Be Careful with Debts

(Sumber : Azizi Ali Newsletter October 2011)

Every now and then I would receive a question on mortgage refinancing.“Azizi, should I refinance my mortgage?” They would ask. “I took a mortgage 10 years ago when the interest rate was 6.75 percent. Now that the interest rate has gone down, I want to refinance the mortgage so that my monthly repayments would drop. This will help ease my cash flow. Furthermore, as the value of my house has gone up considerably, I can get a much higher mortgage, which means I will have some money for investments. What do you think of the idea?” Though the details about the interest rate and the period may differ, the point of the questions remained the same – should they refinance the mortgage to take advantage of the low interest rate and also the rise in value of their property?

In other words, should they take on a new larger debt? I told them that the answer is yes and no!Let me explain the ‘yes’ part first. Yes, they should refinance if the intention is to take advantage of the current low interest rate. By doing so, their monthly repayments would drop (assuming that the loan amount remains the same, of course). Generally speaking, you should consider refinancing your mortgage if the interest rate drops by 2 percent or more from the rate that you are currently paying. Of course, to be sure about the whole thing, just add up all the charges, such as stamp duty and legal fees (if applicable) to the total repayments for the new mortgage, and then compare it with the total repayments from your current mortgage. If the figure from the new mortgage is lower, then ‘yes’, you should do the refinancing. If the answer is otherwise, then obviously, you would be better off sticking with the current mortgage. At the same time, you also need to look beyond the numbers. You must also consider the terms and conditions of the new mortgage. Needless to say, they should also be better than your current mortgage.

Now, we’ll move on to the ‘no’ part. I’ve discovered that the reason why most people refinanced their properties is not because they want to take advantage of the lower interest rate. Actually, it is because they want to out the equity from the property. As the value of their property has gone up considerably in the last couple of years, it means that their equity has gone up considerably as well. After seeing their neighbours living the good life – vacations, new furniture and fancy cars – from the cash received from the refinancing, encouraged by well meaning (though no experts on money matters) workmates and cajoled by smiling loan officers, it is little wonder that a lot of people cannot sit down still! The thought of having all that extra cash to spend is burning their behind!

Of course, they justify it by saying that they are going to use part of that money to make investments. “I’ll use it as seed money to invest in shares, business and gold,” they would tell me. Now if they actually did that, i.e. find an investment that pays a return higher than the interest charged, things would not be so bad. But the reality is that it is not so easy to find an investment that pays a return higher than the interest charged for the loan. To compound matters, most people know very little about investments. As a result of this, instead of making money, they often lose money from their investments. So this is why I often answer ‘no’ to the question. No, they should not refinance if the intention is to take out the equity from the property. And why not? Because; (1) they would increase their debt level as the new mortgage is larger; (2) their monthly repayments would also increase as a result of (1); and (3) chances are they will blow much of that cash in no time at all.

Now we’ve come to the bigger question: How come I’m just about the only person (aside from the folks at AKPK) cautioning you about taking on new and bigger debts? The answer is that the others (loans officers and financial institutions) want you to get into debt! They make money, lots of money, whenever you and I do so. First of all, the loans officers get a fat commission every time our loan is approved. Next, the financial institutions are happy as they have just added your name to their long list of people who just volunteered to work hard for the next 20 years to make them richer! Hey, I would also encourage you to borrow money if such a deal is at stake!

Of course, this is not to say do not borrow money (though that wouldn’t be a bad idea). You would probably need to take on debt to buy properties (not too many of us can afford to pay cash for a property worth half a million ringgit). Borrow yes, but make sure that you can afford to pay the mortgage on a consistent basis without having to sacrifice much else. Next, make sure that you can still afford to do so when interest rate rises (and they will rise). Actually, there is nothing quite like borrowing money. When times are good and the value of your investments rise, you will look like a genius to the power of infinity by using borrowed money. Tragically, the same debt will cut you into a thousand pieces when the tide turns. I once attended a talk given by our former finance minister, Tun Daim Zainuddin, some years ago. He told a story about one of his colleagues who was so high flying during the good times that he was termed as having the Midas touch – a real life Superstar! Practically everything he touched, particularly stocks, rose in value. Banks were lining up at his office to offer him their money!

