Did you know that 70% of Malaysians exhaust their EPF savings within just five years of retirement?
This is a shocking reality, but it doesn’t have to be yours. Without proper financial and mortgage planning, many people find themselves struggling with rising living costs, increasing debt, and an uncertain future.
Many people believe that simply saving money in a bank or relying on EPF will be enough to sustain them after retirement. However, with inflation, economic uncertainties, and an increasing cost of living, savings alone are not enough. To secure your financial future, you need a smart strategy that builds wealth while you sleep—and that’s where financial and mortgage planning come in.
If you want to retire rich, not broke, it’s time to take control of your financial future!
The Importance of Financial & Mortgage Planning
1️⃣ Your Salary Alone is Not Enough
Many Malaysians rely solely on their salaries as their primary source of income. However, depending only on salary comes with risks: ❌ Job insecurity – What happens if you lose your job or your business slows down? ❌ Limited earning potential – Salary increments may not keep up with rising expenses. ❌ No long-term wealth creation – Once you stop working, your income stops too.
By understanding financial planning and leveraging mortgages, you can turn your income into wealth-building assets like property investments that generate passive income.
✅ Smart financial planning ensures that your money works for you, not the other way around.
2️⃣ The Rising Cost of Living & Inflation
The price of food, petrol, housing, and healthcare has been rising every year. What seems affordable today might be out of reach in the next five or ten years.
📌 Example: 12 years ago, a property in Kuala Lumpur cost RM300,000. Today, the same property is worth RM600,000. If you had bought it back then, you would have gained RM300,000 in capital appreciation.
Now imagine if you had invested in properties over the years—how much wealth would you have built?
This is why financial planning and leveraging mortgages for property investment is crucial. The sooner you start, the better you can protect yourself from inflation and rising costs.
3️⃣ Using Mortgages as a Wealth-Building Tool
Many people see mortgages as a burden. But in reality, a mortgage is one of the most powerful financial tools you can use to build wealth.
Here’s how: ✅ Leverage: With a mortgage, you can own high-value properties with only a fraction of the cost upfront. ✅ Passive Income: By renting out your properties, you create a steady income stream that covers loan repayments and generates profit. ✅ Capital Appreciation: Over time, property values tend to increase, helping you build long-term wealth.
4️⃣ Securing Your Retirement with Smart Investments
Many retirees face financial struggles because they failed to plan early. Without a steady stream of passive income, they depend entirely on their savings, which can deplete quickly.
A well-structured mortgage plan can help you own multiple properties that generate rental income. This means that by the time you retire, you’ll have a steady cash flow to support your lifestyle—without relying on savings alone!
How to Start Planning Your Financial Future Today
🔹 Understand how mortgages work – Learn how to maximize loan approvals and use mortgages to grow your wealth. 🔹 Invest in the right properties – Avoid costly mistakes and find properties that give high returns. 🔹 Create multiple income streams – Secure your future with passive income from real estate investments.
Final Thought: The Best Time to Invest is NOW!
Many people delay financial planning, thinking they have plenty of time. But the truth is, the longer you wait, the harder it becomes to build wealth.
💡 The best time to invest was yesterday. The second-best time is NOW!
🚀 Don’t wait until it’s too late. Take charge of your financial future today!
After two days of insightful discussions, expert sharing, and valuable networking, the Real Estate Summit 2025 (RES2025) has officially concluded! This event brought together some of the most renowned experts in real estate, finance, and investment, providing participants with actionable insights into the property market, financial planning, and smart investment strategies for 2025.
We were honored to welcome participants from Malaysia, the Philippines, Singapore, the USA, Germany, and many other countries. The diversity of attendees enriched discussions and created a vibrant learning environment.
A Heartfelt Thank You to Our Participants & Speakers
First and foremost, we extend our deepest gratitude to all participants for attending RES2025. Your enthusiasm and eagerness to learn made this event truly impactful.
