Should I Pay My Property Mortgage Loans Singapore

Should I Pay My Property Mortgage Loans?

by with No Comment Money ManagementMoney MindsetProperty

Property Mortgage Loans are getting a lot of attention now as the interest rates are increasing. On 15 Nov 2022, DBS, OCBC and UOB raised their fixed home loan interest rates, with rates reaching up to 4.5 per cent. If you are approaching your refinancing period, there is a high chance that you are thinking of paying off your property mortgage loans. Should you do it or not?

Side note, if you are unaware of the latest property cooling measures, click here to read about it.

Should I Pay My Property Mortgage Loans Singapore
Should I Pay My Property Mortgage Loans Singapore

Brief Introduction

Mortgage is a loan that is secured by real property. It is a financial tool that makes the ownership of property possible as not everyone have the luxury of having hundreds of dollars in the bank at once.

The mortgage is made up of Borrower (you), Lender (usually the banks), Loan Amount, Interest Rates, Loan Tenure and Monthly Installment. Using a formula, you will be able to find out your monthly installment for your mortgage.

Should I Pay My Property Mortgage Loans Mortgage Formula
Should I Pay My Property Mortgage Loans Mortgage Formula

The Methodology

Behind every financial model, there is a few key assumptions that we will have follow. I have build an adjustable model to take into account your property mortgage loan value and also the interest rates. Here are the assumptions.

  1. Loan Value: $1,000,000
  2. Interest Rates: 4% and 1.1% (for comparison)
  3. Interest Rates are Annualized
  4. Amount to Pay Off: $100,000
  5. Loan Tenure: 25
  6. If not paying down loans, will be investing $100,000
  7. If paid down loans, will be investing the interest that is saved by paying down loans

The 2 scenarios are whether this person should pay off their loans or not.

The Results

Should I Pay My Property Mortgage Loans Singapore Interest Rate 4%
Should I Pay My Property Mortgage Loans Singapore Interest Rate 4%

In the first case study at interest rate 4%, you can see that it only make sense to pay down your loan if you are unable to find an instrument to invest at >4% (with the actual number closer to 5%). Usually, this means that you might be a balanced or adventurous investing personality.

The are interests in T-Bills and Singapore Saving Bonds (SSB) as these instruments are now offering cut off yield of 4.2% (T Bills on 5th Jan 2023) and 3.47% (SSB on 1st Dec 2022). Very simply, if you invested into T-Bills and SSB at this rate with an existing property loan of 4.5%, you would be worst off.

Should I Pay My Property Mortgage Loans Singapore Interest Rate 1.1%
Should I Pay My Property Mortgage Loans Singapore Interest Rate 1.1%

If we were to rewind the clock and see property mortgage loans to be at 1.1%, it make senses to pay down your loan if you are unable to find an instrument to invest at 2%. Although this number might seem low, it also worth noting that at that period, interest rates for T-Bills and SSB were significantly lower too. The average interest for SSB on 2nd Jan 2022 was 1.76%.

In this scenario, those that were invested in the equity markets would definitely not pay off their loan.

To put these 2 scenarios together, there is a strong case not to pay off the loans in a lower interest environment.

Final Thoughts

That being said, I would advise you to consider that there are many more factors that you should take into consideration.

  1. If you are thinking of paying off the loan, will this reduce your saving significantly? While it is good to reduce the amount of interest you are paying, it is unwise to do it when it affects your liquidity ratio. A period of retrenchment or illness will let you wish you didn’t pay down the loan.
  2. Are you planning to invest into another property? As you pay off the loan, you will be able to get another loan to acquire another property.
  3. Are you someone who considers being debt-free important? Is accrued interest daunting if you are using your CPF-OA?

The above is simply a financial model. You are unique in your own situation. If you would want clarity in your situation (depending on your interest rate, loan tenure etc), feel free to reach out to me so that you can understand your situation using the financial model above.

Mortgage planning is an important element in financial planning. I wish you all the best and happy chinese new year!

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

My SRS Portfolio Dec 2022

My SRS Portfolio and Thoughts [Dec 2022]

by with No Comment Investment AccumulationSRSTaxes

Congratulations for clearing 2022! 2023 just started. I’ve a good feeling that this year will good to my SRS portfolio. If you need a quick recap, check out my top article for Dec 2022: what happen to the stock market from 2019 to 2022.

Again, if you are new to SRS, please start here.

Disclaimer: This article is not and should not be taken as a buy/sell/hold recommendation.