However, when the Currency Crisis blew into South East Asia, the tide turned and turned so suddenly that it caught a lot of people cold, including the Superstar. As the stock market dived, his shares were forced sold, and he still owed millions. The good thing is that banks were still lining up at his office. However, this time they were demanding for their money back!I hope I will never forget the story. If a smart, high-flying, well-connected and super rich guy can get caught because of debt, what more ordinary mortals? As my friends at AKPK would say – be careful of debts. As for me – I only borrow money to buy appreciating assets, and only in manageable amounts. If I do not have the money to buy something, then I sit in the house quietly!

Copyright © Azizi Ali 2011

My opinion : Simple je. Consider carefully good debt. Jangan over leverage. Monitor BLR.

Try hard to avoid bad debt.

Muay Thai Challenge 2011 - KL

Sapa layan match muay thai? Aku ada offer menarik ni...

Aku boleh dapatkan diskaun untuk harga tiket. Teringin nak pergi ni. Saje nak carik geng2 lain kot2 boleh pergi sekali.

Harga tiket normal : RM 15 (seat biasa aka free seating) ; RM 25 (seat khas)

Harga diskaun : RM 10 (seat biasa) ; RM 20 (seat khas)

Kalau berminat nak pergi, boleh email aku : mdizone@gmail.com

Plan nak book tiket khamis ni (29 sept 2011)

Aku dah pernah pergi match yang dianjurkan oleh TM dulu. Memang best. Kena plak duduk kat seat betul2 sebelah ringside. Boleh nampak peluh memercik bila petarung tu kena tumbuk kat muka. Perghh! Lagi best dari layan HD kat rumah...hehe

Pentingnya Multiple Source of Income

Uish, terleka lagi. Lama tak update blog. Banyak benda berlaku lately so agak bz. Nak update blog pun tak sempat.

Kali ni nak celoteh pasal pentingnya kita ada beberapa sumber pendapatan yang berlainan.

Dulu masa aku keje makan gaji, income aku hanya datang dari satu sumber iaitu gaji bulanan sahaja. Memang ianya tetap dan stabil tapi jumlahnya juga tetap. Dengan duit yang fix tu la aku buat budget belanja bulan2. Nak berbelanja lebih tak berani sebab duit gaji tak banyak.

Selain dari gaji, ada juga la dapat claim mileage (outstation). Tapi claim ni tak fix. Kalau ada keje, baru la keluar. Itu pun kena berebut dengan rakan2 kerja yang lain sbb masing2 pun nak claim.Memang tak seronok juga. Oh ya, bonus pun ada tapi hanya setahun sekali.

So basically hidup memang dikekang oleh budget sebab pendapatan agak fix bulan2. Katakan la tiba2 something bad happen, kena buang keje etc, terus tade income. Nak makan apa bulan2?

So dari situ aku sedar betapa pentingnya ada sumber pendapatan yang berlainan. Time keje dulu, aku dah start melabur dalam hartanah untuk mendapatkan income dari sewa rumah. Tade la banyak tapi cukup la nak buat bayar belanja kecil2 macam petrol etc. Duit extra yang aku dapat dari claim dan bonus aku simpan elok2 dan belanjakan untuk membeli asset. Pernah juga buat keje2 parttime yang lain tapi lama2 jadi tak seronok sbb macam agak unethical especially bila time keje kita buat benda lain. Kalau kita ada pekerja di kemudian hari, kita pun tanak pekerja kita mengular dan buat benda lain sedangkan pada masa yang sama kita bayar gaji mereka.

So aku amik keputusan untuk quit dan buat keje aku sendiri.

Sekarang ni, walaupun aku membina kerjaya dalam bidang hartanah, pendapatan aku datang dari pelbagai sumber seperti jualan projek baru, jualan rumah subsale, jualan lelongan dan juga servis mortgage consultancy. Income yang aku dapat agak cyclical. Ada time income dari subsale banyak, dari sumber2 lain kurang. Ada time vice versa. Cuma yang penting, income terus datang juga bulan2. Alhamdulillah. Masih lagi cukup untuk belanja keluarga dan ada lebihan untuk menyimpan. Katakan la aku hanya fokus pada lelongan, tiba2 tade sales. Tergolek jugak la rasanya.

Pada zaman sekarang, dah tak boleh bergantung harap pada satu sumber income sahaja. Sebab sekarang ni zaman yang volatile. Apa2 sahaja boleh terjadi. Even syarikat gergasi pun boleh membuang pekerja. Kalau tak buang pun, gaji boleh kena potong, tade increment, bonus tak dapat etc. ( benda2 tu mesti biasa kan hehe... aku dulu pun tak tahan nak dengar keluhan2 pasal tak dapat bonus...haishhh..)