A special appreciation to our distinguished speakers, whose expertise and insights played a crucial role in the success of RES2025:
🔹 Dato’ Sri Gavin Tee – A real estate expert who shared his forecast on the 2025 property market and upcoming investment opportunities. 🔹 Richard Oon – A taxation and financial planning specialist who guided participants on tax-saving strategies and financial management for property investors. 🔹 Dr. Daniele Gambero – A respected market analyst who discussed real estate trends, mortgage challenges, and investment potential in 2025. 🔹 Dr. Elane Goh – A finance and investment strategist who shared her insights on wealth creation through property investments and financial planning. 🔹 WK Ng – A seasoned property investor who transitioned from the corporate world to full-time investing, providing real-life success strategies. 🔹 KW Wong – A PropTech innovator and Secretary-General of the Malaysia PropTech Association, who spoke about the digital transformation of the rental market. 🔹 Charles Tan – A leading property market analyst who offered valuable perspectives on Malaysia’s evolving real estate landscape. 🔹 Miichael Yeoh – A mortgage and financial expert, who emphasized the importance of planning before making any major investment decisions.
Your dedication and willingness to share your knowledge made RES2025 a game-changing event for all attendees.
Special thanks to our co-organiser POLA Malaysia and our media partners Property Hunter and kopiandproperty.
Key Takeaways from RES2025
Throughout the two-day summit, participants gained powerful insights into the property industry, with topics covering:
✔️ Where to Invest in 2025 – Discovering high-potential investment hotspots. ✔️ Real Estate Market Trends – Adapting to economic shifts and evolving regulations. ✔️ Financial Planning & Taxation – Understanding tax incentives, financial structures, and mortgage strategies. ✔️ Mortgage Market 2025 – The latest developments in home financing and lending policies. ✔️ PropTech Innovations – The rise of digital property platforms and the impact on buying, selling, and renting. ✔️ Investment Strategies – How to build a profitable real estate portfolio.
As Miichael Yeoh emphasized in his session: “Plan first before making your next move.” Strategic financial and investment planning is essential to achieving long-term success in real estate.
The Power of Networking & Knowledge Sharing
Beyond expert talks, RES2025 provided an invaluable opportunity for participants to connect with industry leaders, experienced investors, and like-minded individuals. The event fostered an environment where attendees could exchange ideas, gain exclusive insights, and build meaningful professional relationships.
Looking Forward: What’s Next?
The success of RES2025 reaffirms GM Training Academy’s commitment to empowering individuals with property education and financial literacy. We believe that informed decisions lead to successful investments, and we are dedicated to helping investors, homeowners, and professionals navigate the ever-changing real estate market.
🚀 Upcoming Initiatives:
✅ More masterclasses and training workshops ✅ Exclusive webinars featuring top industry experts ✅ Property investment study tours ✅ Advanced financial and mortgage planning courses
Stay Connected & Keep Learning
📢 Missed RES2025? No worries! Stay connected with us for upcoming programs that will continue to provide valuable industry insights and expert guidance.
Once again, THANK YOU to all our participants and speakers for making RES2025 a grand success! We look forward to seeing you at our next event.
As of January 2025, Bank Negara Malaysia (BNM) has maintained the Overnight Policy Rate (OPR) at 3.00%, a position held since May 2023.
Understanding the Overnight Policy Rate (OPR)
The OPR is the benchmark interest rate at which banks lend to one another overnight. Set by BNM, it serves as a primary monetary policy tool to regulate liquidity, control inflation, and sustain economic growth.
Implications of an OPR Increase
When BNM raises the OPR, it signals an intent to tighten monetary policy. The effects of such an increase include:
Higher Borrowing Costs: Banks typically respond to an OPR hike by raising their base rates, leading to increased interest rates on loans and mortgages. This results in higher monthly repayments for borrowers.
Enhanced Savings Returns: Conversely, depositors may benefit from higher interest earnings on savings and fixed deposits, encouraging increased savings.
Controlled Inflation: Elevated borrowing costs can dampen consumer spending and business investments, helping to moderate demand-pull inflation.
Currency Appreciation: Higher interest rates can attract foreign investment, potentially strengthening the Malaysian ringgit.
