Why there are few advantages to paying off your flat early???

Quote:


The main reason most people want to pay off their flat is psychological: It might give you peace of mind to know that your home – a major debt – is paid up. But what if we told you that peace of mind can easily be shattered, and turned into a prolonged nightmare?

1. You cannot easily convert your flat to cash during emergencies
2. You may not be making sufficient preparations for retirement
3. You could be paying off your debts in the wrong order


Walau! When Uncle8888 read this article in the cyber world. KNS!


Uncle8888 paid off his housing loan in five years after working for more than ten years i.e. at least 15 years worth of CPF OA money to clear his housing loan. His cash saving is unused for his housing loan! Uncle8888 is not a dumb saver or dumb investor.

The writer just assumed that those could afford to fully pay up their housing loan early are either dumb saver or dumb investor. 

Some writers don't write educational articles based on real people, real life experience; but they write on concept and theory. How useful and practical can it be?


What Uncle8888's  experience on real people, real story on the ground on their housing loan is different.


Quote : It might give you peace of mind to know that your home – a major debt – is paid up. But what if we told you that peace of mind can easily be shattered, and turned into a prolonged nightmare?



On retrenchment: Anybody can be sure that they don't be the next one to be retrenched!

The FACT on real people on the ground: When those who have significant outstanding housing loan; their dream and peace of mind is shattered and prolonged nightmare may be waiting if they are in their late 40s or 50s.


But; for those who have cleared their housing loan; they said heng ah!

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (7)

Read? Home for Living and not for profit taking - Part 2

Read? debt-free — and that, to me, is richness enough

Read more?

Should You Pay Off Your Residential Housing Loan ASAP????

Read? More Articles

Many different views if you ask around and get confused with often conflicting views: Good debt or Bad debt?

Housing loan is the cheapest loan in town and you don't know how to leverage on it. You are dumb! Right?

So you ask Uncle8888 how?

Uncle8888 always thinks that his residential home is consumption item and never was an investment instrument. All consumption loans are bad debts which to be avoided if possible or otherwise pay off ASAP!

Simple man. Simple thinking!

When our company started to rumor on pending retrenchment; then those who are debt free may say: Heng ah!

Taking HDB Housing Loan : Wipe Out CPF OA Or Max CPF OA to SA???

Here is the Maths!

Know the difference

Choose what is right for you as couple. 

Start talking. LOL!

Trust but verify - SMOL


Source --> Enquiry on Monthly Installment

Why I DIDN'T chose a 30 year bank loan but a much shorter one???

Read more on ? Housing Loan


A few questions to be seriously answered before we know whether we ARE LIKELY to be right in the future.


(1) You seriously think that you won't get married and have kids.

(2) You don't REALLY have any dependents counting on you alone.

(3) You don't foresee you will be forced into unexpected early retirement


If the answer is all YES!

You can go ahead with your 30 year bank loan!


Uncle8888's  past conversations with those who have been retrenched. 

Those who said Heng Ah and felt so relieved! are those who have fully paid up their housing loan!

You will know whether you have made that right or wrong decision regarding your housing loan when you are retrenched in your 50s!

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (5) - Refreshing It!

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (5)


"When I told some colleagues that I dumped all available CPF money to pay up and took up only 5-year housing loan. I believe some of them might think that I was stupid not to take advantage of the cheapest loan available." - Createwealth8888

I know that the housing loan is the cheapest loan in town and I also heard many times from Mr Property Guru and Mr Banker that housing loan is GOOD DEBT if you are a savvy investor. Really ah?


The Past is not the Present. The Present is not the Future.

When will we know that we have made the right decision and bear the consequences and opportunities from this decision?

The next Crisis is of the equivalent magnitude of GFC or AFC will teach us great lesson for the rest of our time in the market, economy and our jobs.

Younger ones should ask your parents what are in their mind during AFC and GFC? What have they regretted not doing it?

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (7)

Read? More than 1 in 2 Singaporeans doomed to retire under a pile of debt


Will You Try To Pay Off Your Housing Loan ASAP If You Have One?


At every recession, we will read again and again!

Heng ah!

"We don't have many financial commitments - our car was scrapped last year and the housing loan is paid up, so we're not hit so badly," says Ms Chew, who is taking a break before job hunting.


