Malaysia Financial Blogger | Financial Freedom Ideas | imDavidLee.Com

Factors to Consider When Choosing A Home Loan

David Lee — Thu, 16 May 2013 06:14:57 +0000

The margin of financing is also known as loan-to-value ratio. It is the home loan amount expressed as a percentage of your property’s value. The lower the margin, the more “equity” there is in the property. The margin of financing can go up to 95% of the value of property, and is assessed based on:
i. Age of borrower
ii. Income of borrower
iii. Type of property
iv. Location of property

Some mortgage lenders may impose an early settlement penalty if the loan is paid off in full within a lock-in period, including refinance the loan with another lender. However, it depends on the term & size of home loan, the charge can be quite significant.

There are a number of related costs such as professional fees and government charges that you would have to pay when you get a home loan. Some common fees and charges you would expect to pay include:
i. Stamp Duties Fees: Sale & Purchase Agreement - ranged from 0.5% to 1.0%, Loan Agreement - 0.5% and Transfer of Title (MOT) - ranged from 1.0% to 2.0%
ii. Disbursement Fees: vary by state, land office and property type. Includes land search and bankruptcy search
iii. Processing Fees: one off charge by the lenders (can be up to a few hundred ringgit).

The Base Lending Rate (BLR) is a reference interest rate used by central bank to decide how much to charge for various products they offer. It is a rate that takes into consideration banks’ cost of operations, and is typically similar among other banks. If the BLR increases or decreases by a certain amount, the interest rates incurred on flexi rate of housing loans also increase or decrease by the same amount.

An upfront payment or downpayment made by the purchaser is expressed as a percentage of the purchase price. In Malaysia, it’s usually a 10% downpayment of your purchase price. For example, if the purchase price is RM265,000, then your downpayment is RM2,650.

Besides that, we also have to consider about the loan tenure which is the “period” or “number of years” to finance your house. If your home loan has a tenure of 30 years, then it would take 30 years to fully pay off the loan.

After you have done the home buying transaction and signed all the legal agreements, the final step is to decide on the type of mortgage insurance. You can choose either MLTA or MRTA plan to provide protection for your outstanding loan amount in the event of death or total permanent disability of the person insured. The amount of protection reduces over time so as to match the outstanding loan amount.

Financial Planning for A Young Adult

David Lee — Wed, 24 Apr 2013 02:06:48 +0000

We are faced with various financial concerns on life. Some of the common concerns are:
i. Should we invest? Which investment vehicle? How much?
ii. Can we buy another property?
iii. What sort of protection should we look at?

How can we best optimize our current resources to meet all these concerns and at the same time, meet all our financial goals? Shall we address all concerns at the same time? What is the best strategy moving forward?
Are we overcommitted to a particular asset class? Do we just sell all our loss making investments and concentrate on the oldest investment vehicle such as property? Will this asset help if we need cash urgently?

One of my readers who realized that he needed to get a professional planner to help him out of his dilemma and came to ask me.

From the above, one can see that his major concerns are as follows:
i. Investment: Should he continue to invest, switch or sell the investments in view of current market uncertainty? Would reinvesting the dividends be a good idea?

ii. PTPTN loan (RM63k): Should he settle the amount, now that the government is giving a 20% discount? or should he buy another property instead?

After several discussions on his needs, here is an overview of what he needs to look at:
i. Investments are meant for the long term (3-10 years) before they can yield the desired returns. Even with the conservative risk profile, he needs to invest in more than one particular asset class. He can try to diversify among various asset classes which is the main foundation of successful investing. Property may be the oldest investment vehicle but it is not a liquid asset. This asset may be hard to liquidate in an emergency , it normally takes 6 months to 1 year to liquidate. Working towards long term objectives with the least amount of risk is the true power of successful investing. He would need to look at committing to a higher savings ratio as he is saving only 2.9% of his income currently.

ii. As for PTPTN loan, he should take advantage of the 20% discount and settle the amount in full. By doing so, he can also take pride in the knowledge that she has contributed to society as there are others who need such loans.

Apart from the above, he should look at risk management and estate planning. She needs to cover his liabilities as all the properties are mortgaged. He should write a will so that his estate will be distributed according to her wishes. By doing so, he can obtain peace of mind should any unexpected life events occur.

Having Proper Mindset for Investing

David Lee — Thu, 18 Apr 2013 02:29:45 +0000

Having proper mindset when investing allow investors to obtain a realistic perspective of their investments. Due to misconceptions about investing, some investors may be disappointed when their expectations and needs are not met. Investors who have a realistic expectations of their investments are more likely to achieve their long term financial goals.

