X Close


Monday November 19, 2012

Is paying off a property loan as quickly as possible a wise move?

AT first thought, it might appear prudent to pay off a property loan as quickly and as soon as possible. However, is this really the wisest and smartest financial decision? Consider using cheaper home loans to grow your net worth. - LEE MUN WAI writes...

Home loans usually have lower interest rates than vehicle loans and other unsecured credit, because the use of a home as collateral reduces the lenders risk of financial loss.

People can refinance an existing loan and extract additional funds to pay off credit cards and other debts. Refinancing enables homeowners to lower their overall monthly payments or frees up funds for other purposes and simplify their lives by having to make just one payment.

Refinancing a RM1mil, 30-year loan from 7.5% to 6.5% would save more than RM240,000 in interest over the life of the loan, or more RM150,000 in today's dollars given a present value discount of 3%, all other elements remaining equal. Despite market turmoil, interest rates remain at attractive levels.

Lee Mun Wai Lee Mun Wai

Alternatively, consider investing the additional funds into solid, reputable investments (such as unit trusts, Amanah Saham Malaysia, real estate investment trusts, etc) that can potentially give you returns in excess of what your home loan is costing you.

If your home loan is costing you 5% but you can derive returns of 8% from your investments, you are growing your net worth by 3%!!

Start comparing loans from several different financial institutions before deciding and get information in writing.

Carefully consider your cashflow situation, if you have the income to handle your new refinanced home loan obligations, it might just be more prudent to refinance that house of yours and start growing your net worth. Seating your assets and start letting them work for you.


  1. Johor man first person in Asia to succumb to MERS
  2. High time for the leaders to act
  3. I am Sabahan - and that is that
  4. Water tunnel to function soon
  5. AirAsia to move to KLIA2 by May 9
  6. AirAsia Group says will move into KLIA2 by May 9 (Update)
  7. India's highest court recognises transgenders as 'third gender'
  8. MH370 search: Remark on solving mystery in one second illogical, says Najib
  9. Crane falls off 11-storey building, killing operator
  10. Burst pipe along Jalan Universiti sparks anger