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Hi Hyom,
Thank you for enlightening me that it is actually not a fixed loan but based on interest rate of the CPF account. I totally forgot about that linkage.
Appreciate your reply.
Regards,
Flinger
Hi Jared,
That's true refinancing is a great tool if you are using ARM. Sometimes however, it comes with penalties etc...but if you are careful in your package it can be good to refinance.
However, I think from a risk management perspective for me, I think the HDB loan is a better loan for me.
Thank you for your reply. Much appreciated.
Regards,
Flinger
Thank you for enlightening me that it is actually not a fixed loan but based on interest rate of the CPF account. I totally forgot about that linkage.
Appreciate your reply.
Regards,
Flinger
(25-08-2012, 10:26 AM)hyom Wrote: Hi flinger,
I think your strategy will work fine in a high-inflation-over-many-years environment. However, Cory's assumption that the interest rate remains fixed throughout 25-year period is a critical one in Singapore's context. The last time I asked almost 4 years ago, there are no such thing as a 25-year fixed interest rate bank loan in Singapore. The interest rate will reset every 3 years. Because of this constraint, your strategy will not work in Singapore but will work in US where 30-year fixed interest rate loan is available.
HDB interest rates are not fixed at 2.5%. They fluctuate with the interest rate in our CPF ordinary account.
If someone knows of mortgage loans which fixes interest rates for longer than 10 years, please do let us know. Thank you.
Hi Jared,
That's true refinancing is a great tool if you are using ARM. Sometimes however, it comes with penalties etc...but if you are careful in your package it can be good to refinance.
However, I think from a risk management perspective for me, I think the HDB loan is a better loan for me.
Thank you for your reply. Much appreciated.
Regards,
Flinger
(25-08-2012, 04:43 PM)Jared Seah Wrote: Flinger,
We win some here but lose big time elsewhere
If inflation is 5% and your mortgage loan is 2.6%, you win.
But not so fast!
Is our pay raise higher than the 5% inflation?
Our ability to service the loan may be compromised if our living expenses go up faster than our income.
Total income must beat inflation before we really win by taking advantage of "inflate our debt away" tactic.
We smart; others not stupid.
Would banks and HDB allow us to "win" indefinitely? Even if their management fall asleep on the wheel, I am sure some vested shareholders and citizens will be very vocal on their entitlement on creating shareholders' value
But we still have 1 trick that's in our favour - refinancing!
For that, you may want to compare the pros and cons between a HDB loan and a commercial bank loan
