Asked by Anonymous
Asked on 15 Sep 2018
Pay off the min amount of loan
put everything else in excess into an investment that would generate returns that I can use to pay off the loan
By investing into ETF, most people are looking at compounding their position rather then taking the dividends to cover the loans interest + loan payment.
to have certainty, one can consider clearing the housing loan esp when cpf accured interest are compounding against you.
Do both if you can. Service the minimum and grow your investments. Once the latter is of a sufficient size, can consider liquidating some to redeem the outstanding mortgage partially or fully
It depends! Are you confident that your investments can yield you more money than the loan interest rate? If not, you should clear off your loans first before starting to invest.
For example, if you have $20k to spare. Your housing loan interest rate is, say, 5% per annum (I dont know the actualy % so i am just using a random number). If your investments yield 4% an annum, you are making a loss and also taking a risk (in terms of stock prices). You'd be better off clearing your loan in this case :)
Housing loan interest would usually be high and immediate effect than what an ETF may return to you unless you have a 5 figure sum. Thus debts reductions to save on interest is the right way to go for the 2 options here.
Personally, I would prefer to clear off my debts first to be debt free, to have a peace of mind and prevent the interest payable from accumulating as much as possible