Your Questions Answered Here › Investment plan to settle housing loan
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Chris Teh asked 3 years ago

Hi there,

my current home loan still have outstanding of 1M. After paying the monthly instalment, I would still have additional 10k for saving or investment. is there any investment plan available that can help me to settle my loan in shortest time?

Thanks in advance

7 Answers
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ERIKA Staff answered 3 years ago

Hi Chris, can you explain more on what you have in mind when you said you want 'an investment plan that can help me settle my loan in shortest time' ?

Chris Teh replied 3 years ago

My current loan interest is 4.5%, so I’m looking for anything which is higher than this. I’m currently investing in US ETF, just wondering if any investment option out there which available.

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ERIKA Staff answered 3 years ago

OK Chris, that's a start. So what are the other details on your housing loan?

Original loan amount = ?

Outstanding amount = 1 mil

Interest = 4.5%

Original loan duration = ? years

Monthly repayment = ?

Shortertened loan duration desired = ?

Chris Teh replied 3 years ago

Required info as below:
Original loan amount = 1.12mil
Outstanding amount = 1 mil
Interest = 4.5%
Original loan duration = 35 years
Monthly repayment = 5k

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ERIKA Staff answered 3 years ago

Ok Chris, when was year this 1.12 mil started?

And to how many shortened years you want to compress the 35 years repayment period?

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Chris Teh answered 3 years ago

It was started back in 2016. I hope to settle in coming 5 years time.

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ERIKA Staff answered 3 years ago

Chris, do you realize that if you were to pay your additional 10k/month surplus, on top of your existing 5k/month for the next 6+ years, you would be close to settling a 1 mil mortgage with 4.5% interest?

Context: 1 mil mortgage with 4.5% p.a. interest with 6 years loan tenure comes with repayment of 15874/month.

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Chris Teh answered 3 years ago

Yes, I do realize that. I was looking for the possiblity to make it within 5 years through any available investment.

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ERIKA Staff answered 3 years ago

For 10k/month to compound into 1 mil in the next 5 years, an annual return of 19-20% per year is needed, every year.

While it is not impossible to get that return (or even higher) in any single year, we are talking about 19%+ per year return certainty for next 5 years. The only investment that can promise that is probably Ponzi scheme, in our opinion.

Versus paying 15k+/month gets you closer to your loan settlement goal with higher certainty just by stretching your expected timeline a little bit more.