Rent to Own is Finally Revealed! Is it your BEST Chance to Own your House?

Tags

, , , , ,

We have heard about Rent-To-Own scheme some time ago, and it is now revealed by Maybank Islamic through it’s innovative product – #HouzKEY. What could be better than having the opportunity to own a house by renting it first? We often hear that owning a property is very challenging especially for fresh graduates or young generation, but most still wanting to own a property in long term as renting is deemed unsecured and owning a house is still one of the dream of every Malaysian.

Rent2Own

Before we decide with the Rent-To-Own scheme, we must first understand that we want to own this house and it is not for those who think that rather than paying rent, I might as well choose this scheme so that I have an option in the future. The gap between Market Rental Rate and HouzKEY Rental Rate is too huge for discussion. (Example: Da Men Apartment, Subang Jaya; HouzKEY Rental Rate start from: RM 2908.40; iproperty Rental Rate start from: RM 1,500.00) For this reason, we will not discuss any comparison between this scheme and renting a house.

Few Key Features:

  • Low Entry Cost – compared with the cost involved in purchasing a property. (3 Months Security Deposit)
  • No Obligations to Own it – After a period of 5 years, we can choose not to take up the property and we are not in debt.
  • Ride on Property Capital Appreciation – If anytime after a year, we can choose to “Sell it Off” should the price increased although we have not actually bought it. This is due to the obligation of the scheme to transfer it to the Scheme participant whether through cash out or taking up a mortgage.

Control measure well considered:

It seems to be a good opportunity for speculator again to ride on the low entry cost to get into the scheme with multiple units. However, in order to be eligible for this scheme, one MUST NOT HAVE more than ONE home financing which is one of the good measures to stop speculators.

The question is, what about multiple applications from a person? And, is application to this scheme also considered as a home financing? (Product Disclosure Sheet revealed that participation in this scheme will be reflected in CCRIS)

HouzKEY’s Rental Rate vs Mortgage Financing Rate

From the PDS, both are Effective Rate to be pegged against Bank’s Base Rate and 4.85% has been used for calculation (We are not sure if this is the Effective Rate for HouzKEY). Quick check with online comparison site shows that current rate for a typical RM 500,000 loan start from 4.20%) .

To make the comparison easier, PDS simulation shows a total payment of RM1,204,403 for a RM 500,000 property. We did a simple calculation with RM500,000 loan amount (assume 100% loan) with effective rate of 4.85% (as used in PDF), total amount payable will be approximately RM 949,846 (with tenure of 30 years). There is a difference of almost RM 300,000. This is due to the pre-determined purchase price to be agreed in the contract.

Should we opt for Rent-To-Own?

In our opinion, maybe one could search for 100% loan option available such as Graduate program. When all other options are not available, HouzKEY could be an option to consider.

However, there is one feature of the program that one should not overlook – Lock In Period. The minimum contract period is 5 years; Quick check in the FAQ section on m2own website suggests that if tenants decided to terminate the contract earlier, tenants are required to pay the rentals for the remainder of the lock-in period.

*Disclaimer – Information provided is based on information obtained from official site at the time of publish. Purpose of this post is to share the update in property market for reference only. One should always see a qualified personnel prior to any decision.

Advertisements

2017 Coming to an End, have you found out about 2017 Tax Relief?

Malaysian will be required to file personal tax by end of April each year for employed person (Form BE) and by end of June for self employed/business owner (Form B), however the assessment period shall be from 1st Jan 2017 to 31st Dec 2017. Therefore, we should be prepared and foresee what are items that could benefit to us as Malaysian Tax Residents.

Before we discuss the relief available, we should first understand Tax Relief. Tax relief means it is deducted from you taxable income, which is different from Tax Rebate. Example, if your tax able income is RM 20,000, with tax Relief is RM 3,000, your taxable income will be RM 17,000. Tax Rebate will be the amount deducted from the amount of tax you supposed to pay to LHDN. Let’s say your final calculated tax payable is RM 1,200, and when you are given a Tax Rebate of RM 400, then you only need to pay RM 800. Therefore amount of saving from Tax Relief will depend on the Tax Bracket of individuals.

There are some changes to our tax relief as announced during National Budget in year 2016, let us recap how we could fully benefited from it:

  1. Full Medical Check Up – If you have not carried out any medical check up and intended to do so, it is now the right time as you will be entitled to RM 500 tax relief.
  2. Lifestyle Relief – In year 2017, lifestyle relief included printed newspaper for reading material, tablet and smartphone and monthly subscription for internet. In year 2016 only personal computers are allowed (once every 3 years) and newspaper was not included for reading material relief. However the combined limit was lowered to RM 2,500 compared to RM3,000 for personal computers and RM 1,000 for reading materials earlier. However, it is still worth considering and keep a good record of your purchase or subscription.
  3. Savings in SSPN-i is a great point to consider as SSPN-i dividend for 2016 was 4% and individual are allowed up to RM 6,000 or tax relief. The dividend was better than savings in Fixed Deposit and considering the tax relief up to RM 6,000. If a person tax rate fell into 20% bracket, you could actually saved up to RM 1,200 besides receiving the dividend of 4%.
  4. Another important savings (or investment) is Private Retirement Scheme, tax relief up to RM 3,000 was allowed for investment with approved scheme. If one is planning to utilise Unit Trust as part of retirement planning, you should first invest in PRS since both are of the same concept and have some identical fund manager, but PRS allows tax relief up to RM 3,000. Adding onto that, any individual below 30 years old would be topped up with RM 1,000 from government as encouragement to invest in this scheme.

If you have any opinion or suggestion, please feel free to leave a comment or email to ask@ethanteh.com

Reference: http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=1&bt_posi=3&bt_unit=1&bt_sequ=1&bt_lgv=2

认清购买房地产程序,避免被骗!

Tags

, , , , , , ,

购买房地产,尤其是属于自己的房屋是每个人梦寐以求的梦想。但,很多时候,一些买者因为不了解程序而赔上辛苦储蓄的金钱。所以,大家是有必要了解正常或一般的购买房地产程序,避免蒙受亏损。小编这一扁是针对马来西亚的程序。

MandariSalesProcess

1。先了解自己的财务状况。

在寻找适合的房屋前,有必要先了解自己财务状况就比较容易锁定适合自己的房屋。在了解自己的财务状况的两个重点。

(一)头期

一般上这等于房产价格的十八仙;也就是,如果想要购买的房产价格是700千,那么就必须准备70千。但,除了房产的头期,其实还有一些费用,比如买卖合约费用,转名费用,估价师费用,保险费用,等等。当然,有些费用是可以融入在房贷里。

(二)房贷每月分期付款

房贷可是现代我国家庭的一大开销。所以,在购买房屋前有必要大约理解每个月的分期付款数额。以最简单的算法(大概30年贷款),把每个月所能够付的数额乘200将是您适合贷款的数额。比如,每个月可以付款3000令吉,那么3000 x 200 = 600,000(贷款数额)。那么就应该寻找650千至700千的房产。(没有考虑银行贷款审核条件)

2。预定适合的房产

当有了适合的房产,首先必须预定。一般上是向发展商或透过地产经纪人购买。无论是透过哪一个管道,买者都会先预定。在预定时,双方都会签署一份预定合约/表格。在这时候,定金一般上介于房价的2%至3%。定金最好是以有记录的方法比如支票或转账,而且应该是转账至公司户口(发展商或地产经纪公司)而不是私人/个人户口。预定表格上除了产业地址,款式,买者,卖者等基本资料也必须注意一些事项:

(一)有效期

一般的预定表格都会限定有效期,也就是在几天内必须签署买卖合约。如不能在有效期内,签署买卖合约,卖者就可以取消然后卖给其他有意的买者。一般上有效期将会介于14,21或30工作天。

(二)取消条件/费用

第二个重要的内容既是如果买者在什么情况下可以取消这分预定合约。最普通的是申请不到房屋贷款,因为如果买者申请不了房屋贷款,那么就无法完成这交易。一般上,在有效期内,买者的贷款申请都被银行拒绝将使这预定合约都会被取消。(被银行拒绝就是买者已经把完整的申请移交了,但银行不批准)那么,在预定表格里,双方可以决定是否全数退还或将会收取手续费。

