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Full Payment on House Purchase or Loan Amortization and Investing Funds?

Beannie · 8 · 3228

Poll

Would you pay a house in full or ammorticize it and invest the remaining funds?

Pay in full.
2 (33.3%)
Ammorticize and invest remaining funds.
4 (66.7%)

Total Members Voted: 6

Beannie

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Hello. Ask lng po ako ng opinion ng mga experts dito sa PMT. If you have the funds to fully pay a house would you be doing that or would you opt to amorticize and invest the remaining funds for the meantime? Here are basic values for amortization:

Fund: 3M
Term (ammorticization): 96 months
Interest rate : 7% (for 60 months and to be restructured after)

Magkaiba kami ng opinion ng asawa ko. Lolz. He wants to fully pay and I want to do the latter (ammorticize and invest). So I decided to conduct a poll and see which idea is more popular with fellow PMT'ers. TIA.
« Last Edit: Sep 18, 2014, 12:07 PM by Beannie »


bauer

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^ If you will invest the portion that you may allocate in the purchase, How much do you think you can earn from your investment?

If the interest on the loan is 7% per annum, you need to earn at least 14% in your investment.  Can you do that?  Do you have sufficient skills without risking your capital too much?


Wills

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For me its an easy decision. Pay in full.


guido

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masarap walang utang. pay in full then ipon na lang ulit


lemuel_rabara

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Sir Bauer, paano nyo po na-compute yung 14%, 7% plus inflation?

Somewhat the same dilemma po here..

May loan din po ako sa bank, nagbabayad monthly for 10 years (7%interest)..

Pwede ko pong matapos agad yung utang ko kung mag-aadvance ako ng payment for recomputation.. pero..

May mga banks po sa UITF na ang 5-year gain nila is around 20+%.. Paano po kung i-invest ko na lng din po na ganun long term? At least kikita pa rn po ako di ba? Tama po ba?  Or wag na lang at tapusin ko na lang muna yung utang ko?

 :thankyou:


bauer

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@lemuel_rabara,

The 7% rate was given by the thread starter.  I believe it is the interest earn by the bank that the TS has to pay until the end of the loan.

The 14% rate of return is my own assumption.  It is not guaranteed so there must be a margin of safety.  All things remain equal.

The UITF performance of 20% per annum for a 5-year period is a record of PAST PERFORMANCE.  There is no guarantee on this rate.  You have to take a certain risks if you want to continue on this method. 

Bottom line, when the bank's interest rates becomes unbearable, be sure you are ready with CASH to advance the payments on the loan to reduce your vulnerability.  If you use all your spare cash to invest in UITF or mutual funds, then it is hard to rely on it if the market is on a down turn.
« Last Edit: Sep 19, 2014, 05:21 PM by bauer »


lemuel_rabara

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Noted sir! Thanks for your advice..
 :thankyou:


angeljme

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Depende sa price at fund ko.
Thread starter said, 3M ang fund nya.  3M din ba ang full price ng bahay? Less na ang discount, if paid in full?
Kung equal, I probably won't pay in full.  Mahirap ang walang cash on hand as fall back, specially kung may anak kang nag-aaral, etc.

Probably pay 2/3 of the house's price and amortize the rest.  Kung kayang ipasok sa pag-ibig ang balance, dun ko i-loan.  5yrs to pay lang para maliit pa rin ang interest.

The remaining cash would be for flexibility and probably buying furniture and home finishing and insurance of the house.

Kung significantly lower ang price ng bahay compared to my fund, then pay in full.


 


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