Tag Archives: mortgage

How much is house costing me( or you)?

As I written in previous post, I bought a house with the price tag RM 196,000, it make me wonder how much is this house costing me in absolute cost and working years.

I listed the the cost involved so far and interest I expected to pay if we pay the mortgage off in 10 years.

Deposit :RM1,000

Insurance :RM4,530

Lawyer fee :RM3,100

Disbursement :RM1,130

House loan :RM196,000

Housing loan interest for first 10 years :RM 78,122.68 

Total :RM 283,882.68

As I am sharing the ownership with my sister, my part of responsibility will be RM141,941.34 and that is excluding all the renovation cost , maintenance cost and car cost which might be coming along when my parent move from village to a small town.

Since I am working in Singapore right now, I will use my saving rate in Singapore currency and the current exchange rate to calculate the real cost of my future house.

Current monthly saving amount: SGD 1,500

Exchange rate: SGD 1.00 to RM 2.50

House cost in SGD = RM 141,941.34 / 2.50 = SGD 56,776.54

So, I will need about 38 months of work to cover that cost of my house. Not to mention the opportunity cost I will need bear during those 10 years. 5% of SGD 56,776.54 will give out SGD 2838.83, that is one good passive income to hold on 🙂

Situation here in Singapore is a bit different, a small simple 3 rooms flat here is priced at SGD 330,000(I am talking about minimum). With median salary now at SGD 3,000, it is no wonder not many people staying in Singapore now think they can retire early in Singapore. Besides that, there are other influences here to that make it difficult to retire early too.

It is kind of socially unacceptable for man to not working here, a man look weak without a job here and not many man can accept that.

Secondly, it is very consumer/spending driven here in Singapore, this country is importing everything and we can buy almost everything we need in our daily live and a little bit extra. There are all kinds of interesting product and services that waiting there for us to spend our money on them.

Thirdly, supporting old age parent is expected here in Singapore given there is no solid retirement support system and I think the problem will be even bigger in the future. You might be thinking your living cost will be lower after you paid off your mortgage but the medical cost kick in in old age, so expect more spending during your parent old age (and your own old age).

I just realized I am a bit out of topic here, the points I want to make here is view your house as a liability before you pay off your mortgage and don’t think the house price is always going up. Only buy when you are ready, sometime renting is not a bad decision either.

What do you think?

 

 

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Filed under Debt, Insurance, Passive Income, Spend

What is mortgage teaching us?

Mortgage is one of the loan that having the longest loan tenure, lowest interest rate and most neglected commitment. I guess it is partly because it can be extend to 30 years or even 35 years and its monthly payment is so low. There are even countless advice teaching us how to choose a suitable loan package, how many percent of our salary should we direct to mortgage payment and how much we can afford.

For the past one year, I have been looking around for a place for my parent who are now staying in Malaysia. This was not in my retirement plan before because investment income is more important to me. To me, having investment income actually more stable than buying a house now. For example, if you are paying RM 989.74 a month for your RM 200,000 mortgage for 30 years, you are paying in total RM356,307.44. The interest of the mortgage alone has cost you RM 156,307.44 over 30 years( see image below, calculation from http://www.calculator.net/).

mortgage cost

At the other hand, RM 240,000 invested in an investment vehicle with 5% will give us RM 12,000 yearly and cover that mortgage for years to come. Currently, my savings is still quite low after paid off my student loan. I am still in the stage of saving money to accumulate at least certain amount of capital before I can try my hand on investment. There are many resources on the web now that provide basic knowledge on investment, teaching us what is stock, option,mutual fund, index fund, etc…  I am planning to spend some time on learning all these basic before I start putting in my own money into any market.

Renting or buying is always a debate topic when we are talking about housing. One simple rule of thumb when you are deciding whether to rent or buy a place is the property price. It is wise to rent when the property price is high and it is wiser to buy a house when the property price is low. How to decide whether is the current property price high or low? It depend on you, if you think you can afford the house, it is low, else it is high. It might sounds like a irresponsible advice here but it is also true because everyone situation is different. Only you yourself can decide whether you can afford a house, keep in mind that buying a house involves cost during the transaction and also renovation cost before you are even in the house.