3。申请房屋贷款

买者可以透过地产经济介绍,或自寻银行,房贷顾问来申请房屋贷款。买者可同一时间透过任何管道向不同的银行申请贷款,但决不能通过不一样的管道甚至不一样的银行分行向同一家银行申请贷款。因为如果一家银行接到两份同样的贷款,银行必须先理请申请最后决定要哪一方代办申请手续才会进行审核。如果无法理请,那么将不会继续审核申请。到目前为止,申请程序是不需要付任何的费用

4。签署银行献义信

当银行批准了申请者的贷款,银行将会发出一份献义信。这份献义信将列明贷款数额,贷款期限,利息,及所有重要的条件。所以,当申请者得到这份献义信就应该小心了解献义信的内容。如果申请者得到多于一分批准,那么可以比较哪一份较于适合自己。在签署献义信时也是不需要任何的付费,但如果签署后反悔就可能需要付某些手续费。当然,有些买者会在这同时购买房贷保险,那么买者只是需要付保险的保费。

5。签署房贷合约及买卖合约

一般上,买者会先签署房贷合约再签署买卖合约或是同时进行。两份合约可以由同一律师楼代准备或是两家分别的律师楼。在签署房贷合约时,律师将征收合约的费用及印花税。(在签署前,买者可以要求律师楼清楚解释费用)如果,申请贷款着把这费用加在贷款数额内,律师楼将不会向买者征收。而在签署买卖合约时,律师楼同样会向买者征收合约费用,转名费等。(这费用是不能加在贷款数额内)买者也必须清楚了解,即使卖者也是聘请同样的律师楼代办,那律师楼还是代表买者而不是卖者。所以律师还是要一买者利益为优先。除了合约费用,买者也必须在这时候还清10%的定金给于卖者。如果,在预定时,买者已付了2%,那么买者在这时候只需要付其余的8%。以上所有的程序都必须是在律师办公室,或是在律师(或代表)见证下完成。

切忌,如果在签署了买卖合约后,若买方无法还请其余的数额(自付或贷款),所有已支出的费用(律师费,估价费等)都无法取得退款。10%定金也即将成为赔给卖者在时间上的损失。在签署后,买者将会获得3+1个月的时间把其余的数额付给卖者。(如果已获贷款者,贷款银行必须在时间内把贷款数额付给卖者)3+1个月意味这3个月是合理的期限,如果已进入第四个月,那么卖者将征收利息。这是一般上的程序。在一些情况下比如不是永久地契或分层地契等的产业需要更长的转名时间,那么那将不会构成超出3+1个月期限的状况。(确实有个案是需要超出一年甚至更长的时间)

6。移交钥匙

等待一切手续完毕,律师将把钥匙移交于买方。所以,这可能要等上几个月或是更长的时间。买者如果是有需要在特定时间得到产业,应该在购买前向律师或合格房产代理了解。

SPEF (Flexible Financing Scheme for PR1MA) – DREAM Solution for purchaser?

speffb

PR1MA launched SPEF (Skim Pembiayaan Fleksibel/Flexible Financing Scheme) with the hope to increase loan approval for PR1MA house buyer. It is understood that many qualified purchasers of PR1MA scheme are unable to secure a housing loan, hence could not own their home even with PR1MA. How does SPEF actually work?

How does SPEF works?

First of all, it allows only paying interests for the first 5 years. Is this something special? This is actually as any of our property bought from developer. During construction period, most borrowers are paying only interest during the period of time based on amount drawn down by developers. In this case SPEF could be viewed as extra 2-3 years extension of interest paying only as currently our standard construction period is 2 years for landed and 3 years for high rise residential.

By paying interest only during the first 5 years means if you are serving 35 years loan, your 35 years begin when you start to pay full instalment (the 6th year). Further to that, you are paying highest amount of interest during the first 5 years since no reduce in principal amount. The cost impact is illustrated by The Edge Malaysia as below.

new-doc-39 *Source : The Edge Malaysia, 20th-26th Feb 2017, page 8, “Housing loans are not always productive debt”

How does SPEF increase the chance of approval for Housing Loan?

