That is a fair assessment. As per any investments, we do not know what the returns are going to be; we can predict, we can project, but we can never be sure of it. When you take the loan, you add one additional set of risks in the form of the loan itself (interest rate risks, commitment risks, OPR/BR changes risks).

The same can be said about any other investments. To say one is better than the other is... a folly. "Could end up with higher dividend than the bank interest" as well, so you would be better off with bigger capital.

Everyone should try to read the market and then make a decision based on what you think is best.

It is always best to use the compounding methods when it comes to ASB financing to maximize your returns.

The dividend-rolling method is only applicable for those who cannot afford the monthly commitments, so bankers who need to maximize their sales and fulfil their KPI would suggest using that method

But it comes with the risk of the dividend not being able to cover the installments going forward (coming up short).

Put it this way, there are plenty of made-up "strategies" when it comes to ASB-financing, but if you can afford paying the monthly installments in full, the compounding methods is the best "strategy" to maximize your returns, bar none - well every few years please look into the lowest available rates and tenure and consider refinancing if suitable.

Some of my clients are getting 4.25% rates, starting from 4.75% with HLBB within the past two years, due to the OPR and subsequently BR reduction, it would be folly for these people to refinance now, unless they are looking into refinancing due to the longer tenures of 40 years (but likely higher rates)

In any case, the term dividend should be replaced with distribution, but for the sake of simplicity, I also used dividend to refer to the distribution (as per the financial statements)

This is a classic example of someone who doesn't understand the difference between interests and installment that I have highlighted above. He's also a known troll, a daft one at that, but I am happy he's replying because it gives me the opportunities to explain.

This post has been edited by wild_card_my: Mar 7 2020, 02:21 PM

Not trying to alarm anyone, bit with this news the spread for new financing will likely be increased, as have happened three times in the last three OPR reduction

Doesnt apply to all banks. MBB, HLBB, and CIMB for example will not reduce your installments if the changes in the installment is lower than RM50 compared to previous ones

You do not "profit" on the principal payment. All you are doing is re-paying more of your loan balance. For example, suppose when you signed up for the financing, your installment was set at RM1,100/m. This month you are to pay RM700 in interest and RM400 would go towards your loan repayment; however due your bank's BR reduction (in tandem with BNM's OPR reduction), your effective interest rate (EIR) is reduced as well, thus the payable interest for this month is reduced to RM650. As the bank still requires you to pay RM1,100 for this month's installment, you would end up repaying RM450 to the bank

As we all know, your (daily) interest is calculated based on a reducing balance, the lower the loan balance, the lower the payable interest (at the end of the month). As next month's loan balance is lower by RM50 (compared to the quotation), your payable interest would be lower too. If you notice, this has a compounding effect which will end up shortening your total loan tenure automatically

In short, you are NOT profiting on the principal, there is nothing to profit as that is just the money that you have repaid to the bank which they are holding onto without paying you any interest/returns. Ultimately, in this investment scheme (ASBF), one would prefer to have lower cash outflow - the installment should be reduced according to the effective interest rate (EIR) movements. In reality however, the banks have the final say on your installment amount and you have to abide by their rules as you have signed on the dotted lines

I understand your concerns. But you have to understand that the interest payable is still being lowered accordingly, on a daily-rest (on the same day the BR is reduced) while the installment remains the same. I notice that these concerns are highlighted when investors do not fully understand the components of the installment which are:

a. interest payable
b. loan repayment

When the interest is reduced, instalment is kept the same, your loan repayment increased, thus your tenure is shortened.

I do not mean to scoff at anyone's financial literacy, but the fact that you compared the installment being the same to the FD return rates suggests that you are missing the connection. You cannot compare the FD rates to the installment - FD returns are in the form of interest, which is charged to the bank by the depositor. You need to compare that to the interest charged to you by the bank. These are comparable in that the bank borrows money from the depositors and pay them interest; while you are borrowing money from the bank and pay them interest

Funny thing:

a. People who invest in FD gets a return of about 3.50%
b. ASBF customers borrow from the bank at about 4.50%
c. ASB gives a yearly return of about 5.50%

Everyone is operating on a margin. If you want to skip all these 'horshit' just skip A and B, avoid paying any interests as well as dealing with "inappropriate moves" by the banks, and invest in ASB in cash. Pardon my French, and have a very good morning!

p/s also, do note that the Islamic terms that I should be using are "financing charges" and "hibah"

This post has been edited by wild_card_my: Mar 4 2020, 07:22 AM

1. If you have the cash to fully invest in your ASB account(s), you wouldn't be discussing the loan, including the loan interests - just fully subscribe your ASB and call it a day

2. If you have the cash, why would you bother comparing ASB returns to FD? Just put in ASB la. What you said "compared to FD" was unnecessary as you could have just said "compared to 5.5% from ASB"

3. Due to the effects of compounding AND reducing balance, you can't just take the "net dividend" to determine your total returns as you put it. This is misleading at worst, and paints your (lack of) understanding at best

This is the problem when people refuse to learn and still post all the same. I have posted calculations about this over the course of our discussions over and over again, but you still insist on using the "net dividend" model. I notice this coming a lot from you; not sure if trolling or ignorant

This post has been edited by wild_card_my: Mar 4 2020, 07:33 AM

I am not mumbling, you simply failed to understand. You are comparing two different things:

a. FD interest rates (that you get as return from the bank)
b. installment (that you pay the bank on a fixed term basis as interest/profit to the bank plus the loan repayment).

