Miichael Yeoh

Tag: mortgage rejection

  • Effects of OPR Changes on Borrowing and Savings

    Effects of OPR Changes on Borrowing and Savings

    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.

    From the Desk of

    Miichael Yeoh

  • From Property Millionaire to Property Millionhair

    From Property Millionaire to Property Millionhair

    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.

    From the Desk of Miichael Yeoh

  • 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 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

    2. 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.