As known to most of us, Debt Service Ratio (DSR) is one of the major consideration in housing loan approval especially in determining the amount of loan eligible. Most of the banks allow DSR ratio up to 70% or 85%. Therefore, an increase or RM 100 a month in repayment ability could actually increase about RM 20,000 in loan amount. SPEF Step Up allows borrowers to justify repayment by taking into consideration monthly EPF contribution by both employer & employee into EPF Account 2. Using example below, referring to RM 216 of example one is derived from 30% of (RM 3000 x 24% (11% employee + 13% employer). By additional amount of RM 216, one could actually arrives at extra loan amount of near to RM 45000 (total loan – approx. RM 232,300). This is considered as level one step up loan under SPEF.

Example below is illustration of Step Up Level 2 as borrowers would also agree to use the accumulated amount in account 2 of EPF to pay instalment. (for the terms & condition, kindly refer to www.pr1ma.my) In this illustration, it is assumed that loan amount eligibility is based on instalment ability of borrowers in the first 5 years which is paying interest only. (RM 283,300 x 4.75%/12 = RM 1121). However, we have doubt over this assumption as banks would need to determine further how much amount has actually been accumulated in EPF Account 2, many might not have accumulated a lot, especially those looking for first house might comprised of many who has just started work for not long ago.

As of this time of this article, we have yet to gather enough information from participating banks (Maybank, CIMB, RHB & Ambank) in regards to this matter.

new-doc-40

*Source : The Edge Malaysia, 20th-26th Feb 2017, page 8, “Housing loans are not always productive debt”

Points to consider for PR1MA buyer?

  1. EPF always allow members to withdraw amount from EPF Acc 2 as down payment for purchasing first house. Should you have sufficient amount in Acc 2, you may consider to make EPF withdrawal and pay higher down payment, which resulting lower loan amount, hence, lower monthly instalment and subsequently lower DSR. Many may not be aware that, one is allowed to withdraw a total amount (Property Price – Loan Amount) + 10%. This means that you can actually withdraw 30% of property price from EPF account 2 if you are taking only 80% loan.
  2. Have you done your credit management? The extra repayment ability by taking EPF monthly contribution as discussed above can easily being cancelled off by your other loan commitment. For example, an outstanding amount of RM 3000 in your credit card account would have been considered as RM 150 monthly expenses. Or you might have a personal loan /  hire purchase loan that is about to complete in few months time. We would advise you to talk to a mortgage advisor to understand you own situation prior to make any decision.
  3. Are you ready to utilise your retirement fund for owning your house? Typically Malaysian doesn’t save enough for retirement. By fully utilising EPF Account 2 might further reduce our saving for retirement. Further to that, we can not do any other withdrawal even for Medical in the event of emergency until the loan is fully paid up.

Fixed Rate Mortgage Loan – Is this the RIGHT time?

Tags

, , , , , , , ,

Recently in my sharing session, audiences may find that I’m promoting Fixed Rate Housing Loan. While some knew about it, many still unaware that in Malaysia’s housing loan market, there is a choice of Fixed Rate. The question now, is this the time to take fixed rate? Why I choose to promote this at this time? (In fact, I’ve been promoting this since end of 2014)

Fixed Rate

Before we discuss further, we should first clarify some confusions with fixed rate housing loan. (If you already know, kindly skip this paragraph) First, the interest rate is fixed through out the tenure and the maximum tenure is also 35 years or up to age of 70 years. Does this means the interest calculation works like our hire purchase loan? No, the loan is still calculated on daily basis. For any early prepayment or full settlement, client need to only pay the outstanding principal (plus any administrative cost-if any). Secondly, is the loan locked through out the loan tenure? No – You can settle the loan at any time you wish.

Whenever I talk about fixed rate, as usual, the first question is :

1. What is the interest rate?

The rate is currently around 4.99%. The respond that I will receive is : SO HIGH!. Yes, it is higher than most of the commercial bank rate out there. When I told audiences a year ago, the rate is 4.65% (promotional) and 4.85%(normal), client also told me: SO HIGH!. Some chosen to believe when I share what I’m going to discuss later in this article. Today average commercial bank rate has reached 4.7% and some of the purchaser have not even got their house key from the developer. Many will still wait and say ~So HIGH!

