Miichael Yeoh

Tag: loan

  • Praying For Luck in Mortgage Approval

    Praying For Luck in Mortgage Approval

    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.

    Related article https://miichaelyeoh.com/2024/04/07/what-you-should-do-before-applying-a-loan/

    From the desk of Miichael Yeoh

  • 8 Strategies for Paying Off Your Home Loan Faster

    8 Strategies for Paying Off Your Home Loan Faster

    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:

    1. 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
    2. 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.
    3. 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
    4. 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.
    5. 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.
    6. 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.
    7. Continuous Monitoring and Adjustment: Regularly monitor your loan progress and financial situation, adjusting strategies as needed to optimize repayment efficiency.
    8. 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.

    From the desk of Miichael Yeoh