Question

Aboo and Anna just married last month. Aboo works as an engineer in a semi-conductor factory with an income RM7500 per month. His wife had just started working as a clerk with an income of RM1800 per month. Hence, their total income are the only source they have in starting their new life together. For additional information, they are renting a house for RM700 per month. Aboo wish to buy a house and his wife want to buy a car for her daily use. For the house, Aboo can afford to pay 10% for the deposit. While his wife want to use the full loan for the car. Aboo wish he could settle his wife's car loan after 4 years of payment. . You as a financial planner are asked to advise Aboo and his wife in making the right choice. Show Aboo and his wife detail calculation in order to select a new car plus the rebate for early payment and the house that suitable with Aboo financial.

Answer 1

Aboo and Anna's combined monthly income is RM9,300 after accounting for their rent, leaving RM8,600 for other expenses. A car loan should not exceed 20% of Anna's income, and housing expenses should be within 28-31% of their combined income. Calculations using interest rates and loan terms will determine the maximum loan amounts for both the car and the house.

Step-by-step explanation:

To advise Aboo and Anna on buying a new car and a house that suits their finances, we must first calculate their monthly disposable income. Aboo's income is RM7,500, and Anna's is RM1,800, making their combined monthly income RM9,300. They pay RM700 in rent, which leaves them with RM8,600 for other expenses and savings.

For the car, a full loan means that Anna's income will likely be dedicated to the car payment and associated expenses such as insurance, maintenance, and fuel. It is critical to note that the monthly car payment should not exceed 15-20% of Anna's monthly take-home pay to ensure financial stability.

Regarding the home purchase, Aboo can pay a 10% deposit. To follow the practice of responsible borrowing, his housing-related expenses (mortgage, insurance, taxes, maintenance) should not exceed 28-31% of their gross monthly income. We can use Aboo's annual payment affordability of RM12,000 to calculate the maximum loan he can secure based on current interest rates, using the present value formula of a loan.

If Aboo wishes to pay off Anna's car loan within 4 years, this early repayment could result in a rebate, which needs to be calculated based on the specifics of the loan agreement. They should also build an emergency fund and consider other goals such as retirement savings.

This financial plan should be revisited periodically to adjust for changes in their income, expenses, or financial goals.