Anonymous
Hi David, young couple here buying our first home (BTO)! Can you give some guidance on how we should approach our mortgage payment?
We've received different advice from the people around us so would love some expert opinion! Thank you :)
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All are important.
1. Need at least 6 - 12 months of household expenses. Track all expenses to have a feel of it.
2. Are you considering to have a kid soon? Factor in expenses and think about how you want to care for the kids. Possibly maybe a maid, childcare or someone not working. All these need $.
3. Do you invest? If you do not, better learn but do not do it for the sake of doing it. Otherwise you might lose sleep or money. HDB loan interest is actually very low.
4. One possible way is contribute to SA $7000 per year for tax relief and earn 4% inside but this money can only be used when you reach 65 and assume no change in interest rate.
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Thanks for your question.
Both pay off quickly or pay off slowly is correct depending on what you want to achieve and also how else you want to use your extra $ if you pay off slowly.
To Pay off quickly or not, pros and cons.
I do not like debt. Debt over me gives me stress.
Mortgage interest rate cost money
Say you have $100k extra to pay off your home loan. interest is 2% but you have an investment vehicle that can pay you 5% for your 100k investment
Quick Maths! - says that you should invest the money instead
But if you do not like the risk of the investment vehicle please don't use this option.
Am i going to stay there forever or not?
We can talk about many many reasons here. But the bottom line is always this if else loop.
If you do not pay the loan off, is there another avenue that can generate more returns than your mortgage? and can you accept that other vehicle's investment risk?
Else just pay off the mortgage.