Stretching your $$$ during bad times

Last month, the government seemed to have reduced the interest rates. This was done in an effort to promote spending and therefore to revive the economy.

I noticed that Fixed Deposit (FD) rates that was at almost 4% is now at 2% per annum only.Since FD is the most simplest & safest method of making your money grow, most people would stash away unused cash in a FD account. But looking at the current situation, it is not as attractive to lock your cash in a FD account somewhere and let it lie there almost doing nothing. So what are the options that you have now? Either take some cash and spend it (main intention of the government) or start investing or pay off some your debts that carries higher interest rates. I opted for the 3rd choice after doing some homework.

The home loan I was servicing had interest rate of 5.99% per annum. After the Base Lending Rate (BLR) was reduced by the central bank, most banks cut theirs. The bank now has offered me an interest rate of 4.6% per annum. With this new rate, if I religiously continue to pay the monthly amount I'm currently paying, the loan would be settled within 12 years, instead of 24 years. What a difference it makes!

But no bank will call you an make their offers. They certainly would not want to reduce their profits that they make from you, would they? You will have to make the call and ask for a reduction. Most often, you will find that they are more than willing to accommodate your request. If you are no more within the lock-in period, then you have a better bargaining power on your side, as you can always do a refinancing with other banks.

Opportunities like this doesn't come very often. So, make good use of this bad economic times to your advantage. I believe I've made mine.

How To Retire As A Millionnaire By Investing in Real Estate?

Okay,now let's get down to business.Do you really want to retire as a millionaire and that too by investing in properties? You can, if you really want to. It's not really that difficult. You only need to be disciplined in your savings. The faster you start saving and the more you start saving, the better it is.

All you need to do is from the age of 30 to 60, try your very best to purchase 6 properties worth 100,000 each, with potential of market appreciation. Since our plan is to start at the age of 30, we should have accumulated, over the years of working, at least 25,000. This amount would then be used as the down payment for the property purchased.The remainder can be paid of by taking a 20 years loan.Every 5 years, you have to repeat the same action: Buy a property worth 100,000.The 1st, 2nd and 3rd property would have been paid off by the time you reach 60 years old.So, the rental income that you can get from the properties that has been paid off can be used to pay off the rest of the properties. In fact this enables you to pay off the later properties at a faster pace and not as the initially planned 20 years any more.

When all this is done, you will have a passive income and can retire comfortably. Not to mention that your properties also have potential of having appreciated over the years.

Assumptions made:
- retirement age: 60
- you've got at least 30 years to retirement
- you save around 500 dollars every month: 500x12x5 = 30,000 every 5 years
- rental income is minimum 500 dollars a month
- each property purchased is 100,000 dollars

Warning: You must also be prepared to cover the monthly instalments from your own pocket in case your tenant defaults his payment or when the property is without a tenant. Any cost incurred for repairs must also be born by you.

5 Most Important Things To Watch Out When Taking Housing Loans

Look out for the lock-in period.
This is the time frame set by the banks to tie you down with them. Usually they won't allow you to swith to other financial organisations within this period. They also would not like you to pay off the debts earlier than scheduled. If you do any of the above, it is possible for them to charge a fee which would be between 5%-10% of the loan amount.

Choose the right package
Though there would be various packages offered, they can be summarised into 3 broad categoried:-
-starting off with a very low interest rate and later have a BLR (base lending rate) + x%
-a fixed interest rate throughout the loan tenure
-initial high interest and gradually lowering the rates, or having a BLR -x% for the main portion of the tenure.

Now the question is, which is the best package? Well, it all depends on you. The type of organisation you are working for or running your own business, are you on a tight budget now and how you foresee your income growth in the future.

See whether the lawyer's fee/MRTA is absorbed by the bank or passed on to the customers.
In an economic situation like this, most banks try to absorb the legal cost involved and give free MRTA (Mortgage Reducing Term Assurance) coverage.

Choose a bank with the best service offer
When applying for loans, try to apply to as many banks at once. In fact, instead of going to different locations, looking for these banks, if there is any expos going on for new homes, you can get most of the banks having a counter there. Or simply give a call to them and get a sales representative to see you. You can then choose the fastest service provider or the one that really satisfies your condition of customer service. If you face problems in the beginning itself, most likely you would have problems too later on.