Impact on Property Market: Increased interest rates may lead to higher mortgage costs, potentially cooling property demand and affecting market dynamics.
Recent Economic Context
In the third quarter of 2024, Malaysia’s economic growth slowed to 5.3% from 5.9% in the previous quarter, influenced by reduced oil and gas production. Despite this, robust household spending and increased investments provided support.
BNM’s Monetary Policy Stance
BNM has maintained the OPR at 3.00% since May 2023, citing positive economic growth and steady inflation. Economists anticipate that the central bank will keep the OPR unchanged until at least 2026, aligning with current economic assessments.
Interest Rate Impact Example
Let’s look at an example of how interest rates affect property loans. Assume you’re borrowing RM500,000 for 30 years:
Current Interest Rate (4.5%): Monthly repayment is approximately RM2,533.43.
If OPR Increases by 25 Basis Points (4.75%): Monthly repayment rises to around RM2,608.82.
Impact: This increase of RM75.39 per month adds up to RM27,140.40 over the loan’s term.
This illustrates why understanding interest rates and their potential changes is crucial for planning your finances.
Conclusion
An increase in Malaysia’s OPR has multifaceted effects, influencing borrowing costs, savings returns, inflation, currency value, and the property market. Understanding these dynamics is crucial for individuals and businesses to make informed financial decisions in response to monetary policy changes.
Purchasing or investing in property is one of the most significant financial decisions a person can make. While the prospect of owning a piece of real estate can be exciting, it’s also fraught with risks and complexities. Here are eight compelling reasons why educating yourself before taking the plunge is crucial:
1. Understanding the Market
The property market is dynamic, influenced by factors such as economic conditions, interest rates, and government policies. Without proper knowledge, you might buy at the wrong time or in the wrong location, potentially leading to financial losses. Education helps you grasp market cycles and trends, enabling informed decisions.
2. Avoiding Costly Mistakes
From overpaying for a property to falling victim to scams, the risks of making costly mistakes are high for uninformed buyers. Learning about property valuation, legal processes, and common pitfalls can save you from financial heartache.
3. Maximizing Investment Returns
Investing in property isn’t just about buying a house or apartment; it’s about choosing assets that will appreciate in value or generate steady rental income. Understanding key metrics such as ROI (Return on Investment) and cash flow can help you identify profitable opportunities.
4. Navigating Legal and Financial Complexities
Property transactions involve a maze of legal and financial considerations. From understanding loan agreements to navigating tax implications and zoning laws, there’s a lot to learn. A lack of knowledge could lead to delays or even legal troubles.
5. Building Confidence
The more you know, the more confident you’ll feel about your decisions. Knowledge reduces fear and uncertainty, empowering you to negotiate effectively, choose wisely, and stick to your long-term goals.
6. Identifying Red Flags
Not all properties are created equal. Structural issues, poor location, and hidden costs can turn a dream investment into a nightmare. Learning to conduct due diligence and property inspections ensures you spot potential problems early.
7. Accessing Better Financing Options
Understanding how mortgages and loans work can save you thousands of dollars over the life of your investment. Learning about different financing options and how to improve your creditworthiness can lead to better interest rates and loan terms.
8. Planning for the Future
Property investment is a long-term commitment. Learning helps you align your investment choices with your financial goals, whether it’s building wealth, securing passive income, or preparing for retirement. Knowledge enables strategic planning that benefits you in the long run.
Conclusion
Investing time and effort into learning before buying or investing in property is an investment in itself. It equips you with the tools and insights needed to make smart, informed decisions that align with your financial aspirations. Remember, in the world of property, knowledge isn’t just power; it’s profit.
Five New Taxes Could Be Introduced in Malaysia’s Budget 2024 on 18th October: Key Highlights and Concerns
As Budget 2024 approaches, there are talks that the government may introduce five new taxes designed to address various social, environmental, and economic issues. If implemented, these taxes could bring significant changes to consumer behavior, corporate practices, and wealth distribution. Here are the five proposed taxes:
1. Unhealthy Food Tax
In a bid to tackle Malaysia’s rising obesity and health-related problems, the government plans to impose a tax on foods high in fat, sugar, and calories. This includes fast food, snacks, and baked goods—products often linked to unhealthy lifestyles.
