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What's the most cost-efficient way to pay for property, assuming one has the full financial means to pay for the entire property?
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Tan Choong Hwee
02 Jun 2021
Solutions Specialist at Providend
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Victor
01 Jun 2021
Financial Service Consultant at AIA
Get a loan, use the remaining money to invest in productive assets
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Fun Fact: Banks love to lend money to people who dont need it, and at a far cheaper rates and lenient terms
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Nicholas Ho
06 May 2020
ABC at ABC
Hi Joseph,
Great question! I used to have some client asking that question as well for their investment properties.
The question would be how comfortable are you after you pay finish in full cash and also how are your current financial situations. Are you going towards retirement or are you starting out your career.
There is no right answer to it, in my opinion below are what most Singaporeans do,
either to,
(1) Pay fully 100%, so there will be no debts/loan for your loved ones or, (No Risk)
(2) Bank loan, while using your remaining cash to invest and get higher investment returns than the bank loan interest. (Higher Risk Higher Potential Returns)
Though to answer your question, the most cost-efficient way would probably be to take the latter. As long as your Investment Returns are higher than Bank Loan Interest rate, the risk is lower, at the same time you have capital to do more things, and perhaps not just looking at 1 property, but multiple as well by diversifying your cash.
Take care and stay safe!
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Pang Zhe Liang
25 Feb 2020
Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)
It depends on how much leverage a person needs.
For instance, if he has an instrument that yields a...
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If you can get higher returns than the mortgage loan interests, it is better to take a loan and invest the cash to generate returns on top of paying loan interests.