With zero income as a student back then, I didn't really have any other choice as Credit Card were not an option for me without proper income documentation. Forget about Supplementary Card too as my mom definitely did not qualify for even a basic credit card with her inconsistent income barely covering our monthly expenses on a cash basis. Maybe it's a good thing that she wasn't exposed to credit cards back then, allowing her to stay frugal...

Author's note: Sadly, this has been sitting in my draft since 2022 Mar and it took more than a year to have it finally reviewed and published. By the time of publishing, Wise has already done their rebranding and IBKR has launched a new partnership directly with Wise - better late than never, I guess!

The International Banking Nightmares

Things have definitely changed in the last decade with more and more digitalization taking over the world - with us consumers benefiting from a variety of payment options in our hands, maximising the potential benefits we can reap from financial service providers or merchants.

However, despite all these revolutions, one thing that still consistently bothered me was the hefty exchange rates imposed by banks on overseas card transactions - be it virtually or physically. Whenever we transact internationally, banks would impose a premium exchange rate (above-market rates) plus some fixed fees of 1% - 2.5% on the total price, resulting in at least a 2% - 4% premium paid when transacting internationally.

Thankfully, things changed for me when BigPay (by AirAsia Group) first launched their Prepaid Master Card in Malaysia sometime back in 2018, and I first got the taste of transacting internationally with amounts almost matching the rates that we usually see in Google - something that was never seen with banks in Malaysia.

Whilst my usage of cards internationally has reduced greatly with more companies opting for regional-based pricing (e.g. Steam now sell games in Ringgit Malaysia, with different pricing tier vs. international markets) - FinTech cards are still my #1 choice when transacting internationally out of my own pockets. The only exception, perhaps, is when I travel internationally under Company's budget for a few reasons - credit limit, grace period, insurance and of course points/mileage accumulation.

On the other hand, as I continued investing and dollar-cost averaging into my international ETF holdings, I have to move my money abroad quite frequently - sometimes monthly, sometimes quarterly; converting my Ringgit Malaysia (MYR) into respective Foreign Currencies.

In order to maintain an offshore account under our own name to receive monies from our international brokerage should we choose to withdraw in the future, we will have to go through several hoops just to get it done, with most of us Malaysians ended up opening our own Offshore CIMB Singapore Account to avoid hefty foreign telegraphic transfer fees since most brokerages like Interactive Brokers do not have a presence in Malaysia.

Thankfully, all these are about to change now with Wise Multi-Currency Account enabled for us Malaysians granting us easy access to owning multiple offshore accounts since 2022!

Wise Multi-Currency "Borderless" Account

For those of you who have been following me, or have read my other posts - you'd probably notice that I always advocate for FinTechs like Wise or InstaReM or BigPay when it comes to performing Foreign Transfers - as it is simply cheaper than doing so with local banks for majority of us - unless we have access to "premier" or "exclusive" rates offered by banks.

Wise Payments Malaysia Sdn. Bhd. is regulated under the laws of Malaysia as a licensed remittance, money-changing and e-money issuance business. They first launched under the name of TransferWise Malaysia Sdn. Bhd. in 2019, offering Malaysians a cheap, easy and fast way to transfer monies abroad but sometime in 2020, they had to shut down part of their service offering - then "Borderless Account", leaving us Malaysians with only option to send money abroad but no access to obtain international bank details from TransferWise (except legacy users).

Thankfully, all the wait is now over and Wise Malaysia finally have relaunched their "Borderless Account" service in Malaysia since early 2022, now known as the Wise Multi-Currency Account. What's so good about this is that - you can now have access to maintain an offshore bank account without even the need to go through the traditional banking route such as the CIMB Singapore account for Malaysians since it's much more accessible with fewer restrictions in place - such as no minimum first deposit or no minimum maintenance balance required.

However, can Wise Multi-Currency Account replace 100% of the traditional offshore banking accounts? Let's take a quick look at Wise SGD Currency Account vs. CIMB Singapore Account vs. Maybank Singapore Account below:

Of course, the above comparison is merely singling out Wise's SGD Currency account just to have a fair comparison with CIMB/Maybank Singapore Account. Wise today allows Malaysians to have an account balance in either AUD, CAD, EUR, GBP, HUF, MYR, NZD, SGD, TRY, or USD (non-wire) and receive payments for FREE, just like a local.

In reality, Wise's Multi-Currency account allows you to have access to offshore accounts beyond just Singapore, with no fees except for some outward transfers as there'll be some fees charged depending on the currency. You can check out their pricing details here. Just be wary if you plan to use their EUR account details to hold monies for the long term as there'll be an annual fee of 0.4% once you hold EUR 15,000 or higher for more than 3 days, due to the negative interest rate in Eurozone.

Wise Multi-Currency Card

With Wise's Multi-Currency facility relaunched in Malaysia officially, they now also allow Malaysian users to request a debit card linked to the Multi-Currency Accounts (all of it!) at a low cost of RM13.70. This gives you the ability to spend your account balances with a competitive exchange rate which are pretty close to the exchange rate we usually see on Google - and are on par with BigPay's rate (sometimes beating it).

If you happen to travel overseas, you can also opt to withdraw cash directly from ATM, using Wise Debit Card. However, at this juncture, the fees & limits seem to be less attractive as compared to BigPay's offering

Whilst Wise's card is usable, it gets a little difficult to keep track of the potential fees charged especially when there are cross-currency conversions simply due to the fact that you can hold 50+ different currencies in the account. For now, whilst I already have received the Wise Debit Card, am actually not that keen to use it unless and if BigPay/AirAsia goes bankrupt tomorrow leaving me no other choice for competitive international spending (Revolut, where are you??)

Using Wise for Interactive Brokers

To me (and perhaps many of you out here), this would be one of the most frequent use cases that we'll be using when it comes Wise: simply converting our Ringgit Malaysia into international currencies for investment purposes, depositing into our Interactive Brokers account. The availability of Wise's Multi-Currency Account also means that we, as investors, now have an array of options to choose from and decide how we want to fund our IBKR accounts, whichever more convenient/cheaper for us.

I'll be covering two ways to fund your IBKR account using Wise, with the first one being the more conventional method of sending money (via ACH Direct Deposits) and second one being the recently-launched Wise-IBKR Integration.

If you still don't have a Wise account, just open one here. You'll first need Wise account before you can proceed with the rest of these steps.

Option 1: Link Wise to IBKR through ACH Direct Deposits

Step 1: Get ACH Direct Deposit details from IBKR (first-time setup only)

First of all - we need to get our individual ACH Virtual Bank Account details from Interactive Brokers, which are associated with our account. With this, we'll need to send monies directly to this "recipient" (virtual account) with no prior notification required on IBKR's end in the future (unless IBKR changed your virtual account details).

To get your virtual account details, simply login into your Interactive Brokers account. If your account application hasn't been approved, you can see the "Fund Your Account" button in your Application Status dashboard. Otherwise, if you already have a fully-activated account, just log-in and access the "Transfer & Pay" section and find the "Transfer Funds" button.

