[ggurl]

I need your inputs and opinions.

Here is our situation. We (husband and i) bought a residential house and lot through Pag-ibig amortization last year sometime march 2011. P895,000 ang loan namin sa pag-ibig. Ang term ng loan namin was 30 years (8.5%) --- P8,000/monthly amortization. At the time we took the loan, we had no intention na pa-abutin ng 30 years kase per computation namin, aabot ng around P2.8M ang mabayaran namin (interest and other charges). Before the year ended, we were able to save up some extra cash so we paid P400T (credited to the principal). So around P455T nalang ang utang namin. Nag-update ako ng account and saw na around P55T na ang binayad namin sa interest.

As of the present time, pwede na namin bayaran in full the remaining balance. Medyo hesitant ako -- should i pay na in full or deferred muna? Kase may other project sana kami papasukin ni hubby -- construction of a 3 door commercial building in a prime lot (national highway). Cash on hand namin is around P1M. The estimated cost of construction for the commercial building is around P600-800T.

We were thinking of paying our home amortization in full then thereafter i-loan din namin sa pag-ibig ang title ng lot kung saan tatayuan namin ng commerical bldg. Need your inputs. Thanks.

[Dodong_Simple]

Personally for me, babayaran ko na in Full yung residential house and lot para at least sa inyo na talaga yung bahay at lupa nakapangalan ng buong-buo... Another things eh sayang din ang interest na maipatong kung i-delay nyo pa yung payment. Magkano nalang ba yung total na last payment pag if ever payaran nyo in full? Basta make sure na yung pambayad mo eh hindi naka-allot for daily needs.

[bauer]

@ggurl,

your first decision is correct.  Use your spare cash for investment (construction of commercial space).  Kasi it will generate more cash for you as long as the cash is higher than your 8,000 pesos per month amortization sa bahay (i think it is already lower because you paid in advance).

hindi masama ang may utang hanggat konti lang ang interes at ang buwanang bayad ay hindi mabigat para sa inyo lalo na ang inutang ay ginamit sa isang bagay na may halaga at katuturan.
  

[edspecks2004]

If I am in your position, pay in full po.

[freefront]

I'm with bauer. You pay in full and your safety net is gone. What if you pay in full, take out a loan, construct the building but the generation of income gets delayed for a multitude of reasons? Your liquidity is already gone. Pay in full when the building is already giving you income<- sounds safer.

Besides, won't the time needed to get the papers ready eat up more time, fees and effort that could have been used to start with the new endeavor?

[rds]

^right.

fully paid na nga bahay mo, pero may panibagong utang ka na naman sa commercial building mo.

at pag nag-loan ka uli sa pag-ibig e 8.5% pa rin yan (unless na mababa na ngayun ang bigay ng pag-ibig). tapos may mga fixed charges pa yan sa early full payment ng old loan mo. may fixed charges din sa processing ng bagong loan.

pag na default payment mo sa new loan mo sa commercial building, at stake yung commercial property mo kasama na ang income sa rental.

[zimahtar]

Hi, just to share my opinion po...
... investment decisions should be made on cash flow and roi...Very polarizing kasi ang topic na ito for us Filipinos...debt free or invest(with risk).

Base sa sinabi mo, you have a very good cashflow... imagine saving 455k in 9 months and now you have 1M cash on hand... seems you will be able to finance your project.
- another way is ...survey the area to understand how much is the existing monthly rental fee (at kung patok ang commercial space)...then calculate the assume monthly income of your commercial bldg (total rental fee income less bldg tax, less bir business tax, less bldg maintenance, less at kung ano pa). If the net monthly income will allow you to pay the monthly ammortization of your existing loan for 3 years (which i doubt na paabutin ninyo ng 3 years)... or if you can get the roi in less than 5 years...then go for it....kasi you will generate extra income from the commercial bldg...like what they mentioned above.

yung calculation ko eh for reference lang... i also borrow money for investment purposes...Some businesses will give you faster returns... kaya medyo nag vary ang roi calculation...dati ayaw ko rin ng may utang, but things change ng nagsimulang bumaba ang interest rates:-)

I hope this helps...

[pmtmember]

for me do not pay in full but instead use the money to generate money. If you pay in full, mawawala na yong potential ng money to earn for you. Wag ka manghihinayang na aabot ng ilang milyon if you will compute all na babayaran mo sa pag ibig in 30 years. Just think of it this way.. Yong 8,000 mo 15 years from now, ano na value noon? D ba "cheap" na yan.

If I were you I will use that money to build yong sinabi ninyo na negosyo.

Just sharing

[bajoyjoy]

^I agree.

TS, just do some number crunching, and factor in your "opportunity cost" -- what you will be foregoing/giving up if you choose one investment/project as against the other.

Definition of 'Opportunity Cost' (investopedia)
1. The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

2. The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, your opportunity costs are 4% (6% - 2%).

^ang intindi ko sa definition,if applied in your case/situation, you estimate how much rental income that 3-door comm'l bldg can generate for you per month once completed and nagstart ng operations (w/n a yr siguro pwede na ipa-lease). say conservatively you lease the bldg for 10k per unit per month = 30k/mo... and then compare it with the “interest costs and other charges” which you will be able to save if you paid your residential prop, in full and in cash. remember, what you will be saving if you pay in full is not the 8k/mo but only the 8.5% interest and other charges (tama ba?). Approx mga P650/mo or P245k in 30 yrs ang nasave mo for the interest alone. pero compare it to what you would have foregone, mga P360K in a year na rental income, assuming it will set you back another year/12months para maka-raise uli ng P1M cash to start the construction of the comm'l bldg.

^for illustration lang yan ha. I’m not a realtor so I wouldn’t really know the mathematics behind it, at malamang mali-mali computations ko hahaha.. pero parang ganyan yung idea... goodluck!  

[ggurl]

Thanks for all the inputs. Really appreaciate it.

bajoyjoy --thanks for mentioning "opportunity cost". I will make a more in depth financial projection on our project. 

Our proposed 3 door commercial space building is located along the national highway (535 sqm). Wedding gift sa amin ng dad ko pero the title is in my name. He executed a deed of donation 4 days before my wedding (LOL). May 3 other existing lots na katabi ng lot namin have existing tenants already. Lote lang nag pinaparentahan. May isa na restaurant, motorcylcle parts shop, multi cab surpus shop -- sila mismo nagpatayo ng structure. Rent nila is P8T/month on the 535sqm. Hubby and i want to construct a 3door progressive (future expansion for 2nd floor) as our investment and para naman matuwa ang dad ko that we developed the property. Projected monthly rental income for the 3 stalls would P21T if we will peg it at P7T/month/tenant = P252T minus property tax, building tax, business tax and maintenance expenses. This is if all the units are occupied. I have to consider the vacancy rate pa din.