According to the 2023 National Health and Morbidity Survey, 54.4% of Malaysians are considered overweight, raising alarms about the long-term burden on the healthcare system. The goal of this tax is to discourage the consumption of unhealthy foods and encourage better dietary choices. Funds collected could potentially be channeled into public health campaigns and nutritional education programs.
2. Carbon Pricing Tax
To align with Malaysia’s long-term environmental goals, including achieving net-zero carbon emissions by 2050, the government may introduce a carbon pricing tax. This tax would target industries and businesses that emit large quantities of greenhouse gases, encouraging them to reduce their carbon footprint.
The tax could be implemented through mechanisms like a carbon tax or an Emission Trading System (ETS). By placing a financial cost on carbon emissions, businesses would have incentives to adopt greener technologies and practices. This would help Malaysia transition toward a more sustainable and environmentally friendly economy.
3. Inheritance Tax
A proposed inheritance tax could be aimed at preventing the accumulation of unproductive wealth within a small segment of the population. This tax would target wealth passed down through generations without significantly contributing to the broader economy.
The objective is to promote wealth equality by taxing large inheritances. The revenue could be used to fund public services or social programs aimed at reducing the wealth gap. However, this tax could be controversial, especially among families who view property and assets as a legacy for future generations.
* Updated 14/10/2024
Anthony Loke States Inheritance Tax Won’t Be Included in Budget 2025. “Government policies only become official if they are presented in parliament, and so far, there has been no discussion regarding inheritance tax.”
4. High-Value Goods Tax (HVGT)
The High-Value Goods Tax is designed to target high-income earners by imposing taxes on luxury goods and services. Items such as high-end vehicles, expensive jewelry, designer products, and other luxury items would be subject to this tax.
The goal is to redistribute wealth by generating revenue from luxury consumption and using it to support social programs or economic development. This could also serve to narrow the wealth gap by ensuring that affluent individuals contribute more to public finances.
5. Artificial Intelligence (AI) Tax
In recognition of the growing role of technology and innovation in economic development, the government may introduce an AI tax. This tax would primarily target companies developing and deploying artificial intelligence technologies, aiming to ensure that the tech industry contributes to the country’s growth.
Revenue from the AI tax could support research and development in high-tech industries, positioning Malaysia as a leader in the global AI market. This tax could create a financial framework for innovation, fostering the next generation of technological advancements.
Property Sector Concerns: The Inheritance Tax
While the above taxes aim to address a wide range of issues, the proposed inheritance tax raises specific concerns, particularly in the property market. Many property buyers and investors see real estate as a legacy—something to pass on to their children and future generations. If an inheritance tax is imposed, beneficiaries would be subject to taxation when they inherit property. This could complicate the process of transferring wealth and assets across generations, especially if the property needs to be sold to pay off the tax.
Is It Fair to Property Buyers?
From a property investor’s point of view, this tax could be perceived as unfair. Many people buy real estate not only as an investment but as a way to secure their family’s financial future. They plan to pass down property to their heirs, building a generational legacy. If this tax is implemented, beneficiaries might face an additional financial burden when inheriting property, potentially reducing the long-term value of real estate investments.
Moreover, some might argue that such a tax could discourage property investment altogether, as the future tax implications would make it less appealing to hold on to real estate for the long term.
Will It Affect Future Generations?
Yes, an inheritance tax would undeniably affect future generations. It could reduce the wealth that families can pass down, especially if property values increase significantly. Heirs may have to sell the property to cover the tax liability, which could diminish the intention of leaving behind a lasting legacy. This could be especially difficult for middle-income families who have worked hard to acquire property as a form of security for their descendants.
A Personal Perspective
This is just my point of view, and I understand that others may not agree. In my opinion, an inheritance tax could have unintended consequences, particularly for those in the property market who want to ensure their investments benefit future generations. While wealth equality is important, there needs to be a balance, so the tax does not disproportionately impact those who have saved or invested in property with long-term goals in mind.
