ready to Housing Loans -10 years vs 30 years

Many are not sure .. if you want to buy a house for investment, how many years the best for us to borrow. 10 years? 20 years? 30 years? Select the shortest? Or choose the longest?

There are several factors that should we see: -

The first is the PURPOSE.
Is your goal to buy a house? For investment or to live alone? If you make an investment, so you better take the longest. If to live alone, preferably take at least a short period. This is because, to live alone, we have to bear the interest rate the bank is out of our own pockets. As for investment, our tenants are very well satisfied that the bank will pay interest.



The second is AGE.
If you are young like me ... Yes .. I'm still young even though hair is not already getting some looks ... Ideally, most loans take a long time. 30 years is good. Why? I will tell later. If you are aged 50 years .. you have no choice but to make a short term loan or get help from the kids to do with the loan.

There are four major reasons why we need to take loans in the longest period: -

1. The monthly payment to the Bank will Decrease.

If we make the loan in 30 years, monthly payments to the banks would be small. For example, if 20-year loan, the monthly fee is RM 800/bulan but if the 30-year loan it would be 600/bulan. If your house is rented only RM 600/bulan, there is no need to withdraw money from your pocket to finance the house. So your monthly cash flow is not reduced. Expenses if you can handle all of a sudden something happens such as no rent of 1-2 months. The hole in your pocket was not as much.


2. Cashflow can be obtained for other investment purposes.

If there is an excess of the monthly rent to the Bank, for example, a house rented by RM 800/bulan and monthly payment is RM 600/bulan, we'll have a cash flow surplus of RM 200/bulan. The remaining RM 200/bulan be used for storage in the ASB or the Mutual Fund are invested and generate higher revenues. Or we can put cash in reserve if there are problems in the future. Or extra money so we can save money for a deposit to buy the next house.



3. Can generate greater investment
This is explained very well by Dr. Dolf De Roos Property Riches in his book. If we have money RM 100,000 .. we have the option to buy a house with RM 100,000 cash! Or we can buy 5 houses costing RM 100,000 to RM 20,000 deposit (20%) each and the rest to make loans to the banks of RM 80,000 (80%) each for 30 years.

Suppose that after 20 years of rising house 3x double ... You will find that your portfolio grow like mushrooms. People who buy cash of RM 100,000 RM 300,000 only gets the asset value only. But that borrowing will have a maximum of 5 x RM 300,000 = RM 1.5 million homes. After deducting the balance of the loan, the remainder stayed sekurang2nya RM 700,000. Or you can sell 2 houses and 3 houses to pay the debts of other ... You have assets worth RM 900,000! Tu has not been in the profit rent again! This is called financial leverage. You can read my article "The concept of leverage" in the articles of my choice.



4. Inflation in favor of you!

If you extend the payments to the bank, inflation will be favorable to you. How tuh yer ... Ok lah .. You buy a house with RM 500 per month payment for 30 years. You rent your house of RM 600 (with a positive cashflow RM 100/bulan). Now do you think RM 500/sebulan tuh very big ... But how after 25 years? The value of RM 500 per month may be time tuh only RM 100 per month because of inflation. But try and guess how many times the rental value? Maybe 25 years will come under increased RM 1500 a month right?. Why not take advantage of this inflation? SHJ not you get a profit from the rental of every month from the first year you borrow but you can profit every month for 30 years!



However, the planned strategy is dependent on your individual portfolio. There are some of us want to live free from debt. There was a bold risk. Ideally, all investments are appropriate respectively. Azizi Ali has written, may buy 5 houses in one year is too much, but who want to stop you to buy a house in the 5-6 seeds in 10 years?