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52 minutes ago
Friday, 12 May 2017
Should You Pay Off Your Residential Housing Loan ASAP????
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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!
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You are you and not others.
ReplyDeleteThinking in this way. The day we have paid off our residential home loan; we can say that we have fully pre-pay all our rentals and living in our home rent-free for life.
DeleteHaha true. But still need to pay pty tax, conservancy, any repairs/maintenance, replacement of spoilt appliances/furniture. If only can throw all these costs back to our Landlord! :)
DeleteUnless we are living in our parent's or relative home for free; we are either paying housing loan or rental.
DeleteStill have about 73k of hdb mortgage loan to pay to maximum tenure for another 11 years. Just stretch it there to the maximum or do partial payment?
ReplyDeleteUncle8888 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!
DeleteSimple man. Simple thinking!
Somewhat agree... but it will be your children asset some year later. :)
DeleteOne sound advice is Don't carry any residential housing loan into our retirement phase to put stress onto our retirement cash flow.
Delete"Don't carry any residential housing loan into our retirement..."
DeleteVery true --- in fact if you still got mortgage, not feasible to retire unless your outstanding mortgage is just a small amount of your total $$$$$$ e.g. 20% or less.
Regarding future children's asset .... S'pore property in future will have a much more subdued returns profile. Yes it's a "free" windfall for your children, but don't expect them to be able to sell it for a fantastic price unless it's a GCB or some prime freehold estate.
If I only have a HDB, I will rather downgrade to 2-room Flexi after 55 or 60 yrs old, get whatever silver bonus/rebate from govt, and add realised proceeds to my liquid assets. I will rather bequeath a growing & income-producing portfolio to my kids than a depreciating pigeon-hole that cannot last their lifetime anyway.
Would 73k be considered a substantial amount to worry about? Afterall, hdb loan mortgage interest is 2.6% versus cpf oa interest earned which is 2.5%; the difference is ony 0.1%.
ReplyDeleteFor me 73k is substantial if you consider it as potential CPF-SA.
DeleteI would try to use take-home cash to pay, leaving CPF monies to compound at 2.5+%/4+%. This is a no brainer if you're using bank loans that charges much lower than 2.5%.
In fact, I would leave at most the equivalent amount (or maybe 70-80%) in OA, and transfer the rest to SA. Every pay-check I'll xfer from OA-to-SA.
But that's just me. If you have children, or plan to get another property, or 100% ability to achieve 5+% compounded returns, etc then the decision will be different.
I'm referring to hdb mortgage interest of 2.6%, which is 0.1% more than the cpf oa interest of 2.5%.
DeleteSo balance of 73k, just leave it inside and use cpf monthly payment to clear ?
The question is to use spare cash to pay down partially and let CPF OA accumulate.
DeleteIf it is truly spare cash earning very low return then Maths is quite clear.
Either to invest cash for better return or becoming CPF OA saver @ 2.5% CAGR