Below are several misconceptions about invest8ing which investors should be aware of in their investment:

i. Quick Gains
One of the biggest roadblocks in achieving the successful of long term investing is impatience. Investors need to remind themselves that investments are for the long term mostly. As such, gains made from investing may take some time to be realized. Impatience investors, in their quest to chase returns, may not give their investments enough time to perform adequately.

ii. Mismatch of Risk Profile with Financial Goals
Matching your investment risk profile with your investment objectives is an important determining factor for investment success. Investors need to first identify their risk appetite before a suitable portfolio can be built. By identifying the level of risk that they are comfortable in taking, they can then decide the types of funds that are appropriate for them.

However, a moon mistake that investors make is not assessing their risk profiles properly. Because of this, investors tend to make investments that do not match their actual risk profiles. For example, for conservative investors, their primary goal would be to achieve regular income. A s such, they should not select those aggressive investment.

iii. Expectations of Fixed returns and Past Performance
Compared to savings and fixed deposits, investment mostly can’t guarantee investors fixed returns. Its performance depends on investment portfolio as well as prevailing market conditions. In addition, historical returns do n jot indicate future returns as market conditions may change over time.

In conclusion, holding their investments for a sufficiently long period, understanding risks and returns of their investments, as well as having clear goal are positive steps toward achieving their financial objectives. It is advisable that investors strategise and plan ahead for their financial goals. In doing so, they ca have proper mindset for investing and be able to establish a realistic perspective of their investments.

Is Property in Penang Still Affordable?

David Lee — Thu, 04 Apr 2013 06:29:48 +0000

Scarcity of land has caused to the escalating prices of housing in Penang. The current average condominium price on the Penang island itself is RM450,000 while the median household income is RM52,884, which is equivalent to RM4,407 per household (Source: Penang Monthly, 2012). In fact, the house prices on the island have increased by 50% over the last 5 years.

However, the middle income groups have not experienced an increase in their wages, and the cost of living continues to rise on yearly basis, which biting into any income growth. As a whole, the ratio for Penang state is 5 (RM265010/RM52884), which has been risen from 4 in year 2006.

In comparison, the house price-to-income ratio for US was 3 until 2000, and it rose to 5.8 by 2006, before the subprime crisis. In UK the ratio reached 11 in 2008, just before the credit crunch. The above figures are obtained from October 2011 research on ‘Supply and Demand in the Penang housing market: Assessing Affordability‘ published by Penang Institute.

The chart highlighted that property prices in Penang Island increased quarter on quarter. Looking at the chart above, you will notice that the appreciation of property prices have been significantly higher since 2011 until 3rd quarter 2012.

The house prices are becoming more and more unaffordable for Penangites nowadays. It’s advisable to rebalance the planning powers in developing any projects.

In summary, the average house price in Penang has more than doubled in the past 5 years. Based on the past 5 years historical rates of growth, I can see that average price of house in Penang is projected to increase by further 10-20% this year.

I’m Now a Google AdWords Qualified Individual!

David Lee — Thu, 28 Mar 2013 06:11:11 +0000

It’s finally official. I am happy to say that I have been qualified to be a part of the Google Adwords Certified Partner Program. For those who know AdWords for years, this qualification is indeed valuable as it offers credibility and acts as a door opener.

Google AdWords Certification Program is a globally recognized which showcases knowledge of the best AdWords tools and techniques. I have attained this certified partner status by passing a minimum of 2 certification exams which are Google Advertising Fundamental Exam and Google Search Advertising Advanced Exam. Through its learning process, you are able to illustrate your practical expertise in managing accounts and understand the terms & conditions of AdWords.

Benefits of Google AdWords Certification Program
Google AdWords will provide you quality support if you are AdWords qualified individual or certified partner. There’re still lots of benefits of becoming the qualified individual/certified partner. You will:
• Improve your knowledge and practical application of Google AdWords
• Receive Google branded certificate which you can showcase in your CV, own business site etc.
• Get an endorsement by Google, which will help your in branding.
• Have individual profile page which you can share with your clients
• Leverage potential source of sales leads which resulted from the coupling between Google Engage and AdWords certification

AdWords is not only becoming more and more popular with advertisers, but it’s also being constantly marketed by Google. I believe that with Google AdWords qualification you will have the edge over your competitors when job hunting or as a marketing in attracting new business.

So if you think that AdWords plays a big part for your marketing, then I would recommend you to go fot this course.

My Mission
After what seemed like endless hours of learning I finally can show for it…What’s my next plan? I will plan to make use of what I have learnt to run an online marketing campaign by managing PPC advertising program. Stay tuned…