Select "Direct ACH Transfer from your Bank" and Get Instructions. This will show you a dedicated routing number and virtual account number unique to your own IBKR account. DO NOT SHARE THIS WITH ANYONE!

You only need to do this the first time (or when IBKR notifies you of them changing their virtual account details).

Step 2: Add IBKR as Recipient in Wise (first-time setup only)

Using the above ACH Virtual Bank details unique to you, you can now add a new Recipient in Wise and save those details as your favourite 3rd Party Business Recipient. Doing this allows you to have easy fund-in in the future as your Wise account will have direct access to deposit into IBKR through the ACH network.

You only need to do this the first time (or when IBKR notifies you of them changing their virtual account details).

Step 3: Add Funds to Wise USD Account

Once you have established the direct deposit linkage, you can now proceed to fund your Wise USD account. Simply access your USD Account Balance (with account details) and "Add Money" into it. Alternatively, you can also fund your Wise MYR account then convert it internally into Wise USD account - the fees are roughly the same.

If you do not see USD Balance in your Wise Account, that's probably because you have not opened the account yet - simply click "Open an account" and select USD currency and you're done!

In the below example, I topped up first onto my Wise MYR account and then converted it onto my Wise USD account.

Step 4: Send Money from Wise USD to IBKR Recipient

Once you have funded your Wise USD Currency Account, just hit the "Send" button in the account, select the previously added recipient (Interactive Brokers), and complete the transfer. There should be some charges by Wise to send the money - but it should be okay since you no longer need to pay USD$2 to IBKR later to do currency conversions (assuming you're investing in USD) and the rates from Wise are pretty competitive as well.

Remember to add your IBKR Reference Code during the confirmation screen. Unfortunately, this information is not stored in the Recipient Template in Wise so we just have to remember to do it every time we make a transfer to avoid rejections. In my experience, it took me usually a couple of working hours for the transfer to complete with funds reflected in IBKR for my usage, depending on the time I initiate the transfer.

As you can see, one of the benefits of ACH Direct Deposits (only for USD) is that you no longer have to notify IBKR of your individual transfers. If you are performing a standard Wire Transfer from Wise to IBKR (e.g. in GBP or HKD), there'll be an additional step where you will have to notify IBKR of your incoming deposits. NEVER EVER perform Wire Transfers for USD as there'll be a USD$7.50 charge by Wise.

Option 2: Utilize the IBKR-Wise Integration to directly Transfer from Wise Balances

If you still find what you're reading so far to be cumbersome, trust me, you'll love this even more - as it totally eliminates many of the steps with a simple few clicks transfer directly within your IBKR itself (minus the first-time setup)

Step 1: Enable IBKR-Wise Integration for your IBKR Account (first-time setup only)

Similar to earlier examples, simply login into your Interactive Brokers account. If your account application hasn't been approved, you can see the "Fund Your Account" button in your Application Status dashboard. Otherwise, if you already have a fully-activated account, just log-in and access the "Transfer & Pay" section and find the "Transfer Funds" button and you'll see this shiny new button to Transfer from Wise Balance

If you haven't linked your Wise account with your IBKR prior to this, you'll see a prompt to login into your Wise account. Simply log in to your Wise account and follow through with the steps until your account is successfully linked to your IBKR.

Step 2: Proceed with the Transfer from Wise Balance option in IBKR

If you have successfully linked your Wise account to your IBKR account, whenever you choose the Transfer from Wise Balance option, you'll automatically see your balances in Wise directly within the IBKR page.

Ensure that you have enough funds in your Wise Account. You can have balances in any currency as Wise will automatically do the conversion into your target currency.

All fees are handled on Wise, including whatever premiums that IBKR collects from Wise directly (approx. 5.5% premium on top of Wise's fee, inclusive). IBKR is not involved in this conversion process so they won't be charging you the $2 commission.

Yup. That's it, just two simple steps. In fact, just one if you minus the steps needed for first-time setup.

Help me choose between Option 1 or Option 2!?

Seriously, both are solid options - just go with whatever you're more comfortable with. For the sake of science, I did a simultaneous transfer of RM4,000 with both options only a few milliseconds apart from each other just to compare the exchange rates and fees - at first glance, Option 2 seems to incur a higher fee, perhaps due to the 5.5% commissions take by IBKR for every successful Wise Balance transfers.

The amount however is negligible so unless you're min-maxing, it shouldn't matter much. Just look at the two transfers I've done (within seconds apart today)

As you can see, for RM4000 worth of transfers, the differences between the two options are only USD 0.26 (which is approx. RM1 even with today's terrible USD rates). To put things in perspective, both options incur ~0.7% loss in FOREX fees as compared to Google rate at the same time.

So really, just choose either option 1 or 2, whichever you're more comfortable with and move on!

Wrap Up

So this begs the question - with Wise Multi-Currency Account enabling us easy access to offshore accounts, do we still need to open a CIMB Singapore account when it comes to investing abroad through Interactive Brokers?

In my opinion - you don't really need to, since Wise Multi-Currency Account basically opens up all the other funding possibilities through "other" offshore accounts like USD (for US stocks) or GBP (for GBP-denominated London-listed ETFs). Even if you have plans to withdraw funds from IBKR - with Multi-Currency Account options through Wise, you can easily open and use the USD/GBP Local Bank details to receive your proceedings, then send it back to Malaysia through Wise's send money feature.

The only strong reason to open CIMB Singapore is perhaps when you need to do frequent transfers to a Singapore Local account (e.g. working in Singapore or investing heavily in the Singapore market) and you'd want to enjoy Local FAST transfers with zero fees vs. fixed-fee charged by Wise for all outward transfers.

Another perspective on opening the CIMB Singapore account is if, we have reasons to believe that Wise will cease to exist or close its Multi-Currency account for Malaysians again just like back in 2020s when they abruptly stopped offering their service to new users in Malaysia.

But if your sole reason to have a foreign offshore account is purely for investment purposes via Interactive Brokers, with the newly launched IBKR-Wise Integration the easiest and simplest way is just open a Wise Multi-Currency Account and be done with it.

As always, thanks for reading and I will see you again in my next post! If you haven't already, be sure to follow me on my Instagram, Facebook and YouTube for the latest updates!

Cheers,
Gracie

p/s in case if you'd like to support me, feel free to use my Wise referral code here and part of the commissions will go to a non-profit community charity foundation.

p/s.2. comments disabled on this post due to amount of bot spams

The post Wise Multi-Currency Account & Card for Malaysians appeared first on Ringgit Freedom.