My SRS Portfolio Dec 2022
My SRS Portfolio Dec 2022

My Thoughts and Consideration

SRS Portfolio Tracker Dec 2022
SRS Portfolio Tracker Dec 2022

SGX:HST looks like it is finally recovering. I believe this is because China is reopening on 8 Jan 2023. They are more relax when it comes to COVID-19 testing and seems like lockdowns will be unlikely. China will be living with COVID-19. While I expect there will be short-term COVID-19 spikes and some disruptions, productivity will pick up soon after. Currently, there is no intention to add more position into SGX:HST.

SGX: BTOU is the most disappointing position in the portfolio. While Manulife  have pivoted and shifted into hotelised buildings and provide flex office solutions, there are several concerns to that SGX: BTOU have to address.

I believe there will be some divesting to reduce aggregate leverage in the next few quarters. Overall, these are all bad news to SGX: BTOU. Therefore, there will be no second entry into SGX: BTOU.

SGX: ME8U is a new entry into the SRS portfolio. I have receive first dividend payout from it and looking forward to the further dividends to come.

I have also embarked into dollar cost averaging into the S&P500. More to be added into this space in the articles to come.

Final Thoughts

It isn’t all sunshine for sure. Take care and hope you are well.

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

2022 Financial Recaps That Will Affect You In 2023

Financial recaps that will affect you in 2023

by with No Comment General EconomyMoney ManagementPersonal FinanceProperty InvestmentReflection

Give yourself a pat in the back as 2022 haven’t been an easy year for everybody. I know some who pass away because of COVID. I know some who are retrenched. I definitely know more than one person who had a mental breakdown. I would like to say that you have already done well. Your best will look different everyday.

Your Best Will Look Different Every Day
Your Best Will Look Different Every Day

While 2022 is ending, there are some financial news that are still impacting our lives. I will be updating the 4 most impactful financial recaps that happened in 2022 and will continue to impact us in 2023.

2022 Financial Recaps That Will Affect You In 2023
2022 Financial Recaps That Will Affect You In 2023

#1: Increase in CPF Top Up Tax Reliefs

In 3 Key Changes To CPF Policies From 2022 (if you haven’t read, this is my top article of 2022), I wrote about the change in rules for tax reliefs for Retirement Sum Top Ups (RSTU).

In a nutshell, the amount of tax reliefs structure have been streamlined to be up to $8,000 (instead of $7,000). and this cap will now be shared between Special Account (SA), Retirement Account (RA) and the MediSave Account (MA).

If you are planning to RSTU in 2023, the new limit will be $8,000.

#2: Interest Rates Increasing

I believe the era of low interest rates will be ending and we are moving to a more “reasonable” interest rate ranges. This increase in interest rates have sent some shockwaves to the property market. On the flipside, this means that the interest in your bank account will finally increase.

Frequent readers of my blog will know that I share about the power of the R.E.V. strategy to increase cashflow from your bank accounts. However, as the rules of the banks keep changing, I have refocus my attention on getting more consistent returns elsewhere.

I check if there are changes among the bank multiplier accounts and will only change if the changes are drastic. Best High Interest Saving Account Singapore 2022 will give you a glimpse of what’s available now. I’m willing to bet that there might have already been some new changes already.

In any case, keep things simple and consistent.

#3: Property Rules

Higher interest rates will affect the property market and the local government have already lay down new rules for this. 3 Effects of Property Cooling Measure Singapore.

Loans will have a higher stress test. This will mean that you will get a lower loan amount if you plan to buy a house. If you are purchasing HDB, the loan to value have dropped from 85% to 80%, this mean that you have to increase cash payment by 5%

The one that got the most concern is of the 15 months waiting period for switching from private to HDB. While this has spooked the market. I believe there will be an increase in smaller condo units as a result.

#4: We Are Still in a Bear Market

I will share some statistic to give equity investors a glimpse of hope.

The average length of a bear market for the S&P500 is 289 days. The market begin it’s slide on 3rd January 2022.  This will mean that the bear market will end (on average) on 19 October 2022.

While we have obviously passed that date, this mean that we may be due for a recovery soon. (Disclaimer: this isn’t financial advice and just statistics).

I have written a guide on Bear Market Survival Tips and The Pros And Cons Of Dollar Cost Averaging. This guide has been written as I receive many enquiry on what they should do during this bear market. Please take some time to read them.

 

Final Thoughts

The financial planning industry will evolve every year. While the rules of the game might change, it is vital to keep moving towards your end goal.

