Which is better, paying down property loan or investing, if I am recycling the savings from cutting out expenses / unbudgeted salary increments?
I am negotiating for loan refinancing. My loan interest crept up to 2.74%, but I expect this will come down over the next 6 months. My cash investments are doing about 5 to 5.8% dividend yield, but that's still less than half the monthly interest (in $$) I am paying on the loan.
Very undecided. It seems better for me to stop buying SSBs and just throw these to pay down the loan. I can't decide if its better to stop using the dividends to reinvest or pay down the loan.
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Charmaine Ng
17 Jun 2019
The Value Maximizer at @ Every Ma La Xiang Guo Stall
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Siow Nan
16 Jun 2019
E at NUS
If you are using money from ssb @ around 2% to pay off loans with interests of 2.74%..then it can be considered.
If you have additional cash able to generate consistent 5 to 5.8% dividends... Then why use them to pay off a 2.74% interest? You can enjoy the leverage still and liquidity of funds if needed.
Importantly, make sure you still have sufficient emergency reserves if you choose to redeem your loan. Pros you get ease of mind and can consider to switch job etc easier if you have a lower loan commitment.
But if you have a better way to gain additional interest above the loan interest, then why not make use of this leverage? You can also consider refinancing to lower your loan interest rates as well.
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I would use the money to pay down the loan. If it doesnât fully pay down the loan - youâre still paying interests.. best to eradicate the need to pay interest in the first place.