If you buy a $500,000 house, borrow $400,000 and pay it off over 30 years The bank lending the money will make ~$500,000 in interest from money it cr

[Nemesis_lane123]

If you buy a $500,000 house, borrow $400,000 and pay it off over 30 years

The bank lending the money will make ~$500,000 in interest from money it created out of thin air

Meaning 5-10 years of your career were dedicated to paying interest



This is why financial institutions love real estate investors

That's a very good observation. Interest should be counted on monies in hand not speculated money.

Another way to look at the calculation is like that.

My 1.2 million house has 340k loan. Every month I pay 1792. Interest @2.6@% of the loan is $742.

I take the effective interest rate as actually 742/1792 = 41%. Unless you have am investment return of more than 41% better pay off the loan. That's y I m clearing in another 2 years.

Previous house I cleared in 3 years.

Car loan is the worst as the principal doesn go down. Car if can, that one must really full cash.

 

[cay_one]

HDB loan interest is 2.6% and with a loan period of 30 years, the total interest is only $176,488. How you get 500k? You can check using the mortgage calculator from property guru

https://www.propertyguru.com.sg/mortgage/calculators/mortgage-repayment?loan_amount=400000

 

[skylink67]

Housing bubble burst in US, China and Japan. What happens to banks when people default on payments and they are stuck with property with lower value?

Banks take risk when they offer loans. I mean if everyone so rich should just pay upfront right?

 

[DragonFire]

If you buy a $500,000 house, borrow $400,000 and pay it off over 30 years

The bank lending the money will make ~$500,000 in interest from money it created out of thin air

Meaning 5-10 years of your career were dedicated to paying interest



This is why financial institutions love real estate investors

Also why we love being the bank for the state.

 

[mcylo]

Borrow 400k to buy is is still better than borrow 1000k for 10 years to service car loans……


just look at those foolish fb comments on PI page and u will know.

 

[footi3]

why pple do the same to collect interest

 

[jumpthepig]

Borrow 400k to buy is is still better than borrow 1000k for 10 years to service car loans……


just look at those foolish fb comments on PI page and u will know.

1000k(million dollar Car) Car loans = Super Car. Super LICH people? If so, they don’t need loan….no need worry for them.

 

[mcylo]

1000k Car loans = Super Car. Super LICH people? If so, they don’t need loan….no need to worry for them.

100k just for a Japanese or korean car…..even a BYD

 

[F3Rm1nat0r]

Exactly right.
and this called the evil poison of Capitalism.
can try common prosperity for all if you wang

only owners of capital generating assets are rich now. the rest are all slaves to them



Read HWZ Forum Rules!

 

[hachi]

That's a very good observation. Interest should be counted on monies in hand not speculated money.

Another way to look at the calculation is like that.

My 1.2 million house has 340k loan. Every month I pay 1792. Interest @2.6@% of the loan is $742.

I take the effective interest rate as actually 742/1792 = 41%. Unless you have am investment return of more than 41% better pay off the loan. That's y I m clearing in another 2 years.

Previous house I cleared in 3 years.

Car loan is the worst as the principal doesn go down. Car if can, that one must really full cash.

Even property loan at low precentage... You are effectively alot of interests since the principal is large.

And your primary house is not an investment unit you sell it.

 

[jumpthepig]

100k just for a Japanese or korean car…..even a BYD

100k is 4 times smaller then 400k. Car is depreciating asset, no essential but will improve quality of life..

 

[Sprezatura]

When you take a $400,000 loan from a bank, the bank doesn't need to maintain the exact amount of $400,000 in reserve. Instead, banks follow reserve requirements set by regulatory authorities, which dictate the percentage of deposits they must keep in reserve. For instance, if the reserve requirement is 10%, the bank would need to keep $40,000 in reserve for every $400,000 loaned out. So $390 000 is generated out from the thin air.

you got it the other way round

when you deposit the 400k in a bank, the bank doesn't need to keep all 400k in reserve, it can take 90% and loan it out as per your example

when making loans, the bank needs to have the money first and that money comes from deposits

 

[fortunehunter]

Based on a loan of SGD 400,000 over 30 years at an annual interest rate of 3%:

Monthly EMI: SGD 1,686.42

Total repayment: SGD 607,109.81

Total interest earned by the bank: SGD 207,109.81


The bank would earn SGD 207,109.81 in interest over the loan
tenure.

 

[hachi]

Based on a loan of SGD 400,000 over 30 years at an annual interest rate of 3%:

Monthly EMI: SGD 1,686.42

Total repayment: SGD 607,109.81

Total interest earned by the bank: SGD 207,109.81


The bank would earn SGD 207,109.81 in interest over the loan
tenure.

And banks will take most interests in the first 10y. If your property don't appreciate much and you wanna sell it within 10y... One will realise not much profit...

 

[fortunehunter]

And banks will take most interests in the first 10y. If your property don't appreciate much and you wanna sell it within 10y... One will realise not much profit...

Is best to pay all and sell after MOP.

 

[wahlaneh]

Last time back in early 2000s before all these cooling measures are implemented. 1x BTO and 1x Condo is best combi for a fairly young couple with no kids and earning good combined salary.

Hold the condo to TOP and sell, make a handsome profit and do the same thing again.

 

[coyote]

If you buy a $500,000 house, borrow $400,000 and pay it off over 30 years

The bank lending the money will make ~$500,000 in interest from money it created out of thin air

Meaning 5-10 years of your career were dedicated to paying interest



This is why financial institutions love real estate investors

If you buy a $500,000 house, take a $400,000 loan over 30 years... Current interest rate at 2.6% means a monthly mortgage repayment of only $1,601.36.

So your cash outlay is only $100,000 and assuming a rental of $2000 a month. You actually get $400 passive rental income per month for the next 30 years, that is $144,000 and you a house thats fully paid. And that also far exceeded your initial $100,000 cash outlay by 44%!!! So the loan is only part of the business expenses.

You ROE(return on equity) is actually 500% over 30 years, because your tenant is paying for your mortgage.

That, my friend is how the smarter investors made money from leveraging while the not very smart people are complaining about interest paid to the banks.

You cannot make all the money in the world. You invest in a house, the develop took a cut, the bank took a cut, the agent took a cut, the lawyer took a cut and most importantly you took the biggest cut. It's a win x 5!

 

[RadEoNic]

Use CPF, cos CPF is your money!
Even if sell, it also goes back to your CPF
Problem comes when u don’t get to withdraw it lol

 

[Zze121]

ban loan @ 3.5% 400k 30yr
int 246.6k
int in first 5yr 1.1k x 60mth is 66k
5yr sell breakeven @ 566k

cut from 30yr to 10yr @ 3.5% 400k
int is 74.6k

 

[jumpthepig]

ban loan @ 3.5% 400k 30yr
int 246.6k
int in first 5yr 1.1k x 60mth is 66k
5yr sell breakeven @ 566k

Consider these also….Reno and Furnishing are not cheap nowadays, Look slightly nicer and more comfortable will easily cost around 100k….bigger unit will easily be more than 150k.

“law firm / property firm got work == earn $$
reno / furnishing your house == others earn your $$”