You are not alone in this. I suggest that you can consider to work with a trusted financial advisor that evolves with the economy. Otherwise, take time to read and understand the changes so that you can move towards your intended goal.

I wish you all the best. Take care!

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

 

Save on Cable Bills by Streaming Your Favorite Channels

Save on Cable Bills by Streaming Your Favorite Channels Singapore

by with No Comment Money ManagementPersonal Finance

Are you burnt out or bored with Singtel or StarHub?

Do you wish you had a broader variety of things to watch without paying for extraneous channels?

Are you frustrated with MediaCorp TV?

Do you miss the days of variety from satellite dish entertainment?

If you answered ‘yes’ to any of these questions, you will be well-rewarded for reading the rest of this article. Provided below is a guide to getting digital entertainment for discerning Singaporeans who want to cut the cable (Read More: Purge Your Money Burdens) but still access media on their own schedule and at more negotiable prices.

Save on Cable Bills by Streaming Your Favorite Channels
Save on Cable Bills by Streaming Your Favorite Channels

Determine the Right Video Streaming Service and Plan

Because there are many streaming services out there, you need to understand what each platform offers. While it is best to do your own research, we can assist by providing an overview of the major providers, their pricing and even highlighting which ones have free trials.

Netflix

While the platform that allowed streaming to rise to its current prominence has recently taken several hits, Netflix is still a solid streaming service for original programming. It also features a decent catalog of television and films that is constantly being subjected to updates.

Pricing Structure: Netflix offers three subscription tiers.

  • Basic (S$12.98/month) – This option has a single-screen limit and only offers standard-definition content. Downloads are limited to one device.
  • Standard (S$17.48/month) – This option has a two-screen limit and offers Full HD content. Downloads are limited to two devices.
  • Premium (S$21.98/month) – This option has a four-screen limit and adds Ultra HD to content options. Downloads are limited to four devices.

Free trial – 30 days

Disney+

If you love anything Disney-related or its many subsidiary properties, then this is the streaming service for you.

Pricing Structure: Disney+ subscriptions come in a few plans.

  • Monthly – S$11.98/month
  • Yearly – S$119.98 upfront
  • StarHub Bundles – StarHub features several bundles that include Disney+.

Free trial – Not available

Amazon Prime Video

Prime Video (check review) is full of original series and films, as well as a respectable library of third-party content.

Pricing Structure: Anyone interested in a Prime Video subscription can pay S$2.99 a month. It includes access to Amazon Prime.

Free trial – 30 days

Apple TV+

If you are a fan of all things Apple or curious about shows like “Ted Lasso”, you might consider giving this platform a shot.

Pricing Structure: S$6.98/month.

Free trials – 7 days

HBO GO

HBO GO is an exhaustive compilation of Hollywood films, blockbusters and original series from the various brands of HBO and Cinemax.

Pricing Structure: Anyone interested in an HBO GO subscription without using another service provider can pay either S$13.98/month or S$29.98/three months.

Hayu

Over 200 reality programs are available the same day that Americans see them.

Pricing Structure: S$4.99/month.

Free trial – 7 days

iQiyi

If you love your pan-Asian media, this streaming service is for you. They even offer several original programs.

Pricing Structure: Anyone interested in subscribing to iQiyi has two options:

  • Standard – S$8.98/month with a two-screen limit.
  • Premium – S$12.98/month with a four-screen limit.

Viu

Nicknamed ‘Korean Netflix’, this streaming platform is a reliable spot for binge-worthy Korean dramas.

Pricing Structure: Anyone interested in subscribing to Viu has three options with special pricing available for student subscribers:

  • Basic – This is the ad-supported free tier but comes with only limited access to standard definition programming. Users can access content 72 hours after it becomes available to Premium users and may download one show at a time.
  • Premium – Users have unlimited, ad-free access to Viu’s catalog and are free to download as often as they wish. New shows become available 8 hours after the telecast. While this tier is available for S$7.98/month, that cost is reduced for lengthier subscriptions: 90 days, 180 days or a full year (S$7.58/month, S$7.19/month and S$6.39/month, respectively).
  • Premium (Student) – Students who present a school ID can receive a discounted subscription to Viu Premium that only costs S$3.98 per month.

Free trial – 7 days.

Buy a Video Streaming Device

Once you know which streaming services you like, your next step is acquiring a device to stream those services. In the simplest of terms, this is like a set-top box that connects directly to a TV and allows you to watch your favorite films and shows through that TV; think of it as a replacