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? - Seedly
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Joseph Sng

Asked on 22 Feb 2020

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?


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It depends on how much leverage a person needs.

For instance, if he has an instrument that yields a guaranteed rate of 4% per annum throughout the mortgage duration, and the mortgage rate is a guaranteed rate of 2% per annum throughout the mortgage duration, then it may make sense to consider taking a loan.

However, if such leverage is not required, then stay debt-free since there is no need to take on more risk than necessary for the returns that the person does not need.

Furthermore, it also depends on cashflow planning for the long-term. If this is absolutely spare cash that is not required for the rest of the life, then the more it makes sense to just pay off the property completely.

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Wilson Nid A Break
Wilson Nid A Break
Level 9. God of Wisdom
Answered on 06 May 2020

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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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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Joe Lee
Joe Lee, Adventurer at Game of Life
Level 5. Genius
Answered on 25 Feb 2020

I think you should look into the said person risk appetite. If the person has a low risk appetite and will feel more comfortable being debt free, then go ahead and pay in full.

BUT if the person is able to sleep soundly at night with the idea of using leverage (house loans) to get more out of their asset, by using the cash and invest in a income generating asset that gives you a return more than your monthly loan, then by all means and go ahead.

I have seen people on different spectrum approaching this either way, utimately there are no right or wrong, just how comfortable you are with leverage & debt.


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Level 7. Grand Master
Answered on 24 Feb 2020

The beauty of property investment is that u can leverage with bank loan.

As the interest rate is less than 2% now, u can easily find an investment that give u return more than 2%. Then yr profit minus yr mortgage interest will be yr free money


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Portfolio question.

Look at it as an allocation of the portfolio. Leverage would help to free up your liquidity at the cost of monthly cash outflow. Could you use the extra cash to invest in other cashflow generating assets?

Whether or not you remain debt-free is highly dependent on your comfort level with having debt. Some just prefer not to have debt at all, some prefer to have it as a means to increase their potential return as they can move into multiple assets at the same time as opposed to having concentration risk.

There is really no right or wrong, it is all relative. Meeting with a financial consultant would help if you need someone to talk too.

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