Should you pay off your housing loan fast?

[Dennis Ng]

Should you pay off your Housing Loan fast?
Most Personal Finance books would advice you to pay off your housing loan fast. However, in my opinion, the housing loan should be the last loan you ever repay. My opinion was sought and published in Sunday Times 30 Oct 2005 in the article entitled "Sense, Nonsense?" some oft touted Financial Advice.

Here're my comments:

You should pay off your mortgage fast
IT'S all well and good to try to get that monkey of a mortgage off your back, but consider first if you have other debt that is being charged much higher interest rates.

A housing loan is the last loan that you should repay, says certified financial planner Dennis Ng. Why?

The interest rate is the lowest you can get for any loan, he says. It's around 2.5 per cent currently in Singapore; on a car loan, the rate is twice as much.

'While reviewing the financial situation of clients, I've come across people who reduce their housing loan while buying a new car and taking up a car loan,' says Mr Ng. 'This does not make any financial sense at all.'

If you have a renovation loan, it would be something to settle early as it costs you 7 per cent in interest a year.

Credit card debt ranks up there in priority as you get charged up to 24 per cent in interest a year.


Cheers!

Dennis Ng,
http://www.leverageholdings.com

[Dennis Ng]

Dear Dreamer,

I'm not quite sure what you're asking.

My comments:
1. HDB loans are on monthly rest basis. Your loan principal does get reduced from month to month.

2. your monthly instalment is fixed at outset, depending on the interest rate then when you take up the loan. So the monthly instalment is a fixed amount but every month the proportion of what you pay in interest and what you pay in principal varies from year to year. Typically as the year go by, the proportion of the instalment going towards principal repayment goes up since your loan outstanding is being reduced thus interest charged reduces.

We can provide you with a FREE Housing Loan Analysis showing you the detailed breakdown from month to month. Just email us at info@HousingLoanSG.com providing your name, contact no. and your loan oustanding, your monthly instalment and the interest rate of your loan.

Cheers!

Dennis Ng

[Guest]

Should you pay off your Housing Loan fast?
Most Personal Finance books would advice you to pay off your housing loan fast. However, in my opinion, the housing loan should be the last loan you ever repay. My opinion was sought and published in Sunday Times 30 Oct 2005 in the article entitled "Sense, Nonsense?" some oft touted Financial Advice.

Here're my comments:

You should pay off your mortgage fast
IT'S all well and good to try to get that monkey of a mortgage off your back, but consider first if you have other debt that is being charged much higher interest rates.

A housing loan is the last loan that you should repay, says certified financial planner Dennis Ng. Why?

The interest rate is the lowest you can get for any loan, he says. It's around 2.5 per cent currently in Singapore; on a car loan, the rate is twice as much.

'While reviewing the financial situation of clients, I've come across people who reduce their housing loan while buying a new car and taking up a car loan,' says Mr Ng. 'This does not make any financial sense at all.'

If you have a renovation loan, it would be something to settle early as it costs you 7 per cent in interest a year.

Credit card debt ranks up there in priority as you get charged up to 24 per cent in interest a year.


Cheers!

Dennis Ng,
http://www.leverageholdings.com

On surface the housing loan interest might be lower than say a car loan....but pls bear in mind that a housing loan can stretch to 30 years which the compounding effect can be huge. So to reduce this balloning effect cant be overlook in my opinion.

Any comments on the Standard Chartered Mortgage One concept btw? Do u think it's a good product?

[Dennis Ng]

Dear Guest,

I think as long as a person does not extend his/her Housing Loan beyond 25 years; keep monthly instalment within 35% of his/her income, Housing Loan is the last loan to ever repay.

Interest charged on Car Loan are double of that charged on Housing Loans. Even if a person takes a 7 year loan, please don't forget that he/she is likely to buy another car and take another loan again...so if a person start owning a car at age 30 and continue doing so....he/she is taking more than 30 years (in aggregate) on car Loan where interest rates are double of Housing Loans.

Standard Chartered MortgageOne is a type of interest offset package. Currently, there're 3 other banks offering something like that. Such a package makes sense for people who do have some liquid cash. At http://www.HousingLoanSG.com we'll base on information of each specific individual to provide an unbiased analysis of ALL the Housing Loan packages in Singapore, to help consumers make an informed decision.

We leave the final decision to consumers. Consumers are free to choose whichever bank, whichever Housing Loan package they want, and we'll help them get it, since we have working arrangement with ALL financial institutions providing Housing Loans in Singapore.

Email to info@HousingLoanSG.com for a FREE unbiased analysis. We don't charge a fee for our service, so consumers have everything to gain and nothing to lose in engaging our service.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com - helping you get BEST deal in Housing Loans in Singapore

http://www.MotorInsuranceSG.com - helping you get unbiased quotes on Motor Insurance in Singapore!

[Guest]

Interest charged on Car Loan are double of that charged on Housing Loans. Even if a person takes a 7 year loan, please don't forget that he/she is likely to buy another car and take another loan again...so if a person start owning a car at age 30 and continue doing so....he/she is taking more than 30 years (in aggregate) on car Loan where interest rates are double of Housing Loans.

The bold statement is an assumption but I must say if this point is valid then housing loan would then be the cheapest form of financing and need not be paid the earliest.

In your opinion, is there any disadvantage in Mortgage One loan?

[Dennis Ng]

as mentioned, other than Standard Chartered, there're 3 other banks that provide interest offset packages.

An interest offset package such as MortgageOne is only good for people who have cash to place to offset interest.

If you like us to do an analysis of your specific situation, please email to info@HousingLoanSG.com

I think I've seen people who own cars for 20 to 30 years. Once a person buy a car, after he get used to having a car, it's natural for the person to continue to buy another car after that. Housing Loan is the cheapest loan is a FACT, not an opinion.

Cheers!

Dennis Ng, http://www.HousingLoanSG.com - getting the BEST deal in Housing Loans in Singapore!

[Dennis Ng]

Dear bohemian,

you said:"But suppose a person is financing his monthly housing loan entirely by CPF, & since we can't make use of CPF monies to settle other loans, in the spirit that 1 should reduce/ minimize his total liabilities in the shortest possible time, would you agree that we should still try to settle the house loan fast, in this case?"

My comments:
My answer is still No. I think many people missed out on my other reasons for saying a Person should NOT be in a hurry to pay off Housing Loans. There're other reasons I discussed in the article:"Some Forms of Debt are good". Read and re-read the article and hopefully, you would have a better idea about ALL the reasons I raised instead of just focusing on one or two reasons I said.

Like I mentioned, my role is just to provide necessary information for people to make an informed decision. Everyday, we have clients that decide to pay off their Housing Loan and we'll respect their decision. I don't impose my thinking and decision on my clients.

However, unlike many other Financial Planners out there, I'm someone who not only TALKS, but Walk my talk. As I have shared, I have more than double the amount in cash to pay off my Housing Loan and I'm not using a single cent of it to make prepayment to my Housing Loans for the reasons I shared.

I'm one of the rare "financial doctors" around that actually take the medicine I prescribe.

I've set "to help raise Financial Literacy in Singapore and beyond as my personal mission" and starting this forum is just one of the way and things I'm doing towards this objective.