Year 2010 Credit card service tax - How are you going to react?

Under the Budget for year 2010, the government would impose an annual RM50 service tax on each principal credit and charge card, including free cards, and RM25 for each supplementary card from January next year.

What might happens will be:

1. The banks decide to implement the service tax waiver for selective or all clients.
2. The cardholders with unused credit cards may decide to cancel them.
3. Credit cards balance transfer to single credit card.
4. Apply for personal loan to terminate credit cards with substantial outstanding.
5. Source for funds to settle credit cards with outstanding balance.

This measure is expected to promote prudent spending with the number of credit cards having increased from more than 2 million in 1997 to 11 million as at August 2009, excluding 285,000 charge cards. Analysts said the impact of the service charge on credit cards was expected to be “mildly negative” for the banking industry. A Kenanga Research analyst who covers the sector said credit card loans in the country’s banking industry made up less than 5% of total loans.

Jupiter Securities head of research Pong Teng Siew said he was expecting about 25% of current cardholders, especially those with more than one card, to cancel their inactive cards following this proposal.

Only those Banks depended on their credit segment to drive growth for these past years will experience substantial impact on their profitabilities. ECM Libra said the service tax could well see the banking system incur up to RM542.5mil in additional expenses arising from this measure should they wish to maintain existing levels of business. Alternatively, they could “lose” as much as 50% of the cards issued but the “subsidy” to potential spenders from the system (on the assumption of the current 21.6% utilisation rate) may be reduced to about RM280mil, the research house said.

http://biz.thestar.com.my/news/story.asp?file=/2009/10/27/business/4981459&sec=business

6.3 sen payout for ASW 2020 - PNB update

Amanah Saham Wawasan 2020 (ASW 2020)

Income distribution of 6.3 sen per unit for the year ending Aug 31, 2009
Equivalent of total payment of RM592.26 million
Fund Size of 11.01 billion (872,322 unit holders)
Income of RM661.28 million up to 17 Aug 2009 (increase of 12.62% from 17 Aug 2008)
1. Profit from the sale of shares contributed RM311.27 million (47.7%)
2. Dividend income from investing companies RM223.69 million ( 33.83%)
3. Other income RM126.32 million (19.10%)

Note:
Unit holders will receive their income statement from the end of October 2009.
Net asset value (NAV) per unit of these funds is fixed at RM1.
Income distribution of 7.0 sen per unit for the year ending Aug 31, 2008.
Income of RM587.18 million up to 17 Aug 2008.

Tips on minimising the incurrance of the credit card interest charges

A credit card can be a convenient method of payment when you do not have cash but using it too much may incur plenty of charges. Here are some tips on how to leave your credit card charges to a minimum:

1. Shop around for the best deal. Look out for waivers on annual and joining fees for the first year.

2. Make cash advances with your credit card as a last resort as the finance charges and fees can be very expensive.

3. Make your payment before your statement's due date to avoid paying finance and late payment charges.

4. Try to settle your outstanding balance in full to avoid finance charges and be aware of the consequences of paying the minimum amount all the time.

5. Limit the number of credit cards based on your needs and payment capability

6. Be alert of changes to the policies and rates.

Process flow on acquisition of your dream house

Most of the people especially those who purchase their first dream house do not understand the whole process flow on propety acquisition. Normally we will set a budget for our dream house, get ready the 10% deposit, either engage the real estate agent or by themself to search for a few preferrable properties for evaluation, and lastly bargain with the vendor for better pricing after we decided on the property to purchase. The worth scenario for general public would be committed to the property purchase without any proper planning. I would like to emphasis here that I am not saying these steps/any decsion made by us are wrong.

To most of us our dream home could be the bigger investment in our entire life. For every investment that we choose it does come with its own associated risk, shouldn't we be more alert, rational and well prepared for the purchase/investment then. If you are thinking that the whole process are very troublesome and time consuming, I would suggest that you engage a reliable loan consultant to coordinate the whole process for you right from the day one.

In the following section, I would like to briefly list down the process flow, hopefully it will enlighten you:

1. Budget for your dream house
Setting the budget for your dream house with the maximum 90% loan amount and with 30 or 40 years loan tenure in mind. It is adviseable to utilise only the maximum of 30 - 35% of your monthly salary or income as your monthly loan repayment amount as the general guideline.

Example:
Your gross monthly salary: RM10,000.00
Calculate the 35% of your salary as loan repayment: 35% x RM10,000.00 = RM3,500.00
Deciding on the actual loan tenure you decide to undertake: 20 years
Calculating for the maximum of 90% of loan by assuming the interest rate fixed at 5%: RM530,000.00
The budget for your dream house: 530,000.00/90%= RM389,000.00.
Caculation for deposit & funding: RM389,000.00 x 15%=RM59,000.00

There is not fixed rule in setting the budget for your dream house. The above example is just a illustration of a more rational and systematic way of setting the budget for your dream house.

2. Conducting CCRIS and CTOS check.
Most of the people either they are not aware of or assumed that they record are clean. It would be a good practice to personally attend to the repective office to check for your credit record to ensure that your loan are not affected by these matter, which could resulted in forfeiting your booking fee/deposit paid to some parties.

3. Search & Identify your dream house.
I think I will skip this part. You will be more expert in identify your dream house.

4. Check for the market value of your dream house.
You normally would not know if the price quoted by the vendor or real estate agent are refecting the actual market value. Thus immediately after you have identify the unit to purchse you should engage a loan consultant to check and establish the market value for you. You should only confirm the deal with the vendor or real estate agent after you have secure the loan.