Mortgage loan for most of us, would be one of the biggest commitment we will ever have in our lifetime, typically up to the day we retire from the workforce. Hence it is extremely crucial for us to have thorough understanding before signing the dotted lines, worse if under time pressure (to avoid late payment fees charged by Developers, for example)

Personally, I was under "time pressure" back then and rushed through my researches for my entire home purchase / mortgage - trying to be as thorough and comprehensive as possible but at the same time meet the deadlines to avoid late-payment penalties from the developer. Thankfully it didn't go too bad as I was manage to work it out with a plan that suits me and walked away with only some damages (due to late payment).

I hope that with this article, it will help others whom are in midst of their journey in purchasing their first home to accelerate the understanding of home loan / mortgage as a whole, or if better, to understand the whole concepts in-depth before committing to a home purchase (don't be like Gracie).

This article will be part of my Home Ownership Series (in the future lah...). Let's get started!

Table of Contents

1. What’s a Mortgage?
2. Different Type of Mortgage Loans
   • Traditional
   • Semi-Flexi
   • Fully-Flexi
3. Mortgage Amortisation
   • Fixed Total Payments
   • Fixed Principal Payments
4. Interest Rate… Does it Change?
   • Overnight Policy Rate
   • Base Lending Rate
   • Base Rate
5. Other Consideration Factors
   • Your Current Commitments
   • Financing Additional Costs into Mortgage
   • Pay Down Mortgage Early vs. Investing
6. Wrap Up

What is a Mortgage?

As with all my articles in the past - let's start by first ironing out what exactly does a mortgage mean, shall we?

a legal agreement by which a bank or similar organisation lends you money to buy a house, etc., and you pay the money back over a particular number of years; the sum of money that you borrow

Oxford Learner's Dictionaries

Simply put, a mortgage or mortgage loan or home loan is a type of loan provided by lenders to you, helping you to make a home purchase.

Through this process, lenders will typically require collateral to secure the loan in the event of defaults. Hence there's always a saying where the home is never truly "yours" until you fully pay it off.

In most cases, the lenders such as bank will offer up a mortgage loan package, charging an interest rate on the loan amount which may fluctuate over loan tenure in line with economic situations. The borrowers then can use the money in exchange for a property to stay in (or invested in for rental), with promises that they will promptly repay the bank over a period of several years or decades.

However, in the event of default (i.e. the borrower consecutively fails to pay back the bank the promised monthly repayment), the bank will then exercise their rights to the property putting it on auction or "lelong" to recoup the amount owed by borrowers - also known as the Property Foreclosure process.

Type of Mortgage Loans

In Malaysia, there's quite a few type of mortgage loans available for us to choose from but they generally fit in either one of these categories:

As always, there's never a one-size-fit-all solution even when it comes to mortgage loans. Depending on your circumstances, one may be more suitable for you than the other but before we get there, let's first establish our understanding on the different type of mortgage loans.

But before we move on - it's important to establish the understanding where regardless of loan types, all mortgage / home loan will be calculated following the reducing balance principle. If you don't quite understand the meaning of reducing balance - I strongly recommend to first read my previous post on Understanding "Interest Rate" Calculations in Malaysia.

Term Loan

Sometimes also known as the basic loan / traditional loan. As it name implies, it is the simplest form of housing loan available where the repayment period is already calculated and agreed upfront, with fixed payment schedule throughout the tenure.

Interests are calculated on a reducing balance basis, where principal will be reduced during the monthly repayment. In case if the borrower wants to pay an additional amount as an pre-payment to reduce the capital (or full early-settlement of the loan), there will usually be penalty or fees charged as the borrower is breaching the contractual "term" on initially-promised repayment period.

Since these loan usually comes with more attractive rate than semi-flexi / full-flexi, they are most suitable for those purchasing lower-value property for investments/rental purposes already planned out their repayment periods in advance.

The case is even stronger if they also have no plans to accelerate the loan repayments due to lack of cash or plans to redirect any additional cash proceedings elsewhere (e.g. reinvested in other assets).

Semi Flexi Loan

Similar to term-loan, the interests are calculated on the reducing balance where the principal outstanding will be reduced during monthly payments. However, semi-flexi provide the borrowers the flexibility to make an additional contributions / payments to further reduce their principal outstanding.

By doing this, it will subsequently reduce amount of outstanding principal owed hence ultimately reducing the terms required to complete the mortgage repayment as well as reducing interests charged in the subsequent month.

However, semi-flexi are "semi"  because they usually come with a boatload of terms and conditions which you have to strictly pay attention to, such as but not limited to:

• May come with separate "loan account" number (or combined with a 3-in-1 Current Account for some banks)
• May have monthly account maintenance fees (e.g. RM5 / RM10 per month to maintain a current account)
• May requires cumbersome processes before pre-payments can be made (i.e. approvals required or only can perform over-the-counter)
• May have minimum deposits requirement before it can be used to offset principal balance (e.g. in chunks of RM1000 or RM2000)
• Usually do not have fees for pre-payment / additional-payments, but will charge fees per withdrawal (e.g. deposit however much you want, but if you plan to use the money and cash out, you'll incur RM25 per withdrawal)
• Usually comes with specific terms to allow minimum interest charges / minimum loan period / early settlement fees if full settlement before meeting the minimum loan periods a.k.a. early exit penalty / early settlement clause (i.e. to avoid potential abuses such as cash-rich people taking up mortgage with low effective interest, then park their entire cash there as their "flexible FD" to offset the entire loan amount incurring 0% interests from banks but doesn't require commitment to buy the property cash-upfront)

Still, even with some of these strings attached - it is good for those buying their property with intention to ramp up payments in the later year (in proportion to income growth) which will help them to achieve the peace-of-mind earlier by being debt-free.

As long as there are possibilities where you will plan to shorten the home loan tenure by making additional payments, semi-flexi (or full-flexi) will always be the preferred option. Note that unlike term loan, these may not have the "lowest" interest rate but reducing tenure will almost always save more interest in the long run.

Full Flexi Loan

The differences between semi-flexi and full-flexi is really minimal - with the one key differentiator being the less-restrictive terms and conditions / hidden strings in the full-flexi loan. It will typically still retain conditions such as early exit penalty / early settlement clause, and in most cases they will always have a monthly account maintenance fee of RM5-RM10.

As its name imply, full-flexi loan typically provides the maximum flexibility to the borrowers to make pre-payments at any time with any amount, which will directly offset the principal amount. The borrowers can also opt to withdraw any excess amount from the account with no minimums or fees charged.

Most (if not all) banks achieve this by taking the whole concept of loan account one-step further - by combining the loan facility into a 3-in-1 account which will be acting as your home loan, current account with Online Banking and ATM facility with Debit Card (i.e. Maybank Maxi Home Flexi Loan). During the month end, the bank will simply deduct the predetermined/agreed monthly deductions from your bank account along with the calculated interests.

I am currently using such home loan facility and it's really worth the convenience fees paid. Since I can transfer my payroll here and have my both my floating funds (which will be spent later) or emergency funds sitting there, it helps me to reduce my overall monthly interests charged as the interests are calculated on a daily rest basis with better interest rate than Fixed Deposits (that's how bank gets their cash to "lend" out)

The only extra thing I did was to cut-off my debit card on this account as I find it risky to use this card - considering that this is my "basket of all cash" so I'd rather go through the hassle of transferring funds to different bank's ATM card when I need to withdraw funds.

Mortgage Amortisation

Another important concept that we must first understand - the "Amortisation Schedule". Why is this important, you may ask. Understanding the amortisation schedule allows you to better understand how your loan repayments are being structured and whether if it may potentially choke up your cash flows.

Amortisation Schedule, in simple terms, is basically your schedule of monthly repayments from first month (typically upon complete draw-down of loan amount) until the end of agreed tenure (e.g. 420th months for a 35-year loan).

The monthly repayments are the total sum paid to the lender, consisting of the principal repayment as well as interests charged. However, the exact amount distributed between principal repayment and interests charged will vary depending on which amortisation schedule are used.

Just to better illustrate the point, think amortisation schedule as a table listing the exact amount paid on a month-to-month basis, with the assumption that no additional payments were made to reduce loan tenures (for semi-flexi / full-flexi loans)

Fixed Total Payments

This is the most common amortisation schedule which most of us already know today. Fixed Total Payments is kinda like the de-facto standard offered by most of the banks when it comes to mortgage. In simple term, the borrower agrees to pay a fixed total amount from the first month until the end of loan tenure.

Having a fixed monthly repayment helps the borrower to accurately predict their month to month cashflow as the repayment amount stays consistent throughout the loan tenure. Having said that, while the monthly repayment is fixed, the ratio of the contribution to be spent towards Principal vs. Interests will differ throughout the loan tenure.

Unfortunately, the banks will typically weigh heavier contributions toward interest payment in the earlier months and later on gradually increases the ratio of amount paid towards principal repayment. This helps to ensure that banks will collect their portion of interest as early as possible.

For example, assuming that a borrower purchases a RM500,000 property with 10% downpayment, with the balance funded via 35 years home loan at 4.45% interest (more on interest rates in next chapter). The expected monthly repayment will be flat RM2,115.75 per month from Month 1 up to Month 420 (35 years).

Fixed Principal Payments

However, there's another type of amortisation schedule which not many of us are aware of - Fixed Principal Payments. Unlike the fixed total payment, this method locks down the "principal repayment" amount to be paid on a monthly basis (rather than the total repayment). On top of that, the borrower agrees to also pay interests which will be calculated based on the outstanding principal amount at that point in time.

As such, the total monthly repayment amount will vary according to the outstanding principal - since higher outstanding balance will incur higher interest charges. Due to the varying interest charges, it makes it hard for the borrower to predict the exact cash flow for the month. Since the interests are calculated on the outstanding principal, it will result in significantly higher monthly repayment during early tenure.

This may may put a significant strain on the borrower's ability to manage their cash flow. If borrowers can afford the higher monthly repayment during early years, then it may not be a bad thing at all as it will result in savings on total interests paid - since principals are reduced at a more consistent rate early-on.

If the borrower takes up semi-flexi or full-flexi loan and have the cash-flow ability to maintain "higher" commitment throughout the loan tenure, it can even shorten the total loan tenure resulting in even more interest savings!

For example, assuming that a borrower purchases a RM500,000 property with 10% downpayment, with the balance funded via 35 years home loan at 4.45% interest (more on interest rates in next chapter). The expected monthly repayment will be varying from RM2,740.18 - RM1079.38 per month from Month 1 up to Month 420 (35 years), with higher commitment in earlier months and gradually lowering the monthly repayment amount as outstanding principal reduces.

Interest Rate... Does it Change?

Most home loans offered in Malaysia will come with floating interest rate - which means that interest rate may change (either increase or decrease) throughout your loan tenure. Albeit rarely, there are still mortgages which are offered at fixed interest rate where the interest rate stays constant throughout the loan tenure.

Ultimately, before we go about comparing interest rates, it's crucial to first understand how these Effective Interest Rate (EIR) are calculated. If you are not sure what an EIR is, do check out my previous post on Understanding "Interest Rate" Calculations in Malaysia to at least first have general understanding on interest rates.

There are few factors that will determine interests to be charged on our mortgage, and frankly these topics itself are deep enough that it warrants an article of its own. For now, I will keep it brief enough with resources for further reading.

Overnight Policy Rate (OPR)

For banks to lend out monies to borrowers, they first must have sufficient liquidity in place in line with Central Bank's requirement on Statutory Reserve Requirement (SSR).

But what if they don't have sufficient liquidity / cash reserves from others' savings / deposits? They will resort to borrowing it from their peers (banks) and then lend the amount to you. In simpler words, OPR is basically the general interest rate bank charges one another.

Since OPR fundamentally affects the general interest rate where bank operates and gets their source of fund, any changes in the OPR will definitely affect the rest of the financial systems - including mortgages or fixed deposits rate.

Base Lending Rate (BLR)

Base Lending Rate (BLR) was the de-facto standard used when advertising home loan packages, at least before January 2015 and has since been deprecated. In simpler words, Base Lending Rate is determined by the central bank based on the overall efficiency of the financial institutions across Malaysia.

Whilst the original intention was to provide a consistent and predictable interest rate across several banks - it lacked transparency to the consumers as to the spreads charged by the respective bank for consumer loans. This is especially since most (if not all) banks offered discounts to the base lending rate as the efficiency improved and competition strives.

Base Rate (BR)

This is where Base Rate (BR) was introduced in January 2015 to help boost transparency. Base Rate is basically the net reference rate, bench-marked against respective bank's general lending cost and Statutory Reserve Requirement (SSR). In simpler terms, Base Rate is the bank's baseline rate to "secure" the funds to be lent to borrowers.

Other components of loan pricing such as borrower credit risk, liquidity risk premium, operating costs and profit margin will be reflected in a spread above the Base Rate. In other words, these are the "premiums charged" by the bank on top of their base rate as a baseline. This increases the visibility of the factors underlying changes to the Base Rate.

In order to find out the Base Rate for respective banks, you can visit either your bank's website or Central Bank's compilation here.

Effective Interest Rate (EIR)

What does it mean to us consumers? To get the effective interest rate of the loan, depending whether if it is BLR or BR:

• Base Lending Rate:  subtract the discounts applied on top of the BLR to convert into effective interest rate
• Base Rate:  add the premium charged on top of the BR to convert into effective interest rate

Bank Negara Malaysia summarised it well with the below illustrations, which you can find more here:

What's important to remember is that with mortgage loans, unless you have signed up for a fixed interest rate package, in most cases the package would be on floating interest rate which means that when OPR goes up - so does the interest rate charged for your mortgage (and vice versa). 

In the hard times of COVID-19 like today, with lowest-ever-seen OPR rate throughout the history of Malaysia, do factor in the future possibility of rising OPR rate in the long run which will result in higher interests payable for your loan repayment.