How many folks out there get it?


Read? Help! I've been retrenched

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (6)

How to pay off that mortgage by 65?

Financial commitments, economic downturn and unforeseen life events are disrupting Singaporeans’ efforts to save for retirement.

According to a survey by HSBC, 53% of working-age Singapore respondents said paying off their mortgage and other debts (the third highest globally in the report) is the biggest barrier preventing them from preparing adequately. Other respondents nominated recent economic downturns (27%) and unforeseen illness (23%) as the catalyst for reduced retirement saving.

“There are no guarantees in life so Singaporeans need to future-proof themselves against unforeseen events like market fluctuations, economic slumps and other challenges that will inevitably arise at some stage in their lives,” says Matthew Colebrook, Head of Retail Banking and Wealth Management at HSBC Singapore.

The report shows that with the benefit of hindsight, many retirees would have done things differently before they retired to improve their standard of living in retirement, including beginning planning earlier in life.

CW8888: How many will think in this manner? Future Me?

According to the survey, 40 percent of retirees believe that retirement planning should start at the latest by the age of 30 to build an adequate retirement savings pot.

Ian Martin, Chief Executive Officer, HSBC Insurance (Singapore), said: “Retirees’ saving lethargy is a cautionary tale for current workers. However, better late than never, Singaporeans, regardless of age or income, are not without recourse on what they can do to plug the retirement savings gap and mitigate the negative future scenarios. They should start conversations with their wealth advisers soon to plan out their retirement. 

How to pay off that mortgage by 65?
Financial commitments, economic downturn and unforeseen life events are disrupting Singaporeans’ efforts to save for retirement.
According to a survey by HSBC, 53% of working-age Singapore respondents said paying off their mortgage and other debts (the third highest globally in the report) is the biggest barrier preventing them from preparing adequately. Other respondents nominated recent economic downturns (27%) and unforeseen illness (23%) as the catalyst for reduced retirement saving.
“There are no guarantees in life so Singaporeans need to future-proof themselves against unforeseen events like market fluctuations, economic slumps and other challenges that will inevitably arise at some stage in their lives,” says Matthew Colebrook, Head of Retail Banking and Wealth Management at HSBC Singapore.
The report shows that with the benefit of hindsight, many retirees would have done things differently before they retired to improve their standard of living in retirement, including beginning planning earlier in life.
- See more at: http://sbr.com.sg/financial-services/news/more-1-in-2-singaporeans-doomed-retire-under-pile-debt#sthash.R0peyO7K.dpuf

More than 1 in 2 Singaporeans doomed to retire under a pile of debt

How to pay off that mortgage by 65?
Financial commitments, economic downturn and unforeseen life events are disrupting Singaporeans’ efforts to save for retirement.
According to a survey by HSBC, 53% of working-age Singapore respondents said paying off their mortgage and other debts (the third highest globally in the report) is the biggest barrier preventing them from preparing adequately. Other respondents nominated recent economic downturns (27%) and unforeseen illness (23%) as the catalyst for reduced retirement saving.
“There are no guarantees in life so Singaporeans need to future-proof themselves against unforeseen events like market fluctuations, economic slumps and other challenges that will inevitably arise at some stage in their lives,” says Matthew Colebrook, Head of Retail Banking and Wealth Management at HSBC Singapore.
The report shows that with the benefit of hindsight, many retirees would have done things differently before they retired to improve their standard of living in retirement, including beginning planning earlier in life.
- See more at: http://sbr.com.sg/financial-services/news/more-1-in-2-singaporeans-doomed-retire-under-pile-debt#sthash.R0peyO7K.dpuf

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (6)

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (5)

Pg 36, invest, thesundaytimes, Oct 2013


Using CPF to pay off mortgage in 7 years for a 25-year HDB housing loan of around $194K in 1995



Another "not-so-savvy-investor" like Uncle8888.

How to compute the opportunity cost of being debt-free too early?


Start early. Slow and steady?

Start later but sprint faster?

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (13)

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (12)


Read? Should you pay off your loan even if you have extra cash?


By Wilfred Ling       

How will I advise my clients if they want to buy properties?