So gunakan masa terluang yang korang ada tu untuk membina stream income yang baru. Jadi kreatif. Rajinkan diri sementara masih ada tenaga. Kita tak tahu apa yang akan terjadi di masa akan datang so better bersedia dari sekarang...

Peperangan Mindset

Aduh, bercelaru otak aku hari ni.

Pagi tadi aku lepak dengan salah seorang mentor aku. Dia ni yang push aku supaya aku berdikari. Jangan makan gaji. Kitorang breakfast sama selepas habis sessi view rumah dia di Alam Impian yang dia nak jual dalam masa terdekat ni. Kalau ada sapa2 berminat dengan rumah Alam Impian, boleh tanya aku. Nanti aku provide details.

Alam Impian (Spira)

So masa tengah lepak tu, we talked about many topics. Dalam banyak2 topik tu, keluar la citer pasal kereta. Dia tanya bila aku nak tukar kereta. Garu kepala aku kejap. Memang dah pasang niat. Pastu target and syarat2 pun dah ada. Kena capai certain prestasi baru bole sambar kereta baru. Sekarang ni tengah pulun. Cuma bila time puasa n raya lepas, prestasi menurun sedikit so macam kena realign balik target timeframe.

Mentor aku suruh aku buat kira2 balik. Boleh afford atau tidak. Kalau atas paper boleh afford, hentam je. Jangan ada doubt. Kat part tu aku goyang skit. Bila fikir2 balik, mindset aku rupanya masih bertarung di antara mindset makan gaji dengan mindset kerja sendiri.

Antara benda yang tengah berperang dalam otak aku sekarang ni :

Budget Vs Spend

Masa time keje dulu, bila aku nak beli sesuatu, aku memang buat budget. Sebab pendapatan aku bulan2 adalah tetap. So aku kena work around budget aku berdasarkan gaji bulanan tu. Bila dah keje sendiri, aku masih carry habit tu. Sedangkan sepatutnya aku switch n focus lebih pada earning more income instead of holding off my desire for better things. Bila mentor aku cakap macam tu, aku angguk2. Setuju dengan kata2 dia. Tapi bila nak implement, teragak2.

Resouce oriented vs Oppoturnity oriented

Macam mana nak explain ek. Aku ni boleh dikatakan agak berhati2. Sebelum buat sebarang keputusan, katakan lah satu peluang pelaburan datang. Aku akan pastikan resources aku macam duit, masa , network etc cukup dahulu baru aku berani nak amik peluang tersebut. Bila terlalu calculative, aku tend to melepaskan peluang2 yang bagus hanya disebabkan resource aku tak cukup. Sedangkan sepatutnya jika aku berfikir secara seorang yang keje sendiri, aku sambar dulu peluang tu ( walaupun resource tidak berapa lengkap). Lepas dah secure peluang tu, then baru fikir macam mana nak carik resources lain untuk menjayakan peluang tersebut. Bila keadaan macam ni, kita akan merasa tertekan dan ini akan membuatkan kita berfikir secara lebih kreatif dan usaha kita juga akan meningkat.

Sekarang ni masih lagi celaru. Masih dalam fasa mengenali diri sendiri. Nasib baik la ada mentor2 yang sudi membimbing. The battle will continue...

Cuma yang aku tahu, untuk berjaya dalam dunia aku sekarang, aku perlu ubah mindset aku. Dengan CEPAT!

"Calculate the risk and take them; be bold but don't gamble. Remember, if you opt for a safe life, you will never know what it's like to win," --- > Richard Branson

PS: Nak tukar hp baru pun berfikir sampai berbulan2 lamanya. Itu pun tak tukar2 lagi. Ini kan pula niat nak tukar kereta huhu...lagi lama la jawabnya.

Pinjaman Perumahan bakal diketatkan lagi?

(http://biz.thestar.com.my/news/story.asp?file=%2F2011%2F9%2F7%2Fbusiness%2F9439197&sec=business)

KUALA LUMPUR: A proposal to change the way housing loans are approved has property consultants and analysts worried as they felt loans given based on net income as opposed to gross income would dampen demand for housing.

Some banks, however, don't have an issue with the proposed changes as one banker said changes to the debt serviceability ratio would be good for the housing market. He said the proposed changes were for the benefit of home buyers.