For example, when I signed up for my loan packages in January 2015, I was charged a +1.25% spread premium on top of Maybank's Base Rate (which was 3.2% in 2015). This effectively puts my mortgage's effective interest rate at 4.45% back then in 2015.

Fast forward to January 2021, with the negative outlooks projected by central bank, the OPR remains at the lowest throughout Malaysia's history and thus Maybank's Base Rate are currently sitting at the level of 1.75% from July 2020. With this, my effective interest rate for mortgage have been sitting at 3% since then which helped me to greatly reduce the interests charged.

Eventually, what goes down will come back up. In May 2023, the OPR went back up to 3.00% which makes my effective interest rate to be approximately 4.25%. Hence, it is very crucial for you to consider these factors when taking up a mortgage loan - and not solely looking at only the interest rate at the point of sign up.

Other consideration factors

Before deciding on the mortgage, aside from the more common stuff like the interest rate, l

Your Current Commitments

Or in the financial world, what they call the Debt Service Ratio. Simply put, review your current budget and debts - always ensure that your total debt to be below 40-45% of your net income. General advise is to keep the monthly instalments of mortgage at maximum of 30-35% of your net income - after factoring in the possibilities of rising OPR in the future.

Financing Additional Costs into Mortgage

There are certainly many other costs when it comes to purchasing our home on top of the listed property price. Whilst I won't be able to go through all the details today, I would focus on the common offerings of financing additional costs into the mortgage (i.e. MRTA / MLTA insurance)

Before making such a decision, one important point here is to always consider the consequences of compounding interest working against you. By increasing the amount of principal owed, you will naturally incur more interests in the long run.

Even if it's just RM10K, by financing it through your mortgage, this RM10K amount will be compounded at the loan's effective interest rate throughout the tenure and you'll end up paying more interests which may even be close to double of the original amount (assuming 4.45% EIR on 35 years tenure)

Pay Down Mortgage Earlier vs. Investing

There's no right answer for this as it really depends on individual circumstances. For some, the peace of mind of being debt free is worth it; but for the others, there's no mathematical reason to pay down mortgage especially if the EIR is around ~3% today, where we can easily generate investment returns above the EIR and hence putting the money into better use.

Marcus wrote a very comprehensive post on his thoughts on this subject so instead of me rewriting on this topic, I'll leave you to his post "Should We Pay Off Mortgage or Invest First?" by Marcus Keong

Wrap Up

I hope that this article have helped you to establish deeper understanding on the topic of mortgage / home loans available in Malaysia. As with all financial decisions, you have to understand what suits you the most.

For example, if you're rotating cash flow and maximising number of mortgages of flat/apartment with good rental yield with target to pay it off within 10-15 years (as per loan schedule), and do not foresee any additional cash to be put back into reducing the loan, then getting the best Term Loan with lowest Interest Rate may be the most appropriate case. 

On the other hand, if you are buying your first property (like I was back then) and are committed to reduce interest as much as possible, but requires flexibility for loan schedule just in case of active income could not catch up as quickly as expected - then a semi-flexi or full-flexi loan may be more suitable for you. Make sure to also factor in possibilities of OPR adjustments in the future which will impact the amount of interests payable throughout the loan tenure.

Don't forget to read and understand all the fine prints / clauses as well - as some loans will have petty conditions (favourable to banks, not for borrowers) embedded into the loan offer. For example, some semi-flexi imposes restriction on withdrawal and/or fees upon withdrawal; whereas some will impose minimum qualifying amount to reduce principal.

If you haven't already - I highly recommend you to download Karl's Mortgage Calculator [Apple App Store / Google Play Store] which you can play around with different mortgage loan settings which to calculate various stuff like repayment, amortisation schedule, etc. - and this will definitely helps you with better understanding.

As always - thanks for reading and see you again in my next post! If you haven't already, be sure to follow me on my Instagram, Facebook and YouTube for latest updates!

Cheers,
Gracie

The post Malaysian's Guide to Mortgage / Home Loan appeared first on Ringgit Freedom.

A typical conversation around interest rate can go like this.

Person A: "Eh, nowadays the interest rate for car loan so cheap, only 2.5%!"
Person B: "Oh really? I also want! You taking 5 years or 9 years?"
Person A: "9 years la of course. Cheaper than housing loan leh, Housing loan also 3.5% to 4% already!"

That's the part where I typically will try to jump in and explain the mechanics on how simple interest rate do not take into consideration the compounding effects - and usually most people are lost. Especially since that there’s a ton of calculations involved and may be tricky to have in casual conversational setting without given sufficient time.

Table of Contents

1. Background
2. Simple Interest Rate
   • Explanation
   • Formula
   • Examples
3. Effective Interest Rate
   • Explanation
   • Formula
   • Examples
4. Compounded Interest Rate
   • Explanation
   • Examples
5. Final Thoughts

What is Interest Rate?

We have probably always heard about it - the word "interest rate" that can either make one cry or smile - depending which side of the fences we are on. According to Investopedia, the definition for interest rate is as such:

The interest rate is the amount a lender charges for the use of assets expressed as a percentage of the principal. The interest rate is typically noted on an annual basis known as the annual percentage rate (APR). The assets borrowed could include cash, consumer goods, or large assets such as a vehicle or building.

Investopedia

In a nutshell, interest rates are typically applied on top of principal borrowed from the lenders (i.e. banks). To put it simply, when you choose to take up a loan, lenders/banks will apply interest on top of your original loan amount as part of their profits – a key and importance strategy for lenders to make money.

Lenders and their bombastic definitions...

Unfortunately, when lenders advertise their loan packages, they use several different methodologies (or terminologies) to advertise the interest rates which may paint a rosy picture for those without good financial understanding. There’s quite a number of definitions, just to name a few:

• Simple Interest Rate
• Nominal Interest Rate
• Flat Rate
• Compounded Interest Rate
• Effective Interest Rate
• Reducing Balance Rate

Hence it is not surprising that many people may get confused easily (myself included at one point) unless they have strong finance background or if they have started looking into this topic. To make things worse, you also have mortgage-specific terminologies in Malaysia such as:

• Base Lending Rate (BLR) – deprecated since 2015
• Base Rate (BR)

I will leave the mortgage specific rates on another article – but the easiest way to put it is where by adding or subtracting a certain % from the Base (Lending) Rate, you will in most cases get the Compounded Interest Rate (also known as Effective Interest Rate / Reducing Balance Rate).

There’s also slightly advanced topic such as Rule of 78 when it comes to car / personal loan, but I’ll them leave out from this article for now just to keep things simple.

So many definitions... does it really matter?

So, what does it really mean to have multiple interest rates definition? It means that we can never take things from the surface level and due diligences must always be made to find out the true story behind the numbers.

Assuming that there are two different loan offering 3% interest rate, the “true interest paid” may differ based on which interest rate are stated (nominal or effective? Flat or reducing balance?). The most important factor to take note is how the interest is calculated using which number as the ‘baseline’.

