credit and personal loan management - Webs

Document Sample
credit and personal loan management - Webs Powered By Docstoc
					       Lecture 8

Making Home and Automobile
     Purchase Decision
        Learning Objectives

• The Housing Decision
• The Automobile Decision
      Meeting Housing Needs
• Detached/Semi-
  detached homes
• Single/Double Storey
  Terrace Houses
• Condominiums
• Apartments
• Rentals (apartments
  and houses)
Possible Housing for Different Life Situations

    Young Single
                                 Possible Housing
    Single Parent
 Young Couple No Kids

Couple, Young Children

Couple, children no longer
         at home

              Retired Person
              The Home-Buying Process

•       Determine homeownership needs
    •      Evaluate owning your own place of residence
    •      Assess types of housing units
    •      Calculate the amount you can afford
•       Find and evaluate a property to purchase
    •      Select a location
    •      Consider using a real estate
    •      Conduct a home inspection
•       Price the property
    •      Determine an appropriate market price
    •      Negotiate an agreement price
      .. Continue.. The Home-Buying Process
4.     Buying process
     •     2% earnest money
     •    S&P
     •    Buyer appoint lawyer to formalise transaction and execute
          transfer of custody, to ensure proper transfer of ownership.
5.     Obtain financing
     •    Pre-approved – determine eligibility of loan
     •    Offer letter will only issued upon presenting S & P agreement
     •    Determine amount of down payment
     •    Apply for loan and evaluate types of loans
6.     Completion date of sale
     •    3 months upon executing of S & P
     •    Legal possession of property
     •    Loan agreement has to be executed
     •    Letter of undertaking to be executed
 Buying A Property Under Construction

• Check the background of the developer.
• Make sure the developer:
   – Has a valid licence issued by the Ministry of Housing
     and Local Government which is still in force (not
   – Has a valid advertising and selling permit issued by
     respective local authority which is still in force
• A developer with a good track record reduces the
  risk of the project being abandoned.
       What Can You Afford?
• Work out the budget:
• Your monthly commitments on paying
  installment should not exceed 1/3 of your
  gross monthly household income.
• Check other sources:
  – Savings
  – EPF withdrawals
  – Loan facility from a financial institutions
• Your household gross income is RM2,100 a
  – What is the maximum monthly payment you
    can afford?
  – What is the maximum housing loan you can
    apply if the interest rate is 3% and loan tenure
    is 25 years?
  – How much can you afford on a house if the
    bank provides 95% financing?

• Terms pertaining to housing loans.
     •   Margin of financing
     •   Loan tenure
     •   Loan features
     •   Daily rests VS Monthly rests
     •   Loan disbursement
   Other Costs Involved in Buying a
Type                                     Rate

Professional Legal Fees
Sale & Purchase Agreement 1.0% for the first RM100,000
                          0.5% for the next RM4,900,000

Stamp Duties
Loan Agreement              0.5% of the loan amount
Transfer of Title           1% for the first RM100,000
(for completed properties   2% for the next RM400,000
     Other Costs Involved in Buying a
Disbursement Fees
Include fees for registration of charge, land search and bankruptcy
Search. (These fees vary by state, land office and type of property.
For instance, in Selangor and Wilayah Persekutuan, the fees
could range from RM300 to RM700).

Processing Fees             Rate (RM)            Range (RM)
One time fee charged by the
financial                      50                25,001 – 30,000
institution for               100                30,001-100,000
loan processing               200               100,000 above
• You purchase a RM150,000 brand new
  house from a developer in Petaling Jaya and
  you managed to get 95% financing for your
• What is the total fees that you have to
• House owner/fire insurance
• The Mortgage Life Assurance or MRTA
•   Loan amount:     RM100,000
•   Interest rate:   8%
•   Term:            25 years
•   Payments:        RM771 a month
• Over the life of the loan, you will pay
      RM771 x 300 = RM231,300
  for a loan of RM100,000.
• This is more than 2 times the amount you
• You pay RM131,300 in interest.
House payments are almost all interest
  during the early years of the loan
     Balance   Payment   Interest   Principal
 1   100,000       771        667        104
 2    99,896       771       666         105
 3    99,791       771       665         106
 4    99,685       771       665         106
 5    99,579       771       664         107
 6    99,471       771       663         108
 7    99,364       771       662         109
 8    99,255       771       662         109
 9    99,146       771       661         110
10    99,036       771       660         111
Buying or Leasing an Auto
               Choosing the Car
•   Affordability
•   Operating costs
•   New or used?
•   Desired features
•   Reliability and warranties
•   What to do with old car
• Hire-purchase Act 1967
• HP Agreement must contain the following:
   – Description of motor vehicle
   – Computation of the total sum payable
   – Minimum Deposit
   – Term charges and Annual Percentage Rate for term charges
   – Late payment charges
   – Date on which hiring commences
   – Number of instalment repayments
   – Amount of each instalment repayment
   – Person to whom repayments are to be made, time and place of
   – Address where the motor vehicle is to be kept
• Minimum deposit: 10% or higher
• Term Charges (Interest rate): not more than
  10% flat per annum, i.e., fixed charge over
  the entire HP tenure.
• Late payment is 8% maximum calculated on
  a daily basis.
Rebate on Interest on Early Settlement
      Your Obligation as Hirer
• Not to remove, sell or dispose off the motor
  vehicle without the consent of the finance
• To pay instalments on time
• To inform the finance company of any change of
• To continue to insure the motor vehicle after the
  first year and to inform the finance company upon
  renewal within 14 days before the current policy
Rights of The Finance Company
• To repossess the motor vehicle when you
  default in payment
• To ask you to insure the motor vehicle
• To charge you any fees relating to the
  enforcement of the HP agreement
• You default in two successive instalments
  or the final instalment
• In the case where the hirer is deceased,
  defaults in four successive monthly
• Can be carried out anytime upon expiry of
  21 days
Repossession Schedule

Shared By: