Miichael Yeoh

Author: miichaelyeoh

  • Mastering Your Financial Future: A Guide to Financial Planning

    Mastering Your Financial Future: A Guide to Financial Planning

    Financial planning is the cornerstone of a secure and prosperous future. It involves setting realistic goals, creating a roadmap to achieve them, and making informed decisions about your money. Whether you’re just starting your career or nearing retirement, having a solid financial plan in place is essential for building wealth, managing risks, and achieving financial independence. In this article, we’ll explore the key components of financial planning and provide actionable tips to help you navigate your financial journey with confidence.

    1. Assess Your Current Financial Situation: The first step in financial planning is to assess your current financial situation. Take stock of your income, expenses, assets, and liabilities. Create a detailed budget to track your spending habits and identify areas where you can save money. Calculate your net worth by subtracting your liabilities from your assets. This snapshot of your finances will help you understand where you stand and identify areas for improvement.

    2.Set SMART Financial Goals: Once you have a clear understanding of your financial situation, it’s time to set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) financial goals. Whether it’s buying a home, saving for your children’s education, or planning for retirement, clearly define your goals and prioritize them based on their importance and urgency. Break down each goal into smaller, manageable milestones to track your progress along the way.

    3.Create a Budget and Stick to It: A budget is a powerful tool that helps you allocate your income towards your financial goals while ensuring that you live within your means. Start by listing your fixed expenses such as rent/mortgage, utilities, and loan payments, then allocate a portion of your income towards savings and investments. Be mindful of discretionary spending and look for opportunities to cut unnecessary expenses. Regularly review and adjust your budget as your financial situation changes.

    4. Build an Emergency Fund: Life is unpredictable, and unexpected expenses can derail your financial plans if you’re not prepared. That’s why it’s crucial to build an emergency fund to cover unforeseen expenses such as medical emergencies, car repairs, or job loss. Aim to save at least three to six months’ worth of living expenses in a liquid, accessible account like a savings account or money market fund. Having an emergency fund provides peace of mind and financial security during challenging times.

      5. Manage Debt Wisely: Debt can be a significant obstacle to achieving your financial goals if not managed wisely. Prioritize paying off high-interest debt such as credit cards and personal loans to minimize interest payments and improve your financial health. Consider consolidating debt or negotiating lower interest rates to accelerate your debt repayment journey. Avoid taking on new debt unless absolutely necessary and use credit responsibly to build a positive credit history.

      6. Invest for the Future: Investing is a powerful wealth-building tool that allows your money to grow over time through the power of compounding. Determine your risk tolerance and investment objectives, then develop a diversified investment portfolio tailored to your goals and timeline. Consider investing in a mix of stocks, bonds, mutual funds, and other asset classes to spread risk and maximize returns. Regularly review and rebalance your portfolio to ensure it remains aligned with your objectives.

      7. Plan for Retirement: Retirement may seem far off, but it’s never too early to start planning for your golden years. Take advantage of employer-sponsored retirement plans such as 401(k)s or IRAs to save for retirement tax-efficiently. Contribute enough to qualify for employer matching contributions and increase your contributions over time as your income grows. Consider working with a financial advisor to develop a personalized retirement plan and explore options such as annuities or pension plans to supplement your retirement income.

      8. Protect Yourself and Your Loved Ones: Insurance is an essential component of financial planning that provides protection against unforeseen events such as illness, disability, or death. Review your insurance coverage regularly to ensure it adequately protects you and your loved ones. Consider policies such as health insurance, life insurance, disability insurance, and long-term care insurance based on your needs and circumstances. Don’t overlook estate planning, including drafting a will and establishing powers of attorney to protect your assets and ensure your wishes are carried out.

      Financial planning is a lifelong journey that requires diligence, discipline, and adaptability. By following these key principles and incorporating them into your financial strategy, you can take control of your finances, build wealth, and achieve your long-term goals. Remember that financial planning is not a one-time event but a continuous process that evolves with your life circumstances. Stay proactive, stay informed, and stay committed to securing your financial future.

      From the Desk of

      Miichael Yeoh

    1. What is Reserve Mortgage?

      What is Reserve Mortgage?

      What exactly is a reverse mortgage, and could it be introduced in Malaysia? This financial product, which has been in use in the West for quite some time, allows senior citizens who own property to leverage it for a loan without the burden of monthly repayments. Instead of the borrower making payments to the bank, the bank pays the borrower based on a percentage of the property’s value, typically around 50 to 60%. Repayment is due upon the borrower’s passing, property sale, or refinancing.

      How does the bank pay me?

      Homeowners can choose one of three ways to obtain their borrowing from the bank: a fixed monthly payment with a predetermined number of months/years of payout, a lump sum payment upfront, or a combination of both.

      Who owns the house?

       Just like any mortgage taken from the bank, you are still the owner of the house. You mortgage the property to take out a loan. The agreement will terminate when the borrower passes away, sells the house, or refinances with another bank.

