facebookIf a person has got enough cash to pay for a private property in full, is it advisable to do so? Or will it be better to still get a loan? - Seedly

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Joseph Sng

Joseph Sng

Level 4·Hatchets Burier at FIDReC

02 Jun 2021

CPF

If a person has got enough cash to pay for a private property in full, is it advisable to do so? Or will it be better to still get a loan?

What's the most cost-efficient way to pay for property, assuming one has the full financial means to pay for the entire property?

Discussion (8)

What are your thoughts?

Tan Choong Hwee

Tan Choong Hwee

02 Jun 2021

Level 14·Investor/Trader at Home

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.

V

Victor

01 Jun 2021

Level 8·Financial Service Consultant at AIA

Get a loan, use the remaining money to invest in productive assets

Fun Fact: Banks love to lend money to people who dont need it, and at a far cheaper rates and lenient terms

Nicholas Ho

Nicholas Ho

06 May 2020

Level 3·Financial Advisor at Manulife Financial Advisers Pte Ltd

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! ​​​

Pang Zhe Liang

Pang Zhe Liang

25 Feb 2020

Level 14·Senior Financial Services Consultant at AIA Singapore Private Limited

It depends on how much leverage a person needs.

For instance, if he has an instrument that yields a...

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