Munirah Izzan: June 2018

Getting A Loan Is Easy But Financing It Is Hard. There Are Consequences If You Miss The Payment

12:45 PM

Buying a house in Malaysia can be quite a daunting experience for first time buyers. The process of buying a new house in Malaysia can be as tedious as you can imagine because you do not know the procedure of buying a new house in Malaysia.

You starting doing your research and look for articles that give you a guide of buying property in Malaysia. After that, you start applying for loan and finally get you loan approved.

However, paying for the home loan payment becomes more and more difficult for people nowadays, as the economy in Malaysia is going downhill as compared to the previous years. This article will guide you through the consequences if you miss the the home loan payment.

First and foremost, you will definitely be charged with late payment charges, also know as penalty. Each bank has different penalty interest rate and differs across different banks. Let us say Tony bought a house at a price of RM600,00 and he managed to secure a 90% home loan, with a loan tenure of 30 years. As for the interest rate, it is 4.65%, with 3.9% base rate plus another 0.75% interest rate.

1. Late payment

Imagine a scenario: Tony was 30 days late in making his monthly payment in the first year. The bank then notified him and charges arrears on him. The arrears charged will be calculated based on the formula below with penalty charged:

Monthly payment x 30/365 x late interest (3.9% base rate + 6.35% penalty rate)

He will now have to pay an arrear of RM23.48, on top of the monthly payment of RM2,784.44. The total amount that Tony will have to pay the following month is now RM2,907.92 after the penalty. On the bright side, this will be a one off penalty. However, if Tony fails to make payment on before 60 days, the bank will then have the right to re-evaluate the interest rate. Another thing to take note, if Tony has another late payment again in the future, the bank will also re-evaluate and increase the interest rate.

If the interest rate for a homeowner has been revised, he or she needs not to be too worried as long as he or she gets back on track and pay the loan payment on time. Then, the bank might review the interest rate and revert the interest rate to its original rate again, with the condition that he or she makes payment on time. Do bear in mind that there is also a possibility that the interest rate might not be reverted back to its original rate.

Therefore, it is always good to practice making payment on time to prevent getting your interest rate increased and end up having to pay more for penalty.

2. You should never miss a payment

Being a late payer on bills will have a bad effect on your credit health, and there will be no way to fix your credit health once you are a late payer. If you are one those late payers who have been making late payments, the only thing you can do now is to make payment on time from now onwards.

It will not affect your credit history immediately as the credit history shows your transactions and activities for the past twelve months. That being said, if you start making payments on time, your credit history will slowly improve.

Therefore,. It is always good to make payment on time. Take the example above, Tony was late in making payment once and it has resulted in increased interest rate. You definitely do not want to pay that extra money which could sum out to a big figure in the end.

3. Struggles in making payment

If you are not in any financial struggle and the main reason for missing payment is solely because of a busy and hectic lifestyle, you could always rely on reminder on your phone. Set a monthly reminder on your phone to remind you to make payment so you will not miss any payment. If you are not keen on this idea, you could always opt for automatic transfer from your bank account to make your home loan payment monthly.

However, if you are on serious debt issues, you definitely will need to seek for professional help. It is reported that there are approximately 22,600 Malaysian below 35 years old have declared bankruptcy between 2012 and 2016.

Reasons for the declaration of bankruptcy were mainly the inability to pay for car loans, personal loan and housing loan. To deal with this, you could always look for Credit Counselling and Debt Management Agency (AKPK) and enrol yourself in the debt management programme. If not, you could also contact your bank and renegotiate the terms and condition. Another option will then be refinancing your mortgage to reduce your loan payment monthly.

Property consultant would also advise you to sell your house as a last option to pay for the loan. Move out instead and opt for rented unit that will not cause you financial burden.

In conclusion, think carefully and thoroughly before making such big decision in buying a house. Always set a realistic budget and stick to it to prevent yourself from getting into financial burdens or debts.