What are your thoughts on this? Do you believe such a tax is necessary, or would it be too burdensome on property buyers and their families?
Check out the latest article on how Budget 2025 impacts the property sector
Many people are enthusiastic about making money from property investment. After all, who wouldn’t want a reliable safety net for the future? Property can indeed offer financial security, but this is only true if you plan properly and do your due diligence before buying. While it may sound lucrative, without the correct approach, it can quickly turn into a financial disaster.
I recall an incident that starkly highlights this point. After one of my seminars organized by a property developer, a couple in their 30s approached me. They shared a heartbreaking story: they had declared bankruptcy and had a 6-year-old child to care for. Their downfall began when they followed advice from a so-called property expert and started purchasing properties beyond their financial means. The rental income from these properties was either too low or non-existent, and they couldn’t find tenants. To make matters worse, the so-called expert was nowhere to be found, leaving the couple to face the harsh realities alone.
What lesson can we draw from this? The pursuit of wealth through property investment can sometimes turn into a nightmare, even if you believe such misfortune won’t happen to you.
Let’s rewind a bit. Had this couple engaged in proper financial planning, their situation might have been very different. A crucial aspect of financial planning is understanding your monthly income against your expenses. Personally, I wouldn’t consider purchasing a property unless I had at least 12 months of installment payments saved in advance, especially if I had to take a loan from the bank. There is much more to financial planning, but diving into the details would be lengthy. The key takeaway is this: invest within your capacity. Don’t let greed drive your decisions, as it might be too late to turn back once you’re down that road.
The desire to become a successful property millionaire is understandable, but it’s essential to think carefully before making such a bold step.
I hope this article opens your eyes to the realities of property investment.
If you need expert advice on your property investment journey, please email us at info@miichaelyeoh.com.
Many individuals aspire to become property millionaires. They immerse themselves in books, seminars, and courses, each with their own pace – some favoring quick success, while others opt for a slower, steadier approach. What’s your preference?
But caution is warranted. Sadly, many who aspire to property wealth end up with a different outcome – becoming “property millionhairs” instead. Take Jerry, for example (not his real name). Despite a net income of RM5K, he impulsively purchased five properties at once, enticed by promises of a RM200k cashback per unit. With five units, he envisioned instant wealth. However, blinded by the prospect of millionaire status, he overlooked critical details, such as the absence of the cashback clause in the contract.
To realize his dream, Jerry enlisted his girlfriend’s help to secure mortgage approval, as his income alone wasn’t sufficient. The terms seemed promising – the cashback would be disbursed upon the bank’s final payment release, just a few months away. Jerry was ecstatic, anticipating wealth raining down on him.
When the cashback arrived, Jerry felt like royalty. His eyes gleamed with newfound riches, and he indulged in extravagant purchases – a RM300k car, luxury watches, jewelry, and more. He also spent a substantial sum renovating his properties for potential tenants.
Yet, eight months later, reality set in. Jerry’s million was dwindling rapidly, with vacant units generating no income to offset his hefty RM12k monthly mortgage payments. Facing financial ruin, he discovered his properties were valued 40% below their purchase price, rendering them unsellable without further financial strain.
Do you want to emulate Jerry’s fate? Consider these warnings:
Packages like Jerry’s often involve properties with poor marketability.
Jerry’s scheme of securing multiple loans or called compression method with a single income is fraudulent and can lead to legal consequences.
Jerry may have salvaged some funds, but others haven’t been as fortunate. I’ve encountered individuals on the brink of bankruptcy, struggling to provide for their families, a heartbreaking reality.
Banks are now more vigilant, scrutinizing loan applications meticulously to prevent such misfortunes. Yet, at the heart of it lies human greed, fueled by promises of grandeur.