Renting a house will not give you all this cost and you are free from all the hassle that come from owning a house. Another benefit come with renting house is you can choose your neighbor. If your neighbor happen to be some crazy people that like to making noise during the night, you can easily move to another place when your rental agreement expired.

 

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6 Questions You Need to Ask Yourself Before You Plan For Your Early Retirement

The idea of early retirement seems foreign to lot of people around me. They either never heard of it before or don’t believe it can be done. Not surprisingly, most of my young friend never heard of that idea, and most of my mature friends do not believe it can be done.

Flipping through my life so far, I saw a clear pattern how the “system” want us to live our life, I concludes them into the 9 items as below:

1. Get a student loan
2. Get a degree
3. Get a job
4. Get a house (it is really a mortgage)
5. Get a /some credit cards
6. (Maybe) get a partner
7. (Maybe) raise a kid
8. Get a lot of stuff
9. Get frustrated with life

Most of us have our own share from the list above. Some of us might have the opportunity to obtain a degree, so they avoided item 1 and 2. Some of us might choose to be single and skip item 6 and 7. But I think most of us still take up item 3, 4 and 8, and hopefully not 9.

So, what should we do? Do you want to follow the trend and receive item 9 as your final gift at the end of your career life or you willing to make some changes now to avoid that?

Before the change, there are some questions I took out from the book “ Early Retirement Extreme” which I think we need to ponder them ourselves.

1. Are you completely happy with your life?

Are you completely happy with your life? Person who has a perfect life style rarely embraces the idea of change (I also don’t see why will they do so). But, how about you? Any part of your life you are not happy with? A boring job that doesn’t give you the sense of fulfillment? Lack of time to spend with your partner or your children? Give it some thought.

2. Do you want to live on a solid foundation?

Are you making your end meet every month? Struggles though your bill at the end of every month? Are you worried about your future? If you want to live on a solid foundation, you will have to build it yourself (or with your partner). Many people started their career life not on a solid foundation; it usually started with a student loan and as the time go by, more and more debt commitment (a new car every few years, or a expensive designer bag every quarter) stack up on their back, and these are the same people that complain they can never retire. But this is not you; you will take up responsibility of your financial future by tracks expense, clear your debt, and make investment.

3. Do you want to start a business?

What is your passion? Do you have some interest that you have no time to pursue? Are you care about certain group of people in the society and you like to do more for them? Do you have a business idea that you think it will benefit many people?

With a solid financial foundation, you can focus on building your business without worry about the day-to-day expense is piling up. If you business manage to take off, it is even better. You benefit more people by bringing a beneficial product to the market, strengthen your own financial tower and give others an opportunity to build theirs.

4. Do you dream of doing instead having things?

Do you own a lot of stuff right now? Do you still feel the excitement when you made that purchase now? How long does that excitement lasts? Do you want to spend your life paying off that 30 years mortgage and leave nothing behind after your finite time in this world?

Does your job help you on your inspiration to do something or build something for the world? Will it help if you can have more time to do the thing you want, whatever it is?

5. Do you believe life is an adventure?

I will say most of us lead quite a predictable or boring lifestyle. 5 days a week, we wake up in the morning, rush through the peak hour traffic, finish up as much work as we can at office, totally out of energy by the end of the day.

Do you think life is an adventure? Do you want to build something based on your creativity? Young people nowadays are getting creative in designing their life; they don’t opt in to the traditional retirement planning anymore. They started a creative business; build up online income stream to support themselves rather than working for decades.

6. Do you want to make a difference?

There are a lot of problem in out society right now. Whatever haven been discovered so far is just a tip of the iceberg. Society needs more people to take part in caring for our disadvantaged group, reduce wastage of food and lower down the level of pollution.

Do you have issue that you care about but unable to contribute more because you were drag down by your financial commitment or your spending habit?
Conclusion:

So, what do your think? Do you think you want to start planning for your own early retirement now? I hope I have given you enough belief in the idea of early retirement in this post and enough courage to take this path of less traveled.

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