8 Tricks Millennials Can Learn Save Money

9:32 AM

Assalamualaikum dan salam 1Malaysia

It is normal for the younger generation to not have much savings on hand yet, due to their relatively young age. As many millennials know, saving money is more often easier said than done, especially when earning a starting salary. After taking out rent, utilities, Internet, groceries, student debts and all other expenses, an exciting paycheck can turn into a pathetic fraction of its former self. We’ve all been there: the feeling of starting out is not the greatest in the world. Ergo, millennials need to come up with various ingenious ways to save money while on a tight budget. In this guide, we’ve compiled 5 tips and tricks that you as a millennial can pick up from all generations before you to save money and built long-term wealth.

1. Take advantage of technology

Technology is not foreign to millennials. In fact, they grew up with it. The right apps can sometimes help you scout out good deals. A plethora of apps exist that can help you save money on things ranging from food to clothing. For example, apps such as FAVE can help you enjoy the best deals and discounts for a wide range of purchases including dining, travel, fitness and more.

2. Set financial goals

The key to any successful savings plan is to set achievable financial goals. Having a goal in mind gives you a clear reason to put your money away diligently. Make both short-term and long-term goals for yourself. For example, an achievable short-term goal would be to set aside 10% of your income from your next 5 paychecks. Do keep in mind that you need to have long-term goals as well, for example, owning a piece of johor land.

3. Know what you’re working with

Keep track of your finances well. Get yourself into the habit of creating and sticking to budgets. It doesn’t matter the method of keeping track – whether it is an app, an excel spreadsheet, or a traditional accounting ledger – figure out the best way that works for you. You need to know exactly how much you are making, how much you are spending, and where exactly your money is going. Ignorance may be bliss, but you can’t afford to turn a blind eye to your finances. You need to be aware of your financial situation and capability in order for you to maximize your savings and minimize overspending.

4. Don’t follow the herd

Millennials are all afraid of FOMO, or the Fear of Missing Out. This can be a very pervasive apprehension in terms of social and peer pressure. The advent of social media has pressure the younger generation to do what their peers are doing, to be in the know about, and to be in possession of more or something better than them. It is, however, inevitable that you need to combat this uneasy feeling in the journey of learning to be more financially responsible. Going out often equals paying more for food and drinks. Chasing the latest fashion trends may mean spending a fortune on your Adidas Yeezys or NMDs. The ability to decline invitation and to steel yourself from giving in to FOMO can be an amazing way to save up some money. Try hanging at home for a change.

5. Understand your money pitfalls

It’s not just FOMO that you should be aware of. It is important for you to understand all of the possible pitfalls when it comes to your finances. Keep track of your spending habits. Are you shopping too emotionally? Do you spend a lot of money to keep up with the latest tech gadgets? Whatever your own pitfalls are, it is vital that you develop strategies to manage them.

If you need your daily cup of coffee, think about making your own at home instead of buying one at a Starbucks every morning. Likewise, learn to use up the whole lifespan of your gadgets and electronics.

6. Save money where you can’t see it

Many of the younger generation successfully start saving a small amount of money, only to be hit by a large expense that forces them to dip into their savings. This is a hard habit to break. Instead of saving your money into one savings account, separate your money to different accounts according to their different purposes. Keep a bank account for daily expenses, and a separate one for long-term savings. It is better if the money your account for savings is not as easily accessed.

For example, consider a fixed deposit with a year-long maturity date. Or consider investing with the extra money you have saved. You can look towards mutual funds, or even real estate investments, to not only fully put your savings to work, but also grow your financial mountain at the same time.

7. Get organized

Keep track of all your debt and payments. Pay of your debts on time, whether it is your rent, Internet bills, utilities, or any other bill you’re responsible for. Keep in mind that a single slip of your memory can get you ending up with late fees that are more than a little outrageous. If you find yourself to be absent-minded, or too busy to be keeping tabs of your payments day to day, think about setting up automatic payments with your bank or with your service providers. Not only will you avoid late fees and save money, you’ll avoid all the stress as well.