For me, prudence reigns supreme. I advocate for careful planning, eschewing shortcuts for a methodical approach. If I can’t cover at least 12 months of mortgage payments, I refrain from purchasing, no matter how enticing the property. Financial responsibility dictates my decisions. To everyone out there, heed this advice: stay within your means. When deals seem too good to be true, exercise caution. Protect your financial well-being, for our lives are invaluable.
In the picture, what do you think I am doing? Praying for the money to drop
I do not really depend on these. I don’t think money will suddenly drop from the sky or hoping for a miracle to happen. If a car were to break down, you will need a mechanic to fix the problem. He will have to follow a series of steps in doing repair and to make sure your car is running again.
Likewise, in mortgage approval you cannot wait for miracle things to happen. To me, luck have nothing to do on mortgage approval. Many borrowers and agents, prefer to photocopy many stacks of financial documents and give to every bank they know off or can find and submit to them for approval. Is this the right way?
Do you know that every time your documents are submitted, the banks will record and send to Bank Negara which in turn will update the Central Credit Information System (CCRIS) every month? No matter whether your loan is approved or rejected it will be updated on the last page of your record. Let’s say Bank A rejects your loan, Bank B,C and D also rejects but Bank E actually can approve your loan but seeing so many banks rejected your loan the chances are they will also reject your loan.
Never expose yourself. Every bank have different approval criteria. Some banks might not like you but some does. I have a case once, his Debt Service Ratio is very high at 150% in which is higher than the normal 70-85%. Either the banks rejects or do not want to waste time processing his case. I reviewed his documents and to cut things short, I managed to get 70% loan approval. This case is a fine example where the borrower will have to do the following:
Do a Know yourself (KYS) test.
Check your credit status
Check which bank is suitable for you.
You will have to do more work on the last step. You will need to find out each bank approval criteria and also the different types of documents for approval. You are not buying a RM1,000 property but hundreds or even millions worth of property. It is good to do a research first. It is hard to go back when your loan had been rejected. It is easier to diagnose a problem first.
Without a doubt, your mortgage represents one of the most significant financial commitments you’ll undertake. Over its lifespan, the interest paid to the bank alone can skyrocket into tens of thousands. Consider this: by adhering to a 30-year home loan term, you may ultimately shell out twice the original loan amount in total.
Did you know that within the first five years of a 30-year loan, you’re likely to reduce only about 7% of the principal? Even by the 20th year, you might still be grappling with less than half. It’s high time to reclaim control over your loan and expedite its repayment to save substantial sums in interest.
Gone are the days of rigid loan structures prevalent from the 1960s to the 1990s. Today, borrowers have access to a plethora of tools and flexible bank policies, enabling them to slash down loan tenures.
The sooner you bid farewell to your home loan, the sooner you’ll inch closer to retirement and debt-free living. While myriad methods exist to accelerate repayment, not all may be a perfect fit for your situation. It’s imperative to conduct thorough research and select the strategies best aligned with your needs.
Here are some actionable ways to expedite home loan repayment:
Making Extra Payments: Witness the magic unfold by utilizing a mortgage calculator to see how even modest additional monthly payments can drastically reduce interest and hasten home loan repayment. Remember, every dollar directed towards the principal shrinks the interest burden and speeds up loan clearance
Refinance: Take advantage of prevailing lower interest rates by refinancing your loan. Use a mortgage calculator to gauge potential interest savings, but don’t forget to factor in associated costs like penalties and legal fees.
Negotiate Interest Rate Adjustments: Keep a keen eye on interest rate fluctuations and consider negotiating with your bank for a reduction. Maintaining current installment amounts despite rate reductions can substantially reduce repayment years
Utilize Flexi Mortgages: Explore flexible mortgage options like the Flexi Mortgage or Money Merge Account, where daily interest calculations and account consolidation accelerate principal reduction, thus shortening loan tenure.
Interest Rate Adjustments: Strategize responses to fluctuating interest rates by either increasing monthly installments to maintain repayment duration or maintaining installments to reduce repayment years.
EPF Withdrawals: Tap into your EPF Account II to swiftly reduce principal and expedite loan repayment. This can even be arranged on a monthly basis for added convenience. In Malaysia it is called EPF or Employee Provident Fund. Its a retirement saving account.