“It's up to the banks to manage it. Banks have their own ways to control and approve loans,” said Zerin Properties CEO Previndran Singhe.

Previndran was critical of the proposed change, saying such a drastic move would be self defeating and would mean more Malaysians could not afford homes.

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng said such a move would tantamount to a limit on the amount of money a person could borrow to buy a house.

Although lower demand may push prices down, he does not think developers may be able to reduce prices by much given the increase in building material prices over the years that has pushed the cost of building a home upwards.

“I will support any measure by the Government to cool down the property market so there is no bubble, but they have to be careful when taking measures and need to determine if there is really an asset bubble building up,” Tang said.

One analyst who covers the sector said such a measure, if it was to control speculation in the property sector, was not needed at the moment as house prices would soften in a period of weak demand brought about by an economic slowdown.

“Developers and banks would surely lobby against such a move,” she said, worried about the chain reaction a weaker property market would have on the overall economy.

RHB Research Institute on Monday analysed the proposed changes and concluded that a move to change the assessment of eligibility for housing loans to a net income basis would lower affordability by 14% to 37%.

It said the high-end market would be most affected, and should supply match demand then prices would have to correct by a similar or smaller percentage, or supply will have to be reduced to hold up prices.

“The mass market segment which is largely concentrated in the medium-priced range will see smaller impact, especially if first-time home buyers are excluded from this measure,” it said.

While some might see the measure as a move to bring down the price of homes, others think such a move by Bank Negara would in turn ease the growth in household indebtedness.

Bank Negara, which had been looking to introduce guidelines to stress-test individual borrowers this quarter, has sought the opinion of banks on the proposed move.

One of the factors that precipitated that move is the buildup of debt that has seen household debt to GDP ratio reach nearly 76%, which is on the high side compared with countries in South-East Asia.

Lee says the intention of the proposed change is to get people to buy what they can afford.

“It is understandable for Bank Negara to take action given that the rising household debt, as measured by household debt to GDP ratio, has surged to a record high level in 2009 and 2010, largely stimulated by low interest rate and easy financing scheme for property purchase,” said RHB.

With residential loans rising 14.7% in July, residential loans accounted for 54.3% of total loans in the same month, up from 49.7% a year ago.

Although housing loans had been the biggest contributor to the increase in household debt, the buildup of personal loans had also been rapid and that had caught the attention of the regulator.

CIMB Investment Bank Bhd economic research head Lee Heng Guie concurred that the proposal would affect demand for housing, but said the intention of the proposed change was to get people to buy what they can afford.

Lee said any decision to implement the new computation method had to be weighed against the current sluggish global economic situation.

And while household debt may be an issue, the ability of households to service their loans do not appear to be a problem as yet.

Lee said that in 2010, for every ringgit of income, households paid 47.8 sen to service their debt.

The debt service ratio of household debt was 49 sen in 2009, 39.5 sen in 2008 and 41.1 sen in 2007 and the factors that affect that ratio is household income and the interest rate outlook.

Perghh...kalau la kerajaan betul2 implement langkah ni, memang ramai la yang akan senak...kena plak kalau financial statement tu tak kemas..banyak komitmen..memang kena reject je la application korang...

Macam mana nak kira benda ni? Biasanya bila kita apply loan, bank officer akan buat kiraan nisbah antara komitmen bulanan dengan gaji kasar kita..Biasanya bank guna nisbah 50% ( jumlah komitmen selepas ditambah dengan ansuran rumah yang dipohon tu tidak boleh lebih dari 50% GAJI KASAR)..Kalau langkah diatas dilaksanakan, bank akan guna kiraan GAJI BERSIH ( maybe selepas ditolak EPF, potongan2 bank, PCB etc).. Maknanya lagi susah la nak comply dengan ratio 50% tu sebab gaji yang diambil pakai untuk kiraan dah semakin kecil.Kalau cashflow tak kuat, memang susah la loan nak lepas..

So ada dua cara je nak atasi benda ni, either kurangkan komitmen bulanan atau tingkatkan pendapatan bersih. Silalah pilih ikut citarasa masing2...

Tip Meningkatkan Produktiviti Diri

(Sumber : http://www.renegademillionaireblog.com/what-you-measure-improves-including-examples.html)

In his most recent book, I read that he doesn’t watch TV and I believe this is one of the reasons why he is so productive AND wealthy. He uses the time saved very productively and has outlined his daily schedule in his new book. After reading his new book, I’ve made a few minor adjustments in my schedule to mirror his schedule.

