on paying off the debts.



For example:

There is a Credit Card Debt of RM1000.00. and with no new debts to be incurred.

Minimum payment: RM50 or 5% on the outstanding amount, whichever is higher.

You may study and use the below advice/suggestions to settle the debts.

Option 1:
1. If you are comfortable/decide to settle your debt with 2 years' repayments for what ever reasons.

2. Then you may just pay the minimum of RM50 monthly before the stipulated due date to get rid of the debts.


3. You will definitely be debt free after 2 years with total interest of RM190.00 paid.



Option 2:

1. If you think that 2 years is too long for you, then you need to plan for the maximum monthly repayment budget which must be higher than 5% to shorten the repayments period.


2. with the repayment of RM100 monthly before the stipulated due date of each month, then you will be debt free after 11 months with total interest paid RM89.00.



Option 3:

1. If you want to shorten the repayment period while still have some extra cash for enjoying life.


2. You may go for credit card balance transfer service offered by finance institutions. However, It is important to get the service that best suit you or provide you the significant saving in the interest paid to enjoy its benefits.


Option 4:
Another very good approach will be get a second part time Job to repay the debts.


Option 5:
Lastly will be the combinations of above options which works best for you.



Note:
Interest charges imposed on you on the outstanding balance which you have not paid your card issuer after the payment due date. These charges are usually calculated on a daily basis. With effect from 1 July 2008, interest charges will be on a tiered basis based on the repayment record of cardholders. The intention is to encourage and instill good financial discipline amongst cardholders. With effect from 31 March 2009, the tiered charges are as follows:

Repayment Track Record & Interest Charges
1. Cardholders who promptly settle their minimum payment due for 12 consecutive months
Up to 13.5% per annum
2. Cardholders who promptly settle their minimum payment due for 10 months or more in a 12-month cycle Up to 16% per annum
3. Others Up to 17.5% per annum

That's all for the time being, Coming soon, please watch out for part III on the term loan management.

How to acquire debts and still stay wealthy and happy? Part I

In the journey to wealth creation, you need debts to build your wealth faster and less costly. However, there are two type of debts both short and long term you are able to acquire. namely the healthy and the unhealthy debt. How do you actually differenciate the two for wealth creation?

For simple explanation, the healthy debts will make you rich while the unhealthy debts you acquired will not make your life better and happier. In order for you to make the right decisions in acquiring healthy debts you need the financial knowledge or IQ to help you.

Manage your Credit Card debts:
A credit card is undeniably a convenient electronic payment tool which allows for greater flexibility and added security, particularly when one is travelling. Credit card company normally grant you the spending limit for each card you applied for 2-3 times more than your monthly income. You will enjoy the benefits as long as you did not default or make minimum payments each month.

1. Before apply check the Term & conditions of each card including joining & annual fees. Choose the card that best suit you. Always keep not more than 2 credit cards with you for better budgetting and control over each month expenses.
2. Then set the spending limit/budget for each credit card.
3. Plan your monthly purchases for household, entertainment, foods, & etcs.
4. Eliminates the unnecessary goods purchase to avoid over spending.
5. Plan your purchase according to the cut off date for the monthly billing cycle to enjoy the more than 20 days interest free period given to you.
6. Check your credit card transactions before signing to avoid unauthorised transactions
6. Ensure you check your card statement and clear the monthly outstanding amount immediately before the due date.
7. Safeguard your credit card.

If you are currently have outstanding credit cards debts & other debts please wait for part II, which are coming soon.