Continuous Monitoring and Adjustment: Regularly monitor your loan progress and financial situation, adjusting strategies as needed to optimize repayment efficiency.
Bi-Weekly Payments: Divide your monthly installment into bi-weekly payments, effectively making 13 monthly payments annually. This simple adjustment can shave off at least four years from a typical 30-year loan term, although availability may vary by region. Please take note that not every country has this package.
By diligently implementing these strategies, you can significantly alleviate the burden of your home loan and pave the way towards financial freedom.
After all the searching, surveying and checking, you have finally found your perfect home. Now comes the hardest part. The property is not yours to call home yet. Unless you buy it in cash, like most homebuyers, you would need to rely on a bank loan to turn your dream into reality.
Applying for a home loan can be quite nerve-wracking especially for first-time home buyer. What’s more, it can be very frustrating if the application is unsuccessful. If your loan is rejected, it’s not the end of the world, but it is human nature to put the blame on someone else. In a way, pointing the finger may also help you understand why your application was rejected, and what you can do differently in your next attempt. We have made a list of the top 3 contenders for the blame game:
Plenty of people blame Bank Negara Malaysia (BNM) for the many loan rejections in Malaysia. Are they the culprit, though? Well, BNM is the one making all the loan policies in Malaysia and most people may feel that the ever-tightening policies are making it more difficult to borrow from banks.
However, we need to look at this from another point perspective. If BNM did not have all these policies in place, we will most likely face a subprime mortgage crisis, as what occurred in the USA in 2008. How did this crisis come about? This happens when banks get greedy and start lending to anyone, even to borrowers who have a history of low credit scores and problems with debt. In time, these high-risk borrowers will default on their loan repayment and this will have a ripple effect and evolve into a national issue.
The Solution: Keep tabs on Bank Negara Malaysia’s latest borrowing regulations
With the country’s current slow but fluctuating economic growth, it’s beneficial to keep yourself updated with the latest Bank Negara Malaysia (BNM) borrowing regulations and not depend on word of mouth from friends or relatives.
Prior to that, homeowners were allowed to get their homes refinanced for up to 90% of their value with a maximum repayment tenure of 35 years and were able to use the cashed-out portion for investments. But in the 2014 revision, BNM capped the tenure of personal loans at 10 years.
So why does this matter? Well, take this example: your existing home loan with Bank A is RM400,000 and perhaps because of lower interest rates, you want to refinance your home for RM550,000 at Bank B. The additional RM150,000 would be classified as a personal loan and the 10-year repayment tenure would kick in.
This means that the DSR of the cashed-out portion would be calculated using the 10-year tenure, resulting in a much higher DSR and thereby affecting your overall credit score and potentially leading to your loan application getting rejected.
Besides that, BNM recently shared that many banks were using unfair T&Cs in housing loan contracts. BNM has assured that it will be releasing a set of standard T&Cs soon to keep Financial Service Providers in check – where they must act in good faith by ensuring the fairness of contract terms, provide clear and concise product information as well as offer appropriate advice/recommendation based on the needs and financial circumstances of loan applicants.
As a savvy consumer, you would want to equip yourself with these standards once it is out and study your rights as a financial consumer before approaching a bank for a home loan.
Therefore, we must remember that under BNM, we have a prudent and balanced lending policy. We need it to protect our country. Best to think again before pushing the blame onto BNM.
If we do not blame BNM, can we blame the banks instead? After all, they are the ones who approve or reject the loans. Let’s try this – put yourself in the bank’s shoes. Say you are the lender, and your friend the borrower, wants to borrow RM50,000 from you. You know that your friend earns RM5,000 a month. Each month, most of his money goes into paying off his debts. The big question here is, will you lend the money to him? The risk of not getting your money back is very high. Logically, most people would think twice or not even consider lending their friend that sum of money. A bank thinks the same way – they are not a charity, but a profit-driven organization who are accountable to their shareholders.
