Rushing to pay off hdb flat - pros & cons?

[sellun]

Refering to this article, what do everyone think about the common mindset of paying off housing loan ASAP?

The CONS discussed in the article.

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

4. If you are using a private bank loan, you will incur prepayment penalties

https://sg.finance.yahoo.com/news/rushing-pay-off-hdb-flat-might-big-mistake-082147611.html

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[starfish.starfish]

Used to hv the mindset to payoff my mortgage loan assp till I heeded advise from old birds here to only do so when bank interest goes to a much higher level.

 

[Wood41]

Bank loan 1+% , CPF loan 2.6% .
Many REITs & good stocks 4-10% yield .

The choice is clear.

 

[foxer77]

not using in cash but with cpf why not?

 

[ktyandkyc]

Choice is clear drag out using bank loan

 

[peacefulday]

My take as a new young bird, clear off asap using cpf and then next practice monthly transfer OA -> SA. Any other form of investment use only cash.

 

[ProLogic]

Can boast to be debt free.lol

 

[peacefulday]

Can boast to be debt free.lol

don't underestimate the conservative act. An initial -ve loss and easily get boost up later if well planned

 

[BBCWatcher]

Can boast to be debt free.lol

If you're trying to persuade someone that there might be other, better objectives than being debt free, try this one:

"It is better to have $1 million in the bank with $1,000 of total debt, or $10,000 in the bank with zero debt?"

Of course, the answer to that question is that the first situation is better. Your reliable net worth is what counts. Apple, the world's richest company, has over US$250 billion of cash and cash equivalents on hand. Yet Apple also borrows money around the world. There are two primary reasons they borrow, despite having an immense pile of cash. The first reason is that people are willing to lend Apple money at very low interest rates, and Apple can use that cheap money to generate higher interest (earnings) reliably. The second reason is tax avoidance.

I recall that somebody (a government) was willing to loan me money to attend university. The loan was interest free until 6 months after graduation, then it would start accumulating interest. (The interest rate was not particularly low, but it's wasn't terrible either.) So what did I do? Take the money, of course. About 5.9 months after graduation I paid off the loan, in full, with zero interest owed. I only had to return the principal. That was a good deal!

 

[thatone1]

I think what the article misses out was for this reason:

LTV (Loan to Value) for 2nd property , especially for those who wanna pay off their HDB in order to get 80% loan from banks instead of 50-60% loan.

 

[member1]

the investment "gain " u may be losing, or another word it may prevent you losing investment and save your interest rate from loan..

its always better to have move able assets, liquid assets, asset that you could use anytime.
flat price may drop too.

if you dump all your cash and it trapped ... when the right time come you can't make the best of it AND LOSS PERHAPS A BIG LIFE TIME CHANCE..

 

[BBCWatcher]

LTV (Loan to Value) for 2nd property....

But why buy a second property, at least if you're not going to occupy it? The other option is to take your leverage and invest it in something that, over the life of the mortgage, can yield a higher return than the cost of the mortgage -- hopefully a substantially higher return. Real estate, at least if you're talking about single properties directly purchased, doesn't seem to be the answer. Yields are very low.

Maybe the article forgot to mention that idea because it's a bad idea?

 

[ocs_woodlands]

Refering to this article, what do everyone think about the common mindset of paying off housing loan ASAP?

The CONS discussed in the article.

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

4. If you are using a private bank loan, you will incur prepayment penalties

https://sg.finance.yahoo.com/news/rushing-pay-off-hdb-flat-might-big-mistake-082147611.html

Sent from MiMax using GAGT

An uncommon but possible advantage is if you are planning to get a second property - so that you can get 80% loan....

Posted with Common Sense HardwareZone Forums app

 

[chopra]

I think what the article misses out was for this reason:

LTV (Loan to Value) for 2nd property , especially for those who wanna pay off their HDB in order to get 80% loan from banks instead of 50-60% loan.

But why buy a second property, at least if you're not going to occupy it? The other option is to take your leverage and invest it in something that, over the life of the mortgage, can yield a higher return than the cost of the mortgage -- hopefully a substantially higher return. Real estate, at least if you're talking about single properties directly purchased, doesn't seem to be the answer. Yields are very low.

Maybe the article forgot to mention that idea because it's a bad idea?

not to mention ABSD..