It appears you still don't quite understand that installment is not equivalent to the interest. When the OPR is reduced and the particular bank reduces their BR, the interest charged to you based on your loan balance is reduced accordingly (to your effective interest rate [EIR]). In that sense, the banks indeed have lowered the loan interest immediately. You can check this by looking at your loan statement as explained below. Your installment may remain the same, but the interest payable would be lowered (in the case of lowered BR)

And you are completely misled. I have a client that goes by the name Ahmad, and I hope that he is not you of which if you were, then I would have failed miserably in educating my clients. Your ASBF interest rate is based on BR (of the bank) + [spread]. The [spread] is fixed, but the BR will change as per the bank's own fiscal decision (including due to changes in the OPR). This is why I implore that you 'investors' to understand how your effective interest rates (EIR) are calculated

But bila I cakap lebih2, kena label mumbling la pulak

And no need to guess and hope, just check your loan statement, do your own maths - calculate the interest payable calculated on the daily basis x number of days the interest is calculated for the month (different month have different number of days). See if your interest payable matches what you should be paying as reflected by the lowered interests. If it does, and your installment remains the same, check the amount of loan repayment. If all numbers can be balanced, then by right the tenure would be shortened automatically due to the accelerated loan repayment schedule

This is not difficult, I understood this in 2 minutes when I started working in the bank, granted I am not your typical banker (I am a consultant now). Took my classmates days to grasp the concept, so I understand if people want to take their time with this and I would be happy to help with real documents and calculations.

Knowledge. Get some, inquire, respect others that are sharing, then you wouldn't appear to be so ignorant about all this. I am all for sharing what I know, and would be the first to admit I was wrong when presented with evidences, but it really pisses me off when people run their mouth around asking for answers without taking the time to learn. Mumble, my ass; some people are so ignorant yet very proud of themselves despite figuring out the wrong answers.

In any case, if I didn't know any better, it seems that you guys are trolling me

This post has been edited by wild_card_my: Mar 4 2020, 09:53 AM

nope. as per mortgages, the interest rates are variable.

Btw guys debonairs91 is a proven and called-out troll, been at it for years. He purposely ignores all answers to his questions. I answer his questions because I can, I enjoy sharing, and it helps with marketing

As ler figures before [spread] by the banks are changed:

A. HLBB at 4.50% before additional 0.5% stamp duty, max 35 years
B. RHB at 4.65% max 40 years

This post has been edited by wild_card_my: Mar 4 2020, 09:34 PM

Check the spread, it may have changed after the BR changes. In any case always ask for the spread and don't allow the banker to just quote you based on the EIR

Only HLBB have their customers to pay the stamp duty fees, that I know of

Mbb, cimb, rhb, ambank do not

1. No you cant. The bank holds that certificate

2. Yes, lower than PL. But no, higher in general than mortgages. I can get 4.0% for mortgages before OPR cut for mortgages. ASBF? 4.40% around there

1. Yes, need to settle. By paying off the loan back to bank or by asking the bank to cancel the loan (thus selling the certificate back to ASNB, also known as redemption)

2. This question perplexes me too. ASB and ASBF have lower risk than properties and mortgages. I think the banks are just profiteering of us investors. Remember when ASB dividend was announced as 5.50%? A lot of people wanted to cancel their loans and in turn a few banks offered to reduce the spread (effectively reducing the EIR)

Boleh pulak, selamba badak.

In any case, your question is a little above my pay grade (although i make more than those corporate bankers ), I am only a salesman in the Takaful, UT, ASBF, mortgage, and real estate industries (i coach English too to profesional Bumiputeras huhu), I know nothing of the fiscal decisions made by the top guys

Not necessarily. You earn from the margin between 5.50% and the interest rate you are being charged with (about 4.25%-4.50% for my clients who took it last year). So they get a return for 5.50% on the RM200,000 in ASB, and being charged 4.50% on the financing amount of RM200,000, and getting lower (as you pay your installments, your loan balance get reduced)

If the ASB dividend rate is lower (for example, 4.00%) than ASBF financing rate then sure you can say this. But every year there will be people like you who claims that ASBF tak bebaloi, but investors who do it through ASBF have been earning due to the margin.

Having said that, past performance does not guarantee future results, no guarantees for the financing rate to remain bein g lower than the return rate

This post has been edited by wild_card_my: Mar 5 2020, 10:39 AM

no point guessing for now. distribution will be credited 1st April, announcement a few days before that. Just wait I guess

You can actually increase your softcap even if you have not maximized the RM200,000 hardcap. For example, even if you can ony afford RM100,000 financing, next year when when you earn your RM5,500 distribution (provided 5.50% return rate and full 12-months investment), your softcap would increase by RM5,500. I have verified this among my clients who never did deposited as much as RM200,000 in their account

Of course, to maximize your softcap increment, you should maximize your deposit

Yeap, just wanted to be clear. because someone asked me that question before, in that will the softcap increase by earning distributions even if they have not maximized their ASB hardcarp.

A. HLBB but it has an additional cost which is 0.5025% of the total loan amount to be paid as stamp duty, max 35 years
B. RHB has the lowest rate for max of 40-years tenure

I would go for RHB though, especially if you are younger.

Open your app. You should see something like this. Your hard cap is RM200,000. Your soft cap is anything above that amount.

He refinanced. So he had to send me the proof of cancellation so I can instruct my bank to disburse. In fact he is one of the biggest believer of ASB and ASBF, that's why the softcap was so high

I posted this with his agreement tho, he wants me to further educate people that are eligible to start investing

This post has been edited by wild_card_my: Mar 7 2020, 01:09 PM