Some banks have their own internal policies in lending on top of the existing BNM policies – such as having their own scoring system. As different banks have different lending policies you need to know which bank is the most suitable one for you by conducting your own research and comparison. But do keep in mind that even before they look at your documents, they will first check your credit rating. If your rating is low, it’s not hard to see why your application may be rejected immediately. Do you still think we should be blaming the banks?
But do keep in mind that even before they look at your documents, they will first check your credit rating. If your rating is low, it’s not hard to see why your application may be rejected immediately.
The Solution: Determine the best bank DSR (which will match your DSR)
To reduce the chances of getting your home loan application rejected, you should first calculate your Debt to Service ratio (DSR), which is the calculation of your debt against your monthly income.
DSR = (Total commitment ÷ Nett Income) x 100
One of the most common reasons why banks would reject a home loan application is if the applicant’s DSR is above the bank’s maximum allowable DSR. This can get tricky as every bank will have its own respective guidelines for the maximum allowable DSR that they are willing to accept.
It could be affected by various factors such as income, age, qualifications and even your net worth. The most ideal DSR range would be between 50%-60% as it would hit below the maximum allowable DSR of many banks and thus the likelihood of loan approval would increase.
If your DSR is the reason why your loan application was rejected, don’t worry! You can start improving your DSR by either reducing your current debts or by consolidating your unsecured loans and credit card bills. Check out LoanCare, which calculates and uses your DSR to help you compare home loan products across at least 10 banks in Malaysia.
3. The borrowers
How about if we blame ourselves, the borrowers? Plenty of people are laden with debts from credit cards, personal loans, luxury cars and such. Would it be fair to ask the banks to lend them more money? The risk of non-repayment is very high.
The Solution: Determine your CCRIS report pitfalls
If your home loan is denied, the first thing you want to do is to check your CCRIS report. However, these days it’s rare to find anyone who isn’t aware that they must first check their credit score via The Central Credit Reference Information System (CCRIS). This system reflects your past 12 months of credit activities and shows the bank whether you are a good or bad paymaster.
However, the buck does not stop at having a great credit score. There are other factors which might skew your report. For instance, there is always the question, “If my loan is declined, when can I apply again?”
Did you know that all of your loan rejections are also reflected in your CCRIS? This can prove to be fatal for those that cast a wide net by submitting loan applications to multiple banks. Banks would usually be aware of any prior rejections via their CCRIS record, and thus, applicants would have to wait between 3-6 months before attempting to apply for another loan.
As such, it’s wise to improve your credit score before your next attempt. If you have multiple credit cards and loans attached to your name, making timely payments could help show that you are able to manage your commitments and are a good paymaster.
Besides that, zero obligations are not necessarily a good thing either. Keep in mind that banks would also be reluctant to approve your loan application if your CCRIS report is blank or ‘clean’ – where there are no credit cards/loan/overdraft facilities under your name. Better to have at least one active credit facility with timely payments to prove to the bank that you are able to take on and handle debt obligations responsibly.
The Next Step: Prepare at least 6 months of documentation
After fixing your credit score, the next thing you want to do to prove to the bank that you will be a good paymaster is to prepare at least 6 months’ worth of documentation. Regardless of whether you are a salaried employee or a freelancer, keeping meticulous records of all your financial documents is especially beneficial as the bank requires proof of financial capability.
In order to make your life much easier when it is time to submit your loan application, it’s advisable to keep on hand a record of the latest 6 months’ documentation of the following:
(a) EA Form/Form BE/Form B: Always file and pay your income taxes within the prescribed dateline.
(b) Salary slip/proof of income: Banks will require a continuous monthly record of your proof of income whether it’s salary slips or business banking statements. As such, make sure that your records are well organised with every month accounted for.
(c) EPF statements: This will not be a problem if you are a salaried employee as both you and your employer are required by law to make monthly contributions to your EPF. However, if you are a freelancer, consider making voluntary monthly contributions as a way to boost your credit portfolio.
(d) Bank account statements: Having either a current account or a separate saving account with a steady and consistent balance is another method that can help bolster your image as a responsible and credible borrower.
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.
