Property ownership goes hand-in-hand with end-financing, particularly those who take up home loans as a means to finance their purchases. This begs the question: how much of the principal are you tackling with your monthly repayments? We ask Kevin Cheong, Founder and Managing Director of AceScube, this and a whole host of relevant questions in handling financing and their specialty, BLR Management.

If you own a home or are planning to own one, it is highly likely that you have carefully planned the end-financing part of the equation to the finest minutiae. However, the best laid plans may run aground without due consideration to the fluctuating Base Lending Rate or BLR. For certain types of home financing loans, prudent financial management includes managing the BLR and this is where AceScube, founded by Kevin Cheong and his partner, Danica Cheong, who is the Operations Director, alongside with Macy Chin, the HR and Admin Director, come in.
Kevin, who graduated with a B.Sc in Computer Engineering in 1990 switched fields in 1996 and joined PESAKA Capital, an investment advisory and consultation firm, where he picked up banking practise. In the early 2000s, when he shifted his goals toward the real estate industry, Cheong started up research and development for BLR management and in 2008, AceScube became a reality.

What is BLR Management About?

BLR, which is a guideline on the interest rates for the banking sector is set by Bank Negara Malaysia (BNM) and is applied to credit facilities such as loans by lenders (with a usual margin of either -2% to +2% effective rate to the BLR), directly affecting the interest rate per annum paid by borrowers. As per announced by BNM in Q3 2011, BLR is on an uptrend, with rates set to rise in the coming year between 1-2%.

“The fluctuating BLR will definitely see an uptrend in the coming year, so the possibility of borrowers being affected is very high.” Cheong cautioned, adding that with AceScube’s Slash Interest Methodology (SIM), loan payees need not worry themselves as it is now possible to save on the loan’s tenure between 30% to 75%.

The following table gives an example of how a BLR increase of 1% to 2% can affect the monthly payable interest of borrowers:

Cheong said that the table above is the best example of showing how BLR increase can affect the interest being paid per month. If the current BLR rate provided by the lender is 4.20%, borrowers pay RM1750 every month in interest. However, if BLR increases by 1%, the monthly interest rises by 23.8% while an increase of 2% in BLR sees a whopping 47.6% increase in monthly interest. This will surely be an added burden to household debt should the BLR increase.

Seeing this, AceScube was formed to help property buyers manage the impact of BLR rate fluctuation through their Slash Interest Methodology (SIM). Instead of gambling, SIM puts to good use calculated risk, whereby Kevin and his team uses a 99% accurate method to do a verification of their finances. What they do is simply the optimisation of your money by managing the accurate date and payment amount to control both interest and principal paid back to lenders at the same time managing the BLR.

This helps all parties concerned as lenders negate non-performing loans by having manageable and on-track servicing of loans, property buyers benefit from the shorter repayment period, thus saving capital for further investment and developers benefit from purchasers’ freed up capital for higher take-up rates of projects.

Different Folks, Different Strokes

AceScube provides three modes of the Slash Interest Methodology (SIM), namely SIM 30, SIM 50 and SIM 75 which suit different needs depending on the percentage of loan amount saved. The basic tenet remains the same, to increase liquidity or cash flow for those who approach him. The following table shows the difference between the original loan tenures and loan tenures after following the SIM 30, SIM 50 and SIM 75 systems:

When asked if either paying extra monthly or paying a lump sum would help to reduce loan tenure, while keeping the loan interest in check, Cheong held that it is a common myth as paying extra monthly will not do much for the borrowers.

“Dumping in a lump sum is never advisable. In fact, paying the extra only works until the BLR fluctuates. Let’s look at an example of investing in a lump sum payment.”

As we can see, the lump sum makes a small difference in reducing the monthly interest of the loan, which is a difference of only RM100. When the BLR increases by a mere 0.25%, the monthly interest will revert to the original, making the lump sum invested seem to totally “disappear.”

We have seen what happens when BLR increases but in the event that BLR decreases, Cheong pointed out that there is no need for borrowers to reduce the amount they are paying monthly. Saying that it’s a “profit gain for the buyer,” Cheong mentioned that with AceScube’s calculated amount, it will tackle the principal amount and reduce the loan tenure even further.

Entering Mid-Stream or at the Beginning

With a 99% accuracy of AceScube’s system, Kevin showed us a few examples of the clients they have on hand which due to BAFIA, would remain a confidential matter between them and their clients. From such case studies, we could see that AceScube’s calculations did not burden the property buyers, yet their clients have all managed to shave off 30%, 50% or 75% of their loan tenure.

While lenders have always prescribed a certain fixed amount to pay for a monthly instalment, many pay willingly without really finding out if the sum that they pay adequately reduces their outstanding balance. This is why when we asked Kevin if there would be any problems or if borrowers need to inform the lenders of their intention to change the prescribed payment, he mentioned that it is a client’s right, as per Bank Negara’s charter, to seek professional help when it comes to getting a professional verification done. This is the reason why AceScube, as professionals are paid to optimise their client’s money by calculating the optimum amount to pay per month.

When it came to first time home buyers, Cheong has mentioned that as lenders will be looking at the net income for loan approval from January onwards and while shorter loan tenure has not been offered from the lenders for ages, generally, the shorter the loan tenure, the better the cash flow is for the client.

“For a regular 30 year loan, SIM 30 provides 9 years of savings, after the loan tenure is reduced to 21 years. If it’s a rented property, the owner would have enjoyed extra 108 months of net rental income without have to pay their lenders anymore. If one month the rental is RM1000, the owner will have extra RM108,000,” he claimed, adding that their system provides free upgrades from SIM 30 to SIM 50, which offers better surplus.

Part and Parcel of Property Sale

Cheong mentioned that although in Malaysia the service is considered new, in other developed countries like Singapore, it is an essential part of a home-owner’s package. He compared BLR management to the discounts given by the developers, and said that while discounts are highly valued, they are but a one-off shot in the arm, whereas BLR management is a long-term service that benefits borrowers in the long run, and developers too.

Cheong expressed AceScube’s interest to work with corporations and to tie their service down as a package with developers, as he noticed that a lot of people are having problems obtaining and maintaining loans.

“With the current rate of property appreciation and longer loan tenures, our services will definitely come in handy for those who need help in BLR management. Time is of the essence now.”