When you drill down into the things we have in our lives, it’s easy to see that time is our most valuable asset because it cannot be replaced. This is significantly different from almost everything else in life. Almost everything in life can be replaced including…

Houses
Cars
Money
Investments
Friends
Businesses
Clients
Spouses
Partners
Employees

On the flip side, the things that cannot be replaced are…

Time
Health
Parents
Grandparents
Brothers/Sisters
Our Children

Sure you can argue with a few items on my list, but you must agree that time is NOT replaceable and IS critically important.

As a little experiment, I’ve decided to eliminate TV for next two weeks. When I decided to take this little test, I didn’t think I watched much TV. However, within the first day of my experiment, I realized I watched more TV than I thought.

I’ve used the time saved to get caught up on a few nagging “To Dos”, read and I’ve spent a little extra time writing. Right from the beginning of this little experiment, I can tell that eliminating TV is going to be a very productive decision.

Want to become instantly more productive? Try this little experiment yourself and see what happens! You might find that you have time to pursue new hobbies, start new businesses, exercise more, or read an extra book or two.

Baru je terbaca artikel ni. Menarik gak idea yang cuba disampaikan. Harap kita sume dapat manfaat.

Selain dari tu, dengan implement benda ni, bukan setakat masa sahaja dapat dijimatkan, malah wang ringgit juga. Kita dapat berjimat dari beli tv yang canggih2, dapat jimatkan bil astro, dapat jimatkan elektrik etc. Wau terbaik!

Raya oh Raya

Uish, dah dekat seminggu lebih kita bercuti raya kan? Rasanya majoriti dari kita dah mula balik ke rumah masing2 dan mula bekerja. Ada juga yang sambung lagi cuti sebab tanak sama2 meredah jem pada weken yang lepas. Tapi dari feedback yang aku terima, weken lepas tade la jem sangat. Yang teruk jem adalah semalam ( Isnin). Haha pelik kan. Rasanya ramai orang fikir benda yang sama kot. Sumer nak elak balik time weken sbb konpem jalan jem so semua orang pakat balik hari isnin. Tup2 jem jugak. Sure tensen...


Macam mana raya korang tahun ni? best? tak best? Sepatutnya sure lagi best kan sebab cuti panjang. Bukan senang nak dapat extend cuti raya sampai seminggu. Biasanya 2-3 hari je. Kalau nak cuti panjang, kena tolak dari rekod cuti tahunan. Tak syiok la. Cuti tahunan nak simpan untuk benda lain juga kan. Raya aku tahun ni memang best. Ada banyak improvement. Harap2 keadaan ni akan berterusan dan semakin baik.


Cuma satu benda yang aku concern sekarang ni adalah pasal makan. Ayoyo ! time bulan puasa memang nampak badan aku susut. Biasa la nama pun puasa. Rasanya ada kot 4-5kg turun. Tapi yang merunsingkan kepala ialah time sambut raya especially time minggu beraya tu. Tiap2 hari makan rendang, nasi impit, lemang, bla bla bla. Pergh hasil usaha dalam sebulan, terhapus dalam masa beberapa hari sahaja. Baru je plan nak maintain berat badan ideal. ( Sebenarnya kalau ikut BMI, dah terlajak beberapa point dah ni hehe)


Budget raya korang plak macam mana? ok? within control? burst? Aku nyer budget raya tahun ni kureng skit la. Tersasar sedikit. Sebab nya bukan pasal aku overspend. Belanja raya memang dah ada allocation. Rupanya duit yang sepatutnya diasingkan untuk raya, tak kunjung tiba. Sepatutnya duit tu dah dapat sebelum raya. Itu la namanya tade rezeki. Kita hanya merancang, Tuhan yang menentukan. So terpaksa la korek sikit2 kat saving untuk tampung belanja raya. Anyway, semuanya masih dalam keadaan terkawal so lepas raya ni, kena pulun balik la nak top up duit yang dah digunakan tu.


Saje nak update u all. Sabtu ni ada acara mega auction kat KL. Under CIMB Bank. Banyak property2 menarik yang akan dilelong. Rugi kalau terlepas. Nak tengok listing tu? Boleh klik link di bawah cari auction 10 September 2011.


rumah lelong panas



Kalau takut terlepas listing2 yang best di masa hadapan, korang boleh isi form kat ruangan atas kanan tu. Listing2 terbaru akan diemail terus kepada korang. Mudah kan? :)