Simple Interest Rate

Simple Interest Rate, in other words, nominal interest rate or flat rate calculation. If the interest is calculated based on the original principal amount regardless of current repayment period, then most likely we’re looking at a simple interest / flat rate calculation.

In simpler words – simple interest, as its name imply, keep things simple by neglecting the compounding effect and assumes interest calculation based on original principal throughout the repayment period – irregardless how much you have paid up so far.

This is most commonly found in most personal loans or car loans, though banks may introduce advanced concepts to accelerate their interest collections during the early loan tenures (e.g. Rule of 78). The most obvious disadvantage is that you tend to "lose out" even if you choose to make extra payment - because your interests are always calculated based on the original principal amount.

Put it simply, you've already agreed upfront on the amount of interests to be paid when taking up the loan. Even if banks may provide "discounts" or "rebates" if you choose to repay the loan earlier, you may end up not saving much due to the way banks typically structure their loans to maximise interest collection early on (more on this advanced topic for other day).

Formula

Simple Interest Amount = P * i * n

Where

• P = principal amount
• i = nominal interest rate
• n = number of periods

Equated Monthly Instalment = (P + S) / n

Where

• P = principal amount
• S = simple interest amount
• n = number of periods

Example

As its name imply - simple interest is also very simple to calculate. To better illustrate the point, say we took up a 5 years loan of RM10,000 from a bank with simple interest of 3% per annum, on a monthly repayment scheme.

To calculate the interest payable,

SIMPLE INTEREST AMOUNT = 
P * i * n =
RM10,000 X 3% X 5 YEARS = 
RM1,500

Add that amount of interest to be paid on top of the principal, and you'll get the total amount payable. Once you have the total amount, simply divide it by the total repayment period over 5 years (a.k.a. 60 months), and you'll get the monthly instalment amount.

EQUATED MONTHLY INSTALMENT = 
(P + S) / n =
(RM10,000 + RM1,500) / 60 =
(RM11,500) / 60 =
~RM191.67

This means that we will need to repay the bank with an instalment of approx. RM191.67 monthly.

If you are interested, check out this Google Sheets illustrating the detailed calculations above with amortisation schedule.

Effective Interest Rate

If the principal used to calculate the interest reduces over time in tandem with the current repayment period, then we are looking at effective interest / reducing balance calculation.

It takes into consideration the compounding effect from the reducing principal balance owed over time, hence the term “reducing balance”. This will in return reduce the interests payable over time.

We will usually see these in Mortgage loans - as the amount involved are huge and if simple interest calculation are applied, the amount will be crazily enormous and it will simply make no sense to take up mortgage loan to purchase homes.

Formula

Equated Monthly Instalment = (P * i * (1 + i)ⁿ ) / ((1+i)ⁿ)-1

Where

• P = principal amount 
• i = effective interest rate per period
• n = number of periods
  

Effective Interest Amount = (EMI * n) - P

Where

• EMI = equated monthly installment 
• P = principal amount 
• n = number of periods

Example

Using a similar example, in this case, we took up a 5 years loan of RM10,000 from a bank with effective interest rate of 3% per annum, on a monthly repayment scheme (a.k.a 60 months)

To calculate the total effective interest amount, you have to either do it backwards by first calculating the equated monthly instalment (EMI) amount - or calculate individual period manually. Either way, it's a mess.

EQUATED MONTHLY INSTALMENT = 
(P * i * (1 + i)n ) / ((1+i)n)-1 =
(10000 * (3%/12) * (1 + (3%/12))^60 ) / ((1+(3%/12))^60)-1 =
29.04041954 / 0.161616782 =
~RM179.69

From here, you can then calculate the total effective interest amount

EFFECTIVE INTEREST AMOUNT = 
(EMI * n) - P =
(RM179.69 * 60) - RM10,000 =
~RM781.21

As you can see, compared to the previous example, you are only incurring ~RM781.21 worth of interest (vs. RM1,500 earlier). Even though both have 3% interest rate, but due to the different methods used in calculation, you are effectively paying less with this reducing balance method.

If you are interested, check out this Google Sheets illustrating the detailed calculations above with amortisation schedule.

Compounded Interest Rate

By definition - both "effective interest / reducing balance calculation" and "compounding interest" follows the exact same theory. This is merely an "extended" topic from the above chapter.

In some special cases, bank may combine the reducing balance calculation with additional compounded interest rate - or otherwise known as "Interest-on-Interest". This concept is exactly the same of Effective Interest Rate - with only one differences where interests incurred are allowed to be "compounded" on top of the balance principal - exactly the same concept why compound interest (for investing) can be so powerful.

This is common in scenarios of outstanding credit card balances, where any "finances charges" calculated, if not settled, will be added back on top of your principal balances hence resulting in longer repayment periods.

This is why you always see lengthy explanation on the back of your credit card statement explaining the concept of higher interests accrued if card holders only make minimum payment - and why they will always enforce minimum 5% payment. Otherwise the compounding effect will be more than enough to send debtors into infinite loop.

p/s try flipping this scenario and replace "credit card" with "investments" - and you'll see the reason why we've always been going on and on about the power of compounding effects.

Example

Assuming that you currently owe bank RM10,000 with 18% per annum on outstanding balances incurred as Finance Charges.

On the first month, the finance charges of RM150 will be added on top of your principal - awaiting for your repayment hence the total owed to the bank will be RM10,150. 

• If you paid the bank's recommended minimum (RM50 or 5% of outstanding, whichever is greater)  @ RM500, your outstanding balance for next month will be RM9,650
• If you paid extra @ RM600, your outstanding balance for next month will be RM9,550
• If you paid nothing, your outstanding balance for next month will be RM10,150

When next month comes, the "finance charges" (a.k.a. compounded interest) will be calculated on your outstanding balance. This is why bank enforces minimum 5% payment (or RM50, whichever is greater) otherwise your single debt of RM3K can compound into infinity.

If you are interested, check out this Google Sheets illustrating the detailed calculations above.

Final Thoughts

I hope that this article has helped you to better understand the differences between simple interest (flat rate) and effective interest (reducing balance), together with compounded interest (interest-on-interest). 

The two most common underlying principle will be the flat rate (simple interest); followed by reducing balance (effective interest). Compounded interest on the other hand is basically just an extension of reducing balance, by compounding interest on top of interests - adding it onto the principal.

The next time before you decide to take on any loan, make sure to go through the details and understand the type of interest calculations applied on your loan. Some loans also have specific clauses on handling of early or additional repayments and its effect towards principal balance – always read before signing the dotted lines!

If there's at least just ONE key takeaway that you should remember - effective/compounded interest rate is basically your friend, when used correctly. It allows you to compare various financial product offerings - from loans to investments, as it provides you with the "true" interest rate adjusted for compounding period.

This is also the whole reason why starting investment as early as possible are beneficial for us - as we're having Compounded Interest to work in our favour rather than against us (in the case of Credit Card finance charges).

