Plenty of threads have been created about ASB financing in Kopitiam (mohon mods not move this to the Finance sub-forum as this is more of a chill thread), this thread is no different except that it starts without the ignorance by the threadstarter (me) of the ASB fund and ASB-financing. Many (either purposely or sincerely) mistook ASB-financing returns as the difference between the interest rate vs the yearly returns (distribution). Nothing can be further than the truth. The loan interest is calculated as a reducing balance, while the distributions (often mistakenly referred to as"dividend") is calculated on a yearly compounding basis.

In a way, ASB-financing is no different than buying a house with a mortgage. Both has a collateral which backs the loan, allowing the bank to approve the loans at low interest rates (4.4%-4.85% VS personal loans and credit cards with much higher rates). The main difference is in the collaterals themselves. To buy a house, you would bleed money to:

a) buy - SPA/LA/MOT/SD/Valuation/MRTA/10%-deposit
b) maintain - damages/rental-defaults/maintenance-fees/sinking-funds/cukai-pintu/cukai-tanah/fire-insurance
c) sell - RPGT/agent-fees/charge-to-discharge

No such thing with ASB and ASB-financing. You can invest in ASB just like any other unit trust, but at the same time you have the option of taking a loan to finance the investment:

a) There are no deposits required, you can get 100% financing
b) No legal fees involved other than RM60 for endorsement and stamping fees (not stamp duty)
c) Distributions are calculated on a prorated basis, there are no "distribution defaults" like when you are renting out your properties
d) No fees nor taxes to sell, there is a ready buyer - ASB is always ready to purchase the units and return your investment value to you in cash

Projections and assumptions:

1. Bank interest (financing) rate of 4.85% p.a - which may change according to the bank's base-rate (BR) movement
2. ASB expected returns of 6.5% p.a - which is lower than the historical lowest return of 7% a year for 2018 distribution
3. Loan and investment tenure of 35 years - maximum tenure, for 30 years old and below
4. Distributed units left in the ASB account to experience the effects of compounding
5. A small one-off insurance with the bank's panel insurance for RM350, capitalized into the financing

Total unit value after 35 years: RM1,812,450.97


Total loan repayment after 35 years: RM416,665.20


Bonus info. Total unit value after 35 years, but with cash-investment of the same monthly installment of RM992.06: RM1,528,086.67 . A difference of RM284,364.30 compared to investing using financing



This post has been edited by wild_card_my: Dec 17 2019, 10:05 AM

ah long got.

my bank forced me to sign MRTA which almost wiped out half of first year dividends

im pretty sure there are upfront cost to this

anyways, i dont take it because its full already. but i am facing a problem now beecause ASB 2 and ASB3 also full, and need to claw for units.

Only for bumi

Mehh

Parking at deleted thread because derailed into Vroom Vroom thread.... Pretty norm in K.

If BLR naik 5% during that 35 years period.

GG

they cannot force you. But they can appear as if it was compulsory

gotto use all the tongkat available right?

jsut cancel it. With ASB units you can sell it in 2 months. You can't do the same with properties.

GG

but u cannot put in more than 200k kan?

992 monthly, in 16 years already reach 200k

cannot pump in more money

so if target to get 1mil, better take loan

please correct if ayam wrong

too bad. most of us dun have that 35 years

Then only realize you're already in your late 40s. Too late to sketch up a new retirement plan.

Thee's a trend free money gonna keep coming down.

thats only a problem if you plow in money MANUALLY

as far as ASB loan is concerned, you took a 200k loan upfront

ur just paying of ur debts.

if u plow in money into ASB slowly, ur gonna hit that 200k (far later than the loan)
so once u reach the cap, u gotta put it somewhere else with lower return.

Can. Any distributions (mistaken referred to as dividends) received into you account would increase your softcap

https://forum.lowyat.net/index.php?showtopi...post&p=91527495

Haha. Well take what you can get I guess. I have clients as young as one born in 1999 (daddy kasi). Father would become a joint applicant, the child will continue paying once reach the age of 25 when she would be stably working

Whatever you have earned in the past years are yours to keep. The dividends are given on a yearly basis, but calculated on a prorated monthly minimum balance.

You can say sketching all that retirement plan in every investment vehicles - including properties. Plenty of people go bankrupt buying properties.

Opr expected going down at nxt bnm meeting.

Are the loan rate also will be lower?

in the end if you had a bigger target, just take the loan but higher risk

if wanna play on safe side, put in monthly

so people got choices and all they have to do is to choose wisely

Good info. Keep it up.

i am 100% sure this is wrong

its always better to take the loan, because you cap upfront, and pay it off

and even if rates rise, you can sell off your holdings and close the loan.



if you put money every month manually (instead of using the debt route), you will quickly hit the cap, then you gonna have lower returns.

the difference in 40 years can be almost half a million

After 5 years: RM274k in ASB


After 5 years: RM188k outstanding loan balance


After 5 years, if you feel like cancelling, you would still have earned RM86k, cash in hand For the uninitiated, the RM86k figure comes from RM274k value deducting RM188k balance that you owe to the bank.

Depends if the banks would respond to the OPR decreasing. If they don't shame them. OPR naik they naik (in fact, for some banks OPR tak naik pun, but they tetap naik the BR)

This post has been edited by wild_card_my: May 2 2019, 02:28 PM

Whats your argument against “but ASB is haram”

Seems like by the end of 35 years.
Monthly investment is better than taking an ASB loan.

ASB loan net profit after 35 years : Total unit value - Total Repayment
= 1,812,450.97 - 416,665.20
= RM1,395,785.77

Monthly investment after 35 years: RM1,528,086.67

ya lah but if bank rate is crazy, some people lazy to check, they will rugi

so up to you lah

i do think up front 200k is better but still prefer put in manual lah

haha