2. Why is the rate for Fixed Rate Housing Loan higher that variable rate?

Actually, Fixed Rate is not always higher than variable rate. When interest rate is on high side, fixed rate will be lower than average market rate. Why? Fixed Rate will always be closer to average rate over long span of time. Currently 30 years average is about 7%, therefore fixed rate is nearer to average and higher than variable rate. When variable rate were around 14% during 90’s, fixed rate is also around 7% and much lower than market rate. Fixed Rate need to take into consideration of long term rather than short term market rate. Honestly, fixed rate is actually still very low currently. This was due to stiff competition over the past few years.

3. Will Fixed Rate increase?

Yes, definitely fixed rate will increase when market interest rate increased. However, at this specific moment, if you locked it, it will not increase for your loan no matter what happens.

4. I want the lowest! 

Just like when we were buying stocks in share market, I want to buy at lowest point and sell at highest point. But, how many investors really bought at lowest point? Everyone expect it to be lowest until the price rebounded and start to increase. And we know that the rate has just rebounded over the past one year.

5. Where the loan money come from? Bank’s share holders or public?

The fund definitely comes from the public. Let’s look at deposit rate; is it in the increasing trend or decreasing trend? From any marketing materials by banks, anyone of us would sense that the interest is in the increasing trend. If the cost of fund got higher, how do financial institution get their profit? Should they increase the lending rate?

6. Who control Base Rate and Base Lending Rate?

Bank Negara Malaysia (BNM)? Wrong! It’s is controlled by banks. Recently few banks had adjusted their Base Rate (BR) and Base Lending Rate (BLR). I’ve no intention to  discuss this as the information can be easily obtained.

Please do not get me wrong, we are independent mortgage advisers. We do provide consultation and assist our client for mortgage loan applications to few major banks. Our intention is only to share our view with the public for everyone’s benefit.

If you would like to know more, feel free to contact us: email to ask@ethanteh.com

We also provide training/sharing/seminar session in matters regarding to Mortgage Loan.

 

How Anyone Can Calculate Property Loan Repayment, for FREE!

Tags

, , , , , ,

Have you wonder how can you make your own calculation for Property Loan repayment? One of the easiest way is download a free application – Karl’s Mortgage Calculator (from google play). Below I attached a simple tutorial – How to use the calculator?

Karl's Mortgage Calculator

Thank you for watching.

Follow me on:

FB: https://www.facebook.com/EthanETTeh/

Blog: http://www.ethanteh.com

Some Tips on Banks Approval Criteria

Many of us knew but not all the criteria of bank approval for mortgage loan. Video Linked below is a sharing session at MCT Land Sdn Bhd for their purchasers about loan application and approval criteria.

Some of the Highlights:

  1. What are the point to consider for property selection?
  2. What income could be considered?
  3. What are the effect of extra RM 300 income per month to the margin of finance?
  4. How do banks find out about our repayment habit?
  5. What is the challenge faced by a fresh graduates?
  6. How does 70% ruling affect our loan eligibility?

Feel free to contact us for further clarifications. Follow us on Facebook : http://www.facebook.com/EthanETTeh or email us at ask@ethanteh.com.

If you are a property agency, developer, investment group, residence associations & etc, feel free to contact us for workshop/seminars/clinics for the following topics:

  1. How to know my Mortgage Loan Eligibility?
  2. How to Leverage Banks on Property purchasing/ investment?
  3. How to save interest on existing mortgage loan?
  4. How to choose a Mortgage Loan that suits me?
  5. What is Mortgage Loan Protection option? MRTA/MLTA?
  6. How can I plan for my wealth distribution?

Video : https://youtu.be/BXJRxocrPvQ

 

I’m sorry, But MRTA does not necessary protects your mortagage loan!

Tags

, , ,

* This post was written based on discussion from a ex-mortgage sales person from banks.

MRTA Does Not Necessary Protects Your Mortgage Loan!

Most of the Property Owners believe that their mortgage loan was protected by Mortgage Reducing Term Assurance (MRTA or MRTT for Takaful), but this is not the fact! It is a real life situation that many loan borrowers not knowing their loan is not well protected.  In some of the situation, the protection expired within first few years while some with coverage less than half or a quarter of their loan amount.

MRTA

WHY MRTA?

What is the reason a mortgage sales propose MRTA?

First of all, it determines a mortgage sales person incentive and key performance index (KPI). Most of the time, banks will either through collaboration with their sister company or any other insurance company to provide MRTA to their borrower. Whichever the business partner may be, it will generate some revenue for the bank. Therefore, banks will want their mortgage sales to bundle the product to their customers. In order to ensure the cross selling, many banks actually impose minimum requirement to their sales person in order to get higher incentive or to meet their KPI.