As always - thanks for reading and see you again in my next post! If you haven't already, be sure to follow me on my Instagram, Facebook and YouTube for latest updates!

Cheers,
Gracie

The post Understanding "Interest Rate" Calculations in Malaysia appeared first on Ringgit Freedom.

Hence it's not surprising to see that most international brokers will have presence and acceptance of local transfer in those currencies / country, but not for Ringgit. Of course, there's alternatives like international telegraphic transfer (which are super expensive and simply not worth it) or Fintech transfer (via likes of Wise or Instarem) which some global institutions will reject third party transfers under others' account name to avoid potential money laundering (tho some are willing to accept if you provide proof of money trail)

As such, it's always good to have an offshore account either to keep your proceeds in a stronger currency, or just to use it as in-transit account under your name. This guide will is part of International Investing series where I covered on how I explored and selected my international brokerage for overseas investing, For now, I'll be focusing more on how Malaysians, in general, can apply for Offshore bank accounts at the comfort of your desk.

Technically speaking, I didn't need to open another offshore account as I already have my Hong Kong account back in the days when I was still working overseas for a short period. I chose not to close the account when I was repatriated for the convenience that it might bring me in the future (and indeed it was a good decision for me). Ironically I completely forgot about it when I was so fixated on researching the steps to open a Singapore Account

Let's get started!

Why CIMB and not Maybank?

Before I decided to go ahead with CIMB Singapore, I've done some research and compared the two products - Maybank Singapore iSAVvy vs. CIMB Singapore FastSaver. Frankly speaking, both accounts are pretty much the same if you only intend to use it for in-transit account.

Based on my needs, I didn't need the flexibility of ATM Withdrawal in Singapore at this stage (yet) so CIMB is more than sufficient for me, plus it's convenient, free, and no minimum balance to deal with - hence an obvious choice for me although I'm more active with Maybank than CIMB bank back home in Malaysia.

Another thing to consider (if you are using this as transit account for investment) is if there's any withdrawal from your investments onto this account, check if your brokerage does it via Local-to-Local FAST transfer or via Local Wire Remittance (Telegraphic Transfer), as Maybank charges $10 per inward transaction whereas CIMB waived it (as of now)

Your circumstances may wary so choose one that fits your need best (i.e. if you have access to Premier Banking options like HSBC Premier, etc.).

Preparations

As a start, you must at least have these with you to smoothen the journey

• Malaysia NRIC 
• CIMB Malaysia account (with CIMB Clicks Malaysia activated)
• SGD$1,000 equivalent worth of MYR
• Internet Connection and Patience

Opening CIMB Malaysia Account

If you already have CIMB Malaysia account with CIMB Clicks activated (and not dormant like mine), you can skip this entire chapter (or read on, if you plan to save on the annual fees).

If you don't have CIMB Malaysia account yet, you can either opt for a fully-digital OctoSavers Account-i (which is also Shariah-compliant) or the Basic Savings Account 1, both which has zero annual fees.

Personally I'm still holding their traditional Basic Savings Account 1, which provides an option to have a zero-annual-fees. You just have make sure to keep it active and not let it become dormant, as I've had mine dormant twice had to pay penalties to reactivate the account. If you are planning to withdraw (via ATM) very frequently, then you have to evaluate other options (maybe Account 2 is more suitable for you).

CIMB Malaysia also have an online application process so you can just go through with the flow, but from my memory, you'd still need to visit the branch to collect debit card, activate new PIN via ATM machine, obtain CIMB Clicks MY registration key via ATM machine.

So if you're planning to apply online, and never had CIMB Malaysia's account - I'd recommend to just go with their new fully-digital OctoSavers Account-i to save you the hassle since the card will be delivered to your doorsteps. All you need is just to apply through their CIMB Apply App (Google Playstore | Apple Appstore). Some dormant customer reported issues applying their the CIMB Apply app and in those cases, you might have to pay their branch a visit - but no harm trying first!

Opening CIMB Singapore Account

Generally there are five parts in this section. I'll be sharing a top line summary so that you get a rough idea on what you need to go through, followed by a detailed step-by-step walk-through guide.

I've documented the detailed step-by-step walk-through below and hope that this will be useful for you!

Important Note: Once you initiated step 1, you have to complete the rest of the steps within 30 days or risk automatic application closure/cancellation.

Application Form Submission (Online)

1. Go through the CIMB SG FastSaver product details and complete the application form. Make sure to select the "manual" option (unless, of course, if you have SingPass)

For Shariah compliant account, you can opt for CIMB SG FastSaver-i instead.

Prepare also your proof of IC, residential address, and e-signature ready with you. 

It is strongly recommended to open Singapore Account with your Malaysian NRIC to ease the linking process between Malaysia & Singapore with the same NRIC Number.

If you are a tax resident (i.e. tax submission to LHDN), ensure that you declare it under the CRS Reporting section and provide your Tax Identification Number (TIN) - which basically is your LHDN Income Tax File Number.

Useful Links

Non-Shariah Compliant: CIMB SG FastSaver Product Page

Shariah Compliant: CIMB SG FastSaver-i Product Page

2. Upon completing the application, make sure to take a screenshot of the successful page

Which should contain your CIMB SG account number & application reference number

3. In parallel, there will be two notifications sent to you, with a summary of your application details.

When you open the PDF, you will find all your details submitted during the application and also your CIMB SG account/reference numbers.

Some people reported that they did not receive this SMS in step 3. If you have already written down the account number/reference number during step 2, then this won't be a problem for you. Otherwise, you will have to contact CIMB SG customer service to get your account number.

Initiate Singapore Account Linking

4. Once your SG account application is submitted, you can proceed to link it to your CIMB Clicks Malaysia.

This step is mandatory before you can perform e-KYC verification (online) without visiting Singapore Branch.

Since you already have an account opened in Malaysia with your NRIC, linking your CIMB Singapore account to your existing CIMB Malaysia Account allows you to perform "own-account local transfer" within CIMB Clicks Malaysia, which in turn allows the Singapore team to complete the e-KYC verification process by cross-validating your identity in Malaysia Malaysia vs. Singapore without your physical presence.

Login to CIMB Clicks Malaysia, find "Services" page (only visible on Desktop) and select "Link Singapore Account" under Account Maintenance section. 

Once you are here, just input the NRIC number (or Passport number) you have inputted during the CIMB SG account opening application process.

If you choose to skip the above steps, the only alternative for them to validate your identity is to physically visit their branch in Singapore (which is impossible for most of us). This helps them to perform checks for anti-money laundering & fraud prevention.

5. Once you have submitted the linkage request, it will take approximately 1-2 business days for it to get approved from Malaysia's end.

To check on status, follow the exact steps listed earlier (click Singapore Accounts) and it'll show you the status (pending approval)

If for whatever reason, it shows the input screen again (like the ones you saw in step 4), that means your application has been rejected.