8. Start thinking about retirement

You may think you are still young, but it’s never too early to start thinking about your own retirement. Think about it this way, the sooner you start planning savings and investments, the sooner you will achieve your goal of financial freedom.

Last advice

Saving money does not mean that you have to skimp and save by only paying for the bare essentials. You just have to be smart about your spending. Of course, when you have the extra money, and you have achieved most of your short-term financial goals, reward yourself with some of the creature comforts you love.

Things To Take Note Of Before Renovating Your House

10:47 AM

With so many HDB around Singapore, such as HDB in Ang Mo Kio, getting yourself a new home is not difficult as long as you meet the criteria. Have you recently gotten yourself a new home? Are you planning to renovate your new home but you have no idea on where to start? Fret not, this article will guide you through your home renovation journey with ease.

1. Find out average cost of home renovations

The cost of home renovations varies depending on factors such as the age of property, type of property, type of materials used and the scale of project. For built-to-order (BTO) HDB, the average cost of home renovation would range between S$30,000 to S$50,000. As for a resale flat, it will then be 50% more than the cost of renovation for built-to-order HDB. On top of the amount that you spent for your new home, you will need additional money for home renovation. Hence, the importance of setting a realistic budget for home renovation.

2. Set a budget

It is essential to have a budget for your home renovation to prevent yourself from overspending on unnecessary things. You can always choose to use a budget planner to help you keep track of your available budget for your home renovation. Look at your current finances and set a budget accordingly.

In addition, there are also renovation loans available if you require one. Most of the renovation loans available in Singapore allow you to have a loan of maximum S$30,000. Therefore, it is advisable to start saving early for house renovation before you start looking for a house. Do bear in mind that renovation can cost beyond S$30,000.

If the renovation loan of S$30,000 is insufficient for you, you can consider getting a personal loan instead. However, personal loan comes with higher interest rate as compared to a renovation loan. A personal loan comes with a 12% to 15% interest rate as compared to renovation loan that comes with a 6% to 7% interest rate.

3. Come up with ideas

Next, you will need to start planning. Plan your ideal designs, the materials you prefer and so on. You can also start seeking for advises from your family and friends. This will help you to be on track throughout the renovation process.

There are many websites on the Internet that you can visit to get some ideas on what design you prefer. Get yourself exposed to different kind of designs out there. From there you can decide on the paint color, lighting, curtains, electronics and etcetera. Narrow down the designs you like and discuss with your interior designer if you engage in one. Share your ideas with your interior designer on the style you prefer for you living rooms, kitchen, bedrooms and toilets. In addition, it is also essential to have a measuring tape with you all the time so you will be able to measure any furniture you like before buying.

If you are not engaging any interior designers, make sure you look for reliable contractors. Always compare 3 quotes before you decide on which contractor to engage with.

4. Precautions to take

Before you sign any agreement with your chosen contractors, do your research on the credibility of the contractor. You can check from the Consumer Association of Singapore to see if there is any complaint lodged against the contractor in the past. Check for their past projects as well. When the renovation work starts, you will need to supervise the renovation progress from time to time. It is advised that you monitor closely on your renovation on a daily basis. In addition, with close monitoring allows you to avoid any misunderstanding between the contractor and you. It is important to have any mistake spot as early as possible. Rectification can also be done too reduce costs.

These precautions are important to prevent being the one to lodge complaints. Not only it will allow you to monitor the progress of the renovation work, it will also save you from a lot of unneccesary work and costs in the future.

5. Permission for alterations

It is the owner’s responsibility to get permission from the Urban Redevelopment Authority for any renovation that will affect the external appearance of the building and result in increase of floor area.

As for HDB flats, the Housing and Development Board has another set of rules that is catered for renovations. You will need to obtain prior permission from the Housing and Development Board before you go for any type of renovation work.

In conclusion, always plan your budget ahead and try sticking to your budget to prevent yourself from overspending on your renovation limit. Besides, there are also many articles on the Internet on how you can renovate your house without breaking your bank account.