5. Getting mortgage loan.
Most of the people would like to secure the lowest interest rate for their mortgage loan, however, there are lots of banks offerring many different types of loan package, which they designed in such a way to cater to different people's need and requirement. Thus you should study carefully on each package offerred to you by the banks. If this is troublesome to you or you have no time to go through so many banks or you could not really understand what is the differences in the loan packages may be I would be a great help to you. Alternatively you could engage your own loan consultant to do it as well. Lastly signing on the Letter of offer from bank to confirm on your mortage loan. Bank will send the Letter of Instruction to loan lawyer

6. Confirm the deal with vendor
After you have secure the appropriate loan for your dream house, you could proceed to bargain with the venfor for better pricing and signing the letter of acceptance. You should take note on the term and condition writen on the document before you sign on it. Please check for the cooling off period to ensure it is written 21 days or 14 working day to avoid your 3% booking fee are being forfeited. If you have specific concern or term, you may write down on the letter of acceptance.

7. Engaging the Lawyer
After you have signed the Letter of acceptance, you should engage a S&P lawyer and Loan lawyer to help you to execute all the legal process, who are able to represent and work for your benefit throught out the process. As general guideline it would be good to engage the banker lawyer as both your S&P and Loan lawyer. Under this arrangement, your interest are better protected compare to you using the vendor lawyer. Hope you could realised the facts that banks interest will be always be taken care of no matter what happens.

Under the area of S&P lawyer:
8. S&P agreement stamping
Make sure you check through the draft S&P prepared by your lawyer and discuss what ever term and condition that are doubtly or not agreeable to you with your lawyer. After all the necessary amendment is done, both party will be signing on the S&P. You lawyer will then send the document for stamping, which would normally take 1 day.

9. Memorandum of Transfer sent to Stamp Office for adjudication of Stamp Duty
If the propery you purchse has the individual tile already then the Memorandum of Transfer (Form 14A) will be stamped to show that an adjudication fee of RM10 has been paid, and will then be returned to the purchaser's lawyers to hold, pending adjudication.

10. Property Inspection and Valuation
The Stamp Office will direct the district valuation department to value the property. Documentation shall include: - Memorandum of Transfer (14A) - Copy of the sale-purchase agreement - Copy of title deed - Form PDS5 (Stamping Proforma). The inspection is not mandatory to conclude the valuation and it is at the discretion of the valuation department, but in practice, it takes places in the majority of the cases.

11. Memorandum of Transfer (14A) sent to Stamp Office for stamping
The Stamp Office will issue a notice of assessment based on the valuation department's report. Stamp duty must then be paid to the Stamp Office, based on the Notice of Assessment, within fourteen (14) days from the date of such notice or the period indicated by the Collector of Stamp Duty. Usually the Collector will give thirty (30) days from the date of such notice to pay the stamp duty. This procedure may take one day if the purchaser or purchaser's lawyer goes personally. Otherwise it can take up to 5-7 days for the Memorandum of Transfer to be endorsed and be ready for collection. The documentation shall include: Form 14A (Memorandum of Transfer) Notice of Assessment (obtained in Procedure 3)

12. Registering at the Land Office/Registry
The purchaser's lawyer presents the duly stamped Memorandum of Transfer (Form 14A) for registration at the Land Office/Registry. This must be done within three months from the date of the Memorandum of Transfer (Form 14A) which is usually dated when it is submitted for adjudication. A title search is conducted just prior to presentation to ensure that there are no encumbrances or restraint against dealings which may hinder the registration of the Memorandum of Transfer (Form 14A). The real property gains tax (RPGT) at the rate of 5% on any gains, has been abolished on April 1, 2007. The documentation shall include: - Copies of Quit rent and Assessment receipts - Certified true copies of the Memorandum and Articles of Association, Form 24 (Return on Allotment of Shares), Form 49 (Return Giving Particulars in Register of Directors, Managers and Secretaries and Changes of Particulars) of the Purchaser and Vendor - Certified true copies of the Vendor's and Purchaser's board resolutions giving authority to sell and purchase the property respectively - Search report on the Purchaser as extracted from the Companies Commission of Malaysia - Duly stamped Memorandum of Transfer (Form 14A) - Copy of Notice of Assessment bearing Stamp Office's endorsement that ad valorem stamp duty has been paid (obtained in Procedure 3) - Original of the title document

Under the area of Loan Lawyer:
13. Lodgement of Private Caveat
This process is very much depend on your lawyer and bank requirement.

14. Borrowers sign Loan Agreement at lawyer's office
After the loan lawyer receive the documents from the bank, the lawyer will proceed to execute the legal process. Then they will contact you to sign the loan agreement at their office.

7. Purchaser's lawyer undertaking to let loan lawyer have transfer upon stamping
In this case is would be the same lawyer and no delay in days for document transfer.

8. Confirmation on the outstanding amount and disbursements.
The Vendor & your Solicitors will confirm the differential sum between loan and purchase price. At this point of time you have to prepare payment or fulfill the 10% deposit make payable to your lawyer. Follow by vendor's undertaking & vendor's redemption statement.

9. Advice partial drawdown & full drawdown
You lawyer will issue instructions to your bank for drawdowns. The vendor's bank will get its share first if applicable follow by the vendor being the last to receive what ever balance. Upon the partial drawdown or full drawdown, your lawyer will issue letter to you to start servicing your loan interest only or actual repayment amount.

Note: I am not study law nor related to any solicitator firms. I am presenting the above materials as to my best knowledge. I would appreciate if you could forward me the more appropriate details/update if you find any parts of the writing need to be amended.This definitely will be for the benefits of all readers.

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