      How much does it cost?

      Here are some of the costs that you will need to pay: legal fees, valuation fees, mortgage insurance, and monthly maintenance fees. Depending on the bank you apply to, some will advance the costs and put them into the loan.

      Pros and Cons of Reverse Mortgage: In any mortgage borrowing, there are advantages and disadvantages. Borrowers are advised to choose wisely when applying.

      Pros:

      1. You do not need to pay monthly installments.
      2. Funds can help with living expenses such as medical bills and debt repayment.
      3. The fund can help homeowners enjoy their retirement.
      4. With the fund, homeowners will be able to maintain their current lifestyle.

      Cons:

      1. The closing costs, such as legal fees and insurance, can be steep.
      2. The property will be mortgaged with the bank.

      Will Reverse Mortgage come to Malaysia?

      Banks need a healthy mortgage portfolio, and reverse mortgage could provide them with a new avenue to expand their products. Currently, in Malaysia, it is under Cagamas (Mortgage Corporation of Malaysia) and is called Skim Saraan Bercagar (SSB) and SSB Islamic (SSB-i).

      Here are the criteria for borrowers:

      a) Malaysian

      b) 55 years old and above

      c) Owner or joint owners of a residential property

      d) For a joint loan, the joint borrower can be a partner, parent, sibling, or child, subject to age limit

      Do take note of the property criteria:

      a) Residential property in Malaysia held in Borrower’s or joint borrowers’ name(s).

      b) For a joint Skim Saraan Bercagar Loan, joint ownership of property is required.

      c) Property must be owner-occupied and be the primary place of residence.

      d) Freehold property or leasehold property with remaining lease tenure not less than 90 years

      e) Free from encumbrances such as mortgage and other financial liabilities.

      For more detailed information on SSB and SSB-i, interested individuals can visit https://ssb.cagamas.com.my/. It’s essential to thoroughly understand the terms and conditions before applying for a reverse mortgage.

      From the Desk of Miichael Yeoh

    2. What you should do before applying a loan?

      What you should do before applying a loan?

      Securing a mortgage nowadays presents more challenges compared to two decades ago. During my tenure in the banking industry, a loan could easily be approved with just a photocopy of an identity card and salary vouchers. However, in today’s landscape, a more comprehensive set of documents and detailed borrower reports are required. We must acknowledge that we now live in a world of enhanced technology.

      Twenty years ago, when borrowers approached us for loans, we primarily checked their CTOS records for bankruptcy. If they passed this check, I would submit the loan for approval. However, today, the CTOS system has evolved, incorporating many other borrower details. It’s astonishing that, in most cases, the system possesses more information about individuals than they do themselves.

      Today, I’ll discuss the CTOS report. Another platform providing similar reports is called CCRIS, which we’ll cover in upcoming articles.

      What is CTOS?

      https://ctoscredit.com.my/credit-score-report/

      In simple terms, your CTOS report serves as your financial health assessment, aiding loan providers in evaluating your eligibility for borrowing.

      Whether you like it or not, when you apply for a loan, banks will scrutinize your financial health. Instead of leaving this research solely to the banks, why not check your CTOS report yourself beforehand? This way, you’ll be better prepared when submitting a loan application and won’t be caught off guard.

      There are two types of CTOS reports: a free version and a paid one.

      The free report offers basic information, while the paid report, costing RM27.00, provides more comprehensive and useful details for borrowers. For our discussion, we’ll focus on the full report.

      What’s included in the report?

      1. Personal Information
      2. Directorship & Business Interest
      3. Litigation & Bankruptcy
      4. Trade References
      5. CTOS Score
      6. CCRIS Record
      7. Dishonoured Cheques

      For today’s discussion, we’ll delve into sections 2, 3, 5, and 6.

      Directorship & Business Interest

      This section lists any companies associated with the individual. Banks use this information to determine the number of companies an individual is involved with. Sometimes, individuals may disclose only one company, but upon checking, banks may find out about several undisclosed companies. If banks require unbiased information on these companies, they can conduct a CTOS search on them. As mentioned earlier, banks often know more about individuals than individuals do about themselves.

      CTOS Score

      What is it, and how does it work? These are common questions you may have.

      The CTOS score determines your creditworthiness for the loan you’re applying for, indicating the likelihood of defaulting on repayments. Scores range from 300 to 850. If a borrower falls below the “fair” range, loan approval becomes more challenging. Banks become concerned about the higher risk associated with granting such loans. If borrowers discover that their score is below “fair,” it’s prudent to reassess their financial situation.

      You might wonder what factors influence the score. They include:

      a) Payment History (45%)

      b) Amount Owed (20%)

      c) Length of Credit History (7%)

      d) Credit Mix (14%)

      e) New Credit (14%)

      CCRIS Record

      The Central Credit Reference Information System (CCRIS) is established by Bank Negara Malaysia’s Credit Bureau, offering standardized credit reports on prospective borrowers.