Get a longer tenure for the loan
Whichever institutions giving you the longest loan period, grab them!
Though it will boil down to having to pay more in terms of interest, our aim would be to pay more than the stipulated amount monthly. Most banks charge lesser interest rates when the duration is longer. And we can make use of this point to our advantage. When paying off 100 or 200 extra every month, the duration of the loan will be reduced automatically and in bad times, you can choose to pay lesser than what you are used to pay every month and you will feel a great relieve for that.

In Malaysia, there are many banks offering home loans that varies in its packaging. I list some of the more popular ones below:
1. Standard Chartered

2. Public Bank Berhad

3. HSBC Bank Malaysia Berhad

4. Hong Leong Bank Berhad

5. AmBank Berhad

6. MaybankBerhad

7. Citibank Berhad

No, I'm not being paid to list the above banks and neither am I biased towards any one of them. It's just through my own experience of getting a home loan. I finally ended up taking a home loan from Public Bank as it met with most of my requirements.

10 Top Things To Check For When Buying An Apartment/Condominium

As I just moved into my own apartment, I'd like to share some of my experience as well as the mistakes I made when I bought it. Hope it would be beneficial to others.

Security
One of the main reason people move in to apartments these days is security. So make sure that sufficient security officers are at duty. You can even try to enter the apartment and see how difficult/easy it is to gain access. From there, you can judge on your own the efficiency of the security in that apartment before you decide to purchase your unit.

Piping system
Living in an apartment is a lot more different from living in a house. In a house all repairs have to be taken care by the house owners themselves. However, in an apartment you are responsible for your neighbours too. For example, if your neighbour right below your apartment unit complains of leakage from his ceiling, you have to take action to rectify this problem. If not, he can even sue you! But be careful, as you won't be able to detect leakage in your own walls if the property is painted with a new coat of paint.(as I am facing now!)

Distance
Ensure that the property is close to whatever facilities you require such as shops, school, workplace, mother-in-law's house, etc. mmm...maybe you want it to be really far for this last point..:)

Parking
If you own a car, make sure you get an allocated parking space. If you need additional parking space,(maybe your spouse owns a car too) check for the charges and whether they are covered or not.If you expect frequent visitors, then you have to consider visitor's parking as well. Some apartments are really facing problems in this area and resort to double parking (as I've faced before especially in the heart of the city) and this makes the area really congested and not an ideal place to live in.

Public transport
Some people depend on public transport very much. For those in that category, make sure you can get your preferred transport easily. And if you have to travel a bit to the nearest train station, consider the amount you have to fork out for that near distance as well as time taken to get there. However, expect lots of noise and pollution in a place where there is good public transport system.

Occupancy rate
Please check with the management office about the occupancy rate. An ideal situation would be occupancy rate of between 80%-90%. Higher occupancy rate means that the value of the property has a fair chance of appreciating in the future. You will also find it easy to rent out your unit in case you decide to do so in the future. (I made a mistake here too.)

Neighbours
Know your neighbours and love them! Make sure your neighbours are the exact kinds that you would enjoy or comfortable living with.If you are in a multi-racial society, ensure it has a well accepted ratio of people from all communities. If you have kids, ensure that it will be a healthy environment for them to grow up.

Position
It is very important to consider the position of the apartment (whether it faces north, south, east, west) as well as the arrangement of the living room, toilet, kitchen and hall in it. As more have started believing and practicing the ancient geomantic sciences such as Feng Shui and Vaastu Shastra, you will find it easier to sell later on if you have adhered to these principals as well.

Lift/Escalator services
Ensure that there are sufficient number of lifts and they are serviced periodically.In case you are looking at an apartment without these services, try to get a unit on a 1st or 2nd floor. Ground floor would be too noisy and climbing up 5 floors daily wouldn't be a comfortable experience!

Age of building
By knowing the age of the property you are going to invest in, you can roughly estimate the repairs that you have to do such as wiring, plumbing, etc. Apart from that, if the property is a lease-hold, you know how long you can continue living in the same place and after some time, if you plan to mortgage the house to take loans, you have a rough idea from now itself the ease/difficulty that you will face.

If you have any experiences you would like to share, I would love to hear from you.