Further to that, MRTAs bundled by bank are normally financed into the mortgage loan; but, there are guideline by banks that total Loan to Value ratio of a property should not be more than 90% (property) + 5% (Legal Fees, Valuation, Stamp Duty & MRTA). To avoid complication, mortgage sales will bundle the amount allowable for financing. Hence, the consideration is amount of premium that could be financed rather than amount of protection that the client need.

Lastly, due to the current competitive environment, every bank is offering different lending rate for mortgage loan and this is one of the biggest consideration of client when choosing a loan offer. Normally, bank will allow for rate appeal if client is taking certain amount of MRTA. Without properly advising client, mortgage sales will eventually bundle in a minimum amount to ensure the lending rate provided is competitive.

Therefore, MRTAs were often being offered without proper advice to clients.

MRTA’s FACTs MISUNDERSTOOD

What are the most common misunderstood facts about MRTA?

My loan is covered with MRTA (100% loan amount and full tenure year), therefore I’m sure that my loan is very well taken care of if any unfortunate event happens to me. This is true if the plan was properly planned, the interest rate expected during purchase of MRTA is valid or higher than the actual effective lending rate. For example, a 1% increase in lending rate would have increase your instalment by 10% in some case, or the loan will be prolonged by almost 10 years. Hence, the MRTA purchased earlier may not be sufficient to cover the outstanding loan amount.

I’ve bought MRTA for 10 years, therefore for the first 10 years if anything happened to me, my loan is well taken care of. This is one of the most misunderstood fact about MRTA. By refering to the chart below, this is an example of a loan with 24 years tenure, loan amount of RM 875,000-00. Black represent outstanding loan amout, Blue represent the expected protection for the first 10 years. Red represent the actual protection for the first 10 years.

MRTA - Chart

* Mortgage Reducing Term Assurance (MRTA) is one of the tool for loan protection. However, the highlight of this discussion is most of the time a borrower was not properly advised on how MRTA worked and what was provided. Hope this could help to create awareness among mortgage loan borrowers.

Feel free to contact us at: ask@ethanteh.com

Read full text here : About MRTA – Nov 2015 (PDF)

Hope this could create awareness among mortgage loan borrowers.

2 Financial Quick Rules

Tags

, , , , , ,

The first rule to be discussed is related to mortgage loan. After practising and repeatedly making calculation for mortgage loan upon enquiry, I observed that anyone could quickly make a simple calculation base on this rule. A mortgage loan with tenure of 35 years (max) and effective interest of around 5%, the monthly instalment will be about 0.5% of the loan amount. Example, if you are about to get a loan of RM 500,000, the monthly instalment is about Rm2,500 per month. Not too sure if there’s any name for this, for easy of reference, I would like to call it as Rule of 1/200 (equivalent to 0.5%).

How can anyone do a quick check using this rule?

  • Decide on affordability of repayment prior to purchase of property. Simply divide the loan amount by 200 and that will be your monthly repayment amount. Decide whether you are comfortable with the repayment amount or not.
  • Prior to looking for a property, decide how much monthly repayment you are willing to pay. For example, if you decided to pay RM 2,000, multiply it by 200, and you will end up with RM 400,000. Since maximum loan margin for residential is 90%, you could look for a property around RM 450,000.

The Second Rule – Rule of 72. Many write up available for this Rule of 72, but many seems to have not really look into this quick reference. For me, most of the time, this will be used for estimating the viability of a investment. What does this mean?

Divide 72 with the return rate offered, that would easily estimate the time for your initial investment is doubled. I would like to use one of the simplest example, Fixed Deposit Saving. If you save RM 100,000 in a FD account with 3.6% interest rate, with the interest received added back into principal, your saving will be RM 200,000 in approximately 20 years. We get the answer 20 by dividing 72 with 3.6.

You can also use this to estimate your rate of return for investment. Example, my investment doubled in 10 years, therefore my rate of return will be approximately 7.2%.

2 simple rules for quick check. Perhaps with advancement of electronic devices, many will not find these rules helpful, I still like it the old way for quick check.