      CCRIS acts as a centralized database, providing insights into your financial status. Monthly updates from relevant institutions furnish essential data such as banks, insurance providers, and government agencies. This process enables financial institutions to evaluate borrowers’ creditworthiness effectively by referencing their financial history records.

      This section offers a detailed breakdown of each facility, including:

      • Status of the facility
      • Capacity
      • Lender Type
      • Facility Type
      • Total Outstanding Balance
      • Limit/Monthly Repayment
      • Repayment Term
      • Collateral Type
      • Conduct of Account
      • Legal Status
      • Special Attention Account
      • Credit Application Details

      If the conduct of the account consistently shows a number higher than zero, say 3, it indicates the borrower is in a three-month default. Banks use this information to assess the likelihood of future defaults.

      That’s a detailed overview of CTOS. I hope you find it helpful. Stay tuned for my next write-up, and don’t forget to subscribe.

      From the desk of Michael Yeoh

    3. 10 Commandments of Mortgage Approval

      10 Commandments of Mortgage Approval

      Prior to diving into the mortgage application process, it’s essential to heed this advice, which could potentially spare you valuable time and considerable financial resources. Delve into these 10 commandments before embarking on your property journey to equip yourself with the knowledge necessary for a successful and cost-effective experience.

      1. Thou Shall not cheat the bank

      If you are thinking of buying many properties with just 1 income and well above your eligible limits, please think again. Now the banks do check the CCRIS again before releasing the loan. The have the right to reduce the loan limit as stated in the letter of offer you signed.

      2. Thou Shall not fake documents

      Some people have difficulties getting their loan approval. Thus, they resorted to doing fake documents. There are even companies specialized in this area to do it on behalf of the borrower. Let me tell you, banks are not stupid. They always double check before approving any loans. Currently, the check are getting tighter. Once caught,  it will be a police case.

      3. Thou Shall not be greedy

      The word GREED seems very familiar to everyone. Now instead of buying 1 property within your capacity, you instead buy 5. You have been thought how to achieve a lifetime goal of financial freedom at a very short time. If you are lucky you can be an instant millionaire but if you are not, you end to be an instant millionhair.

      4. Thou Shall not be guarantor

      Do you know that been a guarantor for someone else loan can be lead to loan rejection. Many years back, I have this case where a couple were planning to buy a house because they are getting married 6 months later.  They told me that all installments are promptly paid and they do not have any problem with the banks. Their loan was actually rejected by the bank because the lady stand as a guarantor for the brother’s loan. The brother’s car was repossessed by the bank. Her property loan is affected also.

      5. Thou Shall not incur debts

      The more debt you have the more difficult to get loan approval. Debts such as personal loans, car loans and etc are calculated in Debt Service Ratio (DSR) and will be part of approval. High personal DSR can either cost you your loan rejection or a very low margin of finance approval. The smart way is to minimize your debts or to repay all debts.

      6. Thou Shall not use credit card

      Do you know that credit card is the main culprit for loan rejection? Out of 10 loan rejected 65% are from credit card usage. Credit card function like a free money. Use now pay later. As in the term and conditions,

       your only required to pay 5% of the usage every month. Many people also resort to buying things in credit via credit card. All these will be calculated as your debts. The banks will take 5% of the outstanding amount as calculation. If the credit card usage is more than 70% of the approve limit, you are deemed as a high risk person even though you paid the minimum 5% monthly. Your loan approval will be affected.

      7. Thou Shall pay all your loan promptly

      As a bank, they will reject a loan if they were to find out that you have not paid your existing loan promptly. They can see from your CCRIS record. The bank will be worried as they are going to lend you some more but you have already showed to them you are not a good paymaster. They will assume that in future they will have the same problem. They rather not lend to you.

      8. Thou Shall only buy what you can afford

      Many people especially youngsters because of peer pressure buy property that they cannot afford to pay. The person can only afford RM300,000 property but end up buying RM600,000. The installment will be double. As the bank have their strict calculations on approval, the loans might be rejected or the margin slash. We cannot blame the bank for this as they are not charity organization.

      9. Thou Shall not change job

      You might think that what changing job have to do with loan approval. Please do not take this lightly. To the bank you are new to the company although you’re already working for years in your previous company. As you are new, your job is not secured and you might be terminated in 3 or 6 months period. So, the right way to do it is to apply the loan while you are at the existing company. After approval you move on to another company will not affect your loan.

      10. Thou Shall do at least one facility

      Why you may asked? Isn’t no debts at all easier to get approval? You are wrong. To the banks, if you do not have any facility at all you are too cleaned. They do not know who you are. Your CCRIS is too clean. Yeah, I agree getting a loan nowadays are very troublesome.  Well very simple to overcome this. Apply for a credit card, make sure you use it (every month fully paid is ok) then the banks will grant you the loan.