POSB HDB Loan
OCBC Home Loan
Same same lah. So the question isn't really which bank to take the loan from, but rather how large a loan to take and how long a loan period. The truth about housing loans is that the interest is heavily front-loaded; this means that the bulk of the interest is paid in the early years of the loan. Let's take a look at this 10-year loan for $200,000.
Yellow shows the loan outstanding, blue shows the principle repaid and red shows the interest repaid. Blue + Yellow at any instant = $200,00 which is the loan amount. While the amount of interest paid increases over time, it slopes up sharply in the early years and flattens out in the later years. Just how big is the difference? Let's zoom in ...
This shows that 72% of the interest payments have already been made by the 5th year. 47% has been repaid by the 3rd year. So if you decide to terminate the loan early (for example to upgrade a larger property), you would already have paid up most of the interest.
So what does this mean for us? Take a larger loan over a longer period and invest your spare cash or take a smaller loan over a shorter period and get it over quickly? I'll explore this another day, I'm sleepy.
5 comments:
I'm confused, if it's fixed interest rate, why does it change? and your interest rates are sooo LOW!!!!!! no fair no fair no fair:(
and hey I can visit your new home when I visit;p
Why is the interest rate so low?! Is it because it's not fixed for the entire loan period? (Just the first 3 or 5 years?)
Ohh man! I have a 30-year loan. (Can't afford to do a shorter period!) For the past few years, only 20% of my mortgage payments were paid towards the principal!! :( Ohh well, at least I get a lot of my tax back from my paid interest.
Good luck. :)
same same la.....
of cos interest flattens out towards the end. that is simply becos ur principal sum is so much lower by then. end of day..... juz know that u r paying abt 4% p.a. of interest for the outstanding principal of ur loan that's all.
annie: are the rates here low? did you get a sub-prime mortgage loan?? ><
yun: 30-yr loan may not be a bad thing ... you can still refinance. wait till I finish my analysis we'll see ...
yao: i try to keep this blog as anonymous as possible. anyway that question is quite private!
bored: the point is that some people will not keep the loan until the end of the day ...
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