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20190208 How to choose tenure of your loan? Part 1

20190208 (Fri)

How to choose the tenure of your loan? Part 1.

Let us take for example a RM500,000 house. You need to come out with 10% down payment and 90% mortgage. How much is your total repayment after full payment of the loan? Double the value? Let us use the online calculator to arrive at the below summary:

Property price = RM500,000, 90% Loan, interest rate 4.55%

35 years loan, Monthly installment RM2,143.61, Full payment 50% capital : 50% interest
30 years loan, Monthly installment RM2,293.47, Full payment 55% capital : 45% interest
25 years loan, Monthly installment RM2,514.03, Full payment 60% capital : 40% interest
20 years loan, Monthly installment RM2,859.08, Full payment 66% capital : 34% interest
15 years loan, Monthly installment RM3,453.98, Full payment 72% capital : 28% interest
10 years loan, Monthly installment RM4,674.58, Full payment 80% capital : 20% interest

In other words, for scenario No.1 – you will pay RM1,000,000 for the house at RM500,000 purchase price after 35 years. That is why some would say no point investing in property as it will drawn you by its cost (interest).

However, 35 years into the future, this house will cost double of its present value or more. Take for example, your father’s house (where you were born) should now doubled or more than doubled its value. In actual case, it has more than tripled by now. RM200k semi D during the 1980s (1985) are now sold at least RM600k – RM800k in good location around Kuching..

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