I had the same issue as well - call up the Malaysia Customer Service and explain to them you need to have this account linked, to perform ASEAN Transfer for e-KYC verification requested by the Singapore team.

Whatever you do, DO NOT ATTEMPT Telegraphic Transfer - not only it's expensive, it is not recognised for e-KYC verification as these are treated as 3rd party transfer (and not first party own-account transfer). I've paid for my lessons 😀

Performing Account Opening Funding Transfer

6. While waiting for the approval for account linkage, you can initiate your SGD$1,000 transfer.

UPDATE 11/5/2024: There have been several reports that the CIMB SG will call you to request to perform a full SGD$1,000 transfer via CIMB Clicks - so you may skip step 6 altogether and only use it for your FUTURE transfers to save on exchange rates.

Or do it after linkage approval to minimize the days' gap between funding & e-KYC (important! read updates below)

To further explain, to meet the SGD$1,000 account opening requirement, the source of fund is more flexible as long as it comes from yourself.

It does not necessarily need to be funded from CIMB Malaysia as the rates can be expensive even with the fee-waivers of ASEAN transfer (not Telegraphic Transfer) made available after your CIMB accounts are linked.

I personally would recommend using Fintech transfers like Wise (formerly known as TransferWise) or InstaReM to save on international transfer fees. At the time of writing, to fund 1K SGD it will cost me approximately RM3,060.16 (Wise) vs RM3,094.70 (CIMB Asean Local Transfer).

p/s feel free to use my referral for Wise to support my blog! For every successful referral, part of the commissions will go to a non-profit community charity foundation.

UPDATE 9/6/2021: There seems to be a new clause added on CIMB SG FastSaver website, implying that initial funding must be from CIMB Malaysia or other Singapore accounts under your own personal name.

From my understanding with CIMB SG, as long as we ensure to perform step 7 e-KYC process on a timely basis, with at least SGD$1 Local DuitNow Transfer from CIMB CLICKS Malaysia to your Singapore account; there should not be an issue with the funding. This clause was added recently as there were many non-compliant applicants completely skipping the e-KYC process resulting in a refund.

Should there be further developments or new discoveries on this topic, I will be updating this post accordingly.

UPDATE 11/5/2024: There have been several reports that the CIMB SG will call you to request to perform a full SGD$1,000 transfer via CIMB Clicks - so you may skip step 6 altogether and only use it for your FUTURE transfers to save on exchange rates.

Performing e-KYC Verification Transfer

7. By now, hopefully, your account linkage would've already been approved.

If so, simply head to "Transfer Money" (Local  DuitNow Transfer, not Telegraphic Transfer) and you should see your Singapore account under "My Own Accounts Recipient".

Transfer SGD$1000 from your Malaysia Account to your Singapore Account in order to meet the requirements for e-KYC verification. In the past, I transferred SGD$5 via this approach and the rest of SGD$995 via Wise to save on exchange rates, but since 2024 this is no longer possible (at least for the first e-KYC verification)

8. Once you have done, it will take approx. 1-2 business days for the Singapore branch to validate you.

This is where they'll ultimately decide whether to approve or reject your account opening application.

If your application gets rejected, they will refund you all the monies but so far I haven't seen anyone getting rejected yet based on the Lowyat thread & comments section in this post.

Approved Application & Activate TAC

9. If your account opening is successful, you will receive again a set of welcome email & SMS confirming your account activation. 

10. To get you started, alongside with SMS containing your first-time login PIN for CIMB Clicks Singapore.

Set up your CIMB Clicks Singapore by doing the "FIRST-TIME LOGIN" and change your password via their website.

11. Before you can perform any transfers, you will need to have a token device to receive One-Time PIN (OTP).

I personally recommend using their Digital Token via CIMB Clicks Singapore App (Android / iOS), which they have a detailed guide here.

It looks terribly outdated but functional enough to perform basic banking transactions. Another alternative is to visit their branch and collect your "physical token device" for OTP purposes, or request postage to Malaysia via their Customer Service.

Final Thoughts

So that's all! I hope this guide was helpful enough to get you started opening an Offshore Singapore Account whatever your reasons may be. I'll expand / update this post in the future if I ever get the chance to also explore the Maybank route, but I don't foresee it happening anytime soon.

See you in my next post! If you haven't already, be sure to follow me on my Instagram, Facebook and YouTube for latest updates!

Cheers,
Gracie

p/s in case if you'd like to support me, feel free to use my Wise referral code here and part of the commissions will go to a non-profit community charity foundation.

Special shout-out: If you prefer a video version of the step-by-step guide - check out Ziet Invests' video here!

Frequently Asked Questions

I have decided to also compile some of the most frequently asked questions based on the PM/Comments received so far. Hope this will also be helpful for starters!

The post Opening CIMB Singapore account without visiting Singapore for Malaysians appeared first on Ringgit Freedom.

Today I had to make some transfers from Ringgit Malaysia into Hong Kong Dollars for some international trades and I have decided to take the opportunity to test both Wise (formerly known as TransferWise) and InstaReM.

Both are them are Fintech company offering cross-border money transfer at an attractive rate, beating most (if not all) banks that most of us would be using today, perhaps except the top 1%. Wise has been around since 2010, established in London with pretty well recognized worldwide and InstaReM is like the new brother to the party, founded in 2014 in Singapore.

But it doesn't really matter when they are founded, as both of them are  regulated as a remittance business under the Money Services Business Act 2011 by Bank Negara Malaysia, so you can be pretty sure that your money's in the right hand (as long as you transfer to the correct destination account!)

In the example that I will be showing below, I will basically do a mirror transfer on both platforms from my Malaysia bank account to my Hong Kong bank account, with both registered under my own name.

In terms of net exchange rate - comparing Money Converted vs. Money Received; both actually have very close rates and depending on timing, one may be cheaper than the other. So far my experience has been leaning more towards Wise (or even BigPay at times)

If you need the transfer to be completed urgently for whatever reason, Wise will be the best choice as both my experiences with them so far usually have a near-instantaneous transfer in less than a minute. During my two-separate usages of InstaReM, all transfer seems to take at least 2-4 hours to process before they start dispatching funds to your destination account.

In terms of currencies supported, it doesn't really matter to me as the currencies I will be trading will be the worlds' major currencies. If you have very specific currency needs then Wise may suit you better given their near-worldwide coverage.

Another potentially useful feature Wise Borderless Debit Card which sadly are not available for us Malaysians. But I'd imagine that it won't be too far off from BigPay, so we'll see when they finally release it in Malaysia.

Let me know if there's anything else that'd be interesting to you and I'll be sure to add it in my next review (or updating this post)!

Cheers,
Gracie

p/s feel free to use my referral for Wise to support my blog! For every successful referral, part of the commissions will go to a non-profit community charity foundation.

The post Wise vs. InstaRem? Which are better for Malaysians? appeared first on Ringgit Freedom.