Hi, Mr Lau,

First of all, many thanks to you for giving me the free e-book.
Its’ worth reading, cause I’m aware of unit trust investment now.
As introductory, I’m female, age 33, working in a factory.
I’m in debt, honestly. I’m in debt of personal loan, housing loan, credit card loan.
However I’m also having passive income, if that’s correct to describe my monthly income from 3 acre land of kelapa sawit.
But honestly I’m not a decision maker in financing.
Would you please advise me on below problem;

Debt 1;Personal loan with bank rakyat; balance is total RM 35K. mthly is about 568(a bit for get). for another 62mths. Rates 5.75%.
If settle now need to pay RM 28K.

Debt 2; housing loan, balance is 12 years, mthly is RM 850, rates(forgot).
I’m planning on refinancing my housing loan, which is 71K (plus insurance), for 15 years (rates; 1st ~ 3 yrs: 4.9%, 4th yrs onwards : 5.01 %), mthly will be RM 565.

When I read your ebook, I’m thinking of add another 28K to that amount. So that I can settle the personal loan.
So after discuss the bank officer told me, for 28K, for 15 years, mthly repayment is RM 222.

My intention is to reduce the MRI, monthly repayment installment.
So instead of paying 1418 ;housing & personal
Pay only 787.

But problem is, if the personal loan plus interest total if included in refinancing will be RM 40K. SO I feel confused now. Which way to move on?

MY OPINION:
Undeniably, mortgage loan is the cheapest loan available nowadays. Bankers feel secured because your house will likely appreciate in value over time. I agree that it is a wise move to consolidate your personal loan and mortgage. So that the end result is paying only the mortgage of roughly RM99k. Then you will reduce your monthly installment thus providing you more surplus.

However, you mentioned that the total interest will be RM40k, which is true. Refer this file for an estimation of the mortgage amortization table.

Amortization tabel -rm99k mortgage.pdf

Please don’t be confused by the TOTAL interest you will have to pay. In fact, the money will be in “lesser value” relatively, because RM100 now is worth a lot more than RM100 15 years later. That’s the future value of money. If you discount every ringgit you pay down the road, it is not as high as RM40k you might perceive.

The right perception is to think of the money’s worth in today value. The easiest way to compare is the Internal Rate of Return (IRR). Sorry that I don’t want to confuse you with this jargon. In layman terms, just compare the effective annual rate (EAR) of return on where you put the money now. Since the personal loan interest is 5.75%, it is better to consolidate it in your mortgage refinancing which is 4.9%.

photo credit: SqueakyMarmot

In order to provide a case study, further information needed for the analysis:

1. How much is your house worth now?
the value is about RM140K.(its SEMI-D (SINGLE STOREY))

2. Can you check through your document to find the mortgage interest rate?
3.99 %(1st year) + 6.80%/ANNUM(2001) , I read thru docs, mentioned that we have ceiling of 9%,(eon bank)

MY OPINION:
You really should refinance your mortgage. You will be able to save 1.9% interest charges.

3. You mentioned about credit card debt. Can give more details?
I have hongleong master card, I did balance transfer fr hsbc visa & master, at total amount of RM3000. So I’ve committed to pay RM270/mth in order to keep the special rate which is 6.99% within 1 year. Plus I took coc which is cash online credit after that, at amount of RM2900, so I can pay the legal fee for refinancing & get the lowest rates(if non free moving cost, they offer only blr-1.4, if free,the rates is blr-1.7. So I commit for 3 years, mthly I have to pay RM104.

MY OPINION:
If you are taking the COC for the purpose of getting a better rate on your refinancing, that’ll be not wise at all. The extra 0.3% for zero moving cost (ZMC) refinancing package, based on RM99k loan is only RM297 saved on the first year. The amount you will save on interest charges will get less year after year. How long do you think you can recoup the RM2900 for the legal fees? 8-10 years? Plus all the interest you paid for COC? You should have taken the Zero Moving Cost Package which charges slightly higher interest rate of BLR-1.4.

Moreover, is there any penalty to settle your HL master card debt? If not, why not take additional RM3k via your mortgage to settle it. The interest rate of 6.99% is 2.09% higher than your new mortgage of 4.9%

4. Do you have any other assets beside the mentioned land? such as life insurance policy, or other form of investment?
I have maybank life insurance, which I pay RM112 for 16 years & it will be end in 2015, the sum is RM15K plus bonus.

I also have tabung haji. Monthly I deduct RM 220 fr my salary.

I.m sorry ,but I have another question. Since the factory which I’m working have grouping insurance fr great eastern,I’m thinking about taking the money fr maybank life insurance to invest in unit trust. If surrender now, I can get 9000. Is it worth doing that?

MY OPINION:
Please don’t surrender your policy. It is dumb to do so because you are half wet. Use your saving to invest in unit trust. Don’t use your insurance money.
Since you had paid the premium for this Maybank policy for 9 years, it is really worth to continue paying the premium. Now every sen you pay is 100% used for your policy cash value that will generate more bonus.

After you refinance, you will have a better cash flow. Manage your cash flow wisely and do budgeting and frequent monitoring. You shall continue with your tabung haji too.

Overall opinion:
1. Consolidate all your debts (credit card, mortgage, and personal loan) into only one mortgage. Your house value is RM140k and it is enough to finance all your debts.

2. After you consolidate the debt, you will have a better cash flow and surplus. Save regularly. Meanwhile, learn about how to properly invest your savings.

Do you have any advice for this particular case? Please share in the comment.

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