First, I always encourage my clients to pay off their loan as soon as possible for their own residential home. It can be HDB or private it does not matter. I encourage them regardless of the interest rate environment to pay off their residential mortgage because they need a physical place call home which is safe and not subject to any kind of risk such as foreclosure. For a fully paid up HDB, the property is protected from creditors. However, I will not advocate paying off the debt in a single lump sum as it can create a liquidity crisis. So I’ll have a proper pre-payment strategy in place for them. Say, if their loan was a 30 years loan, I’ll have a schedule of  pre-payments over the next 10 years so that their mortgages will be cleared by 10 years instead.


Createwealth8888

Is your only residential home loan your investment loan? Think again!

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (12)

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (11)

50 Year Housing Loans In Singapore…

Are some of our next generation born into House Slaves for the Bankers!!!

"I was debt-free before 36 and live through few recessions without big worries and not losing sleep at nights." - Createwealth8888

Actually, he has dumped most of his saving available in CPF into my home and only took a 5-years HDB loan and that really surprised few people around him at that time.

Did Uncle8888 lose out by not having more money for early investment?

What is the verdict at his age at 56?

Sometime, we should rather listen to those who have arrived as they may have done something right to reach there safely and on time.

When comes to investing during market crash, the state of  Mind is the most important. Only calm mind is able to spot opportunities at the most risky moments as they know will not die even though there is likelihood of great investment failure.

Are you ready for that Moment of the Greatest chance to become rich in stocks?

No 'wealth effect' in S'poreans' spending: MAS

STOCK and property prices in Singapore go up or down, but people do not change how they spend.

The lack of a so-called "wealth effect" in Singapore was highlighted by the Monetary Authority of Singapore (MAS) in its latest macroeconomic review.

MAS found that people do not rush to go on shopping sprees just because the values of stocks or homes in general have soared.

Just For Thinking ....

 Read?  Asset Rich. Cash-flow Rich

Only when we are cash-flow rich, then we can be more generous in spending i.e. wealth effect! MAS's finding just confirm it.  We need to be both asset rich and cash-flow rich to be wealthy. Not meh?

Asset Rich. Cash-flow Rich

Just For Thinking ....

Read? Understanding Asset and Liability (3)

A. You have an asset worth only $500K but it will generate 10% cash flow or passive income i.e. $50K

B. You have nice asset worth $1M but no cash flow from it.

A or B will make you feel richer and can buy drinks for your friends at gathering without feeling the pain in the pocket.

Like A or B?

Understanding Asset and Liability (3)

Read? Understanding Asset and Liability (2)


Read? The place of residence you bought is not an asset?

Interesting question to think about. Right?

The international standard of computing our net worth is to exclude the value of our residential home as an asset and there is obvious reason to do that. I don't think the international standard don't suka suka exclude it.

In Toa Payoh Central, there will be many more 5 rooms HDB millionaires if they are to include the value of their HDB flats as part of their net worth.

But, how much of these folks will begin to live and feel like millionaire if most of their assets come from the worth of their million dollars HDB flat? How many of these "millionaire" can fire their boss tomorrow if they can't tahan their boss anymore?

These "millionaires" may be sitting on Gold mine; but without extracting the Gold out of the mine to exchange for basic needs. They will soon become starving "millionaires". Will they still feel like millionaire?

The moral of story

A conventional millionaire is the one who has other assets producing investment income as cash flow or can easily convert  part of their other assets into cash flow and without having to do much adjustment to their current life style by a major down grade.

May be we can classify our residential home as one extra line below the conventional net worth as contingency asset and that may make every property owners happy.

Understanding Asset and Liability (2)

Read? Understanding Asset and Liability

This concept of asset and liability can be extended to stocks investing.

When we invent in stocks without using margins or leverages we are buying assets; but when we are buying stocks on margins or leverages; they will become liabilities whenever we have margin calls from our brokers as cash from our pocket will flow to our brokers.

Good assets

Good assets are those stocks that are paying regular dividends and putting cash into our pocket and at the same time their stock prices are moving up North. Over time, these assets will make us feel richer and richer.

Non-performing assets

These stocks still pay us decent dividends but their stock prices are not moving up North so they may not actually made us feel richer.

Bad assets

Fallen stock prices with no dividends. These stocks are bad assets that we cannot afford to hold too many of them and for too long as rising inflation over long run will eventually kill us.

To become rich in stocks

This is where Pareto's Law will be helpful in our asset management.

80% of our stocks must be of good assets providing cash into our pocket and at the same time they will made us feel richer and richer over long run.

Understanding Asset and Liability

Read? Opportunity and Outcome??? (2)

What is an asset?

An asset is something that can continuously or periodically put cash into our pocket.

What is liability?

Liability is something that can continuously or periodically take away cash from our pocket.

So is our residential home an asset or liability?

When we are still paying monthly mortgage loan on our residential home, it is a liability as it is taking away cash from our pocket. It is only when we have fully paid up our residential home; it has stopped becoming a liability but not an asset yet as it doesn't put any cash into our pocket.

This is probably the reason why the widely accepted method of computing our net worth is to exclude the value of our residential home as an asset but to include any outstanding mortgage loan as liability.

Renting out rooms from our residential home

When we rent out rooms from our fully paid residential home; it is an asset as it is putting cash into our pocket.

But when we are renting out rooms from our residential home while we are still servicing our mortgage loan; it is just reducing our liability with the net proceed from rental income. It is not an asset yet.

Propety investment gain

When we sold our residential home at profit; it is just an investment gain after net expenses and relocation costs as we will always need a roof over our head elsewhere.

Investment property

Our investment property can be an asset or liability depending on the current rental market condition.

When our rental income from investment property exceeded the monthly mortgage payment plus all expenses related to this investment property then it is an asset as it is putting cash into our pocket. But, when the rental income fails to cover the monthly mortgage payment and other related expenses it will become a liability as it is taking away cash from our pocket.

An Asset or Liability???

When we are investing, we must fully understand the concept of asset and liability. Our assets will help us to build up our wealth over time. Our liabilities may threaten or destroy us unexpectedly when we fail to manage them within our financial means during unexpected and extreme market condition.

Opportunity and Outcome??? (2)

Read? Opportunity and Outcome???

Read? Investing Made Simple by Uncle8888 (33)

Read? Method, Mind and Money

Investing model

Once we understand the investing model we will know that having money at hand for crisis investing is not enough. Our money at hand is just our fuel as supply to the Input. During deep economic crisis, it is likely that our own likelihood may be threatened. Can our investing mind still be in calm and steady state to seize opportunity for larger risk-reward?

Who do you bet to be the one who is calm and steady in his investing mind?

The man who is debt-free or the man who is still servicing his mortgage loan and fear of losing his job?

Opportunity and Outcome???

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (11)

Should you be paying off the cheapest housing loan in town and assuming the house is your only residential home and there is no intention to monetise it during your last phase of your life on Hotel Earth?

The more you read from different sources you may become blur instead of becoming clearer.

Opportunity and Outcome

The moment we have fully pay up our only residential home. It is a definite and positive outcome. We have owned the home outright and unencumbered.

When we choose to take the longest loan and use the excess cash to invest. This excess cash just present an opportunity. What looks like great opportunity initially may not actually end up with positive outcome. This is the truth in the market. How many times have we turned our opportunities into disasters? Think back!

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (11)

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (10)

Enjoy loan tenure up to 40 years, or 70 years of age, whichever is earlier.



40 years housing loan!!! 

The banks are telling you to take your time to pay your housing loan and become a wage slave for next 40 yrs or up to 70, whichever is earlier!

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (10)

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (9)

Fully paid home may go beyond the Returns of investment dollars and opportunity cost

What is the dollar value of the Mind of Peace and Beloved Gift to your family when you are gone?

The best gifts to leave behind for our family when we are gone are (1) fully paid home (if not, then fully insured mortgage insurance), (2) adequate life insurance coverage and (3) well written Will.

We should aim for ONE THING LESS to worry for them.

So, what is the dollar value of this One Thing less to worry for your family? Anyone?

Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (9)

Read? Will You Try To Pay Off Your Housing Loan ASAP If You Have One? (8)

Besides one does get a feeling of freedom when one is debt free; it may actually make it easier for the wife to make a decision to quit working and becomes a stay-at-home mum to look after kids.