If you have extra cash, should you pay off your loan? The standard answer is ‘no’ if the extra cash can earn a higher return then your cost of interest of your debt. Wilfred’s answer is that it depends. First, the debt (such as mortgage loan) is a ‘risk-free’ liability. In financial jargon, the word ‘risk-free’ refers to low volatility. When you borrow money from a bank, the debt level does not … [Read more...]
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Retirees made up a large majority of the investors in Profitable Plots
According to the Business Times report Profitable Plots urged to explain defaults to investorsr retirees made up a large majority of the investors in Profitable Plots. One retiree by the name of Michelle invested her entire life savings in the company. However, in 2009 due to an eye problem she requested that her investments be liquidated which was not possible. To date, she has lost sight of one … [Read more...]
Simple Problem with Complex Solutions (Property Curb 2010)
Did you read the Straits Times article Govt acts to curb speculators dated 31 Aug 2010? By now, all new rules to curb speculators from causing a property bubble have been out. Frankly speaking, I seriously doubt anyone truly could fully understand all the rules. I always give myself 3 minutes to read a newspaper article. If the newspaper article requires more than 3 minutes to comprehend, I … [Read more...]
Man lost almost his entire HDB property to siblings due to poor financial planning
I want to tell a story of how a person lost his entire HDB flat due to poor financial planning. No, it isn’t another property agent who rented his HDB illegally. The purpose of this blog article is to highlight the importance of financial planning but it is not meant to make fun of any persons. The story goes like this: Mr. Cheong (his real name) bought a HDB flat under joint-tenants with his … [Read more...]
Importance of Financial Planning for Property Purchase
In my most recent financial planning case, one of the items in the plan is with regard to property purchase planning. My client did not own any property and he wishes to buy one. His budget for a mortgage loan was $3m. I want to share some of the details of the plan through my discussion with him. His desire was to have a maximum loan period of 30 years but with the intention of early payment … [Read more...]
New rules in HDB further adds confusion and complexity
New rules in HDB will increase complexity for man-in-the-street and more job security for civil servants. One of the most ridiculous policy is with regard to the computation of the amount a person is permitted to borrow from HDB if this is the second concessionary loan. The complexity also means greater job security for professional financial planner because nobody else could understand. … [Read more...]
Economic reality of your net worth (balance sheet) i.e. ILPs increases your debt
Your networth is a balance sheet listing your assets and liabilities. The difference for both is called the net worth. However, the net worth or balance sheet contains many “off-balance sheet” items. Today, I’ll write about the most common off-balance sheet item. I will give an example: Let’s say your net worth is as below: Assets Cash $30,000 Property $400,000 Liability Mortgage … [Read more...]
Is HDB a good investment?
I read in the newspaper today that HDB resale flats “cash-over-valuation” keeps on rising. In one case, it was mentioned that a resale 5 room HDB flat cost $730,000 with a COV of $85,000! On average, the median COV from Q3 to Q4 rosed by 150% - 200% depending on location. I find this to be excessive and unreasonable. Due to the 99 years leasehold nature of HDB flat, the long-term value of HDB … [Read more...]
HDB Title Deed
I was shown a "Land Title Deed" of a 5 room HDB flat. For those who does not know, it is not a title teed. Instead, many are shocked to see that the “owner” of the flat is merely taking out a lease. It clearly shows that the owner is not an “owner” of the flat. The so called 'Title Deed' is given to the owner when all mortgages are paid. However, what is written on it is a reminder that HDB owners … [Read more...]
What Fresh Graduates and Young Persons Should NOT Do
Last week, I encountered a few cases of young clients who had made serious mistakes financially even though they had just started their career. For young persons, they must understand what lies ahead of them. This article is my attempt to advice young persons and fresh graduates on what they should and should not do. These are the things young persons should know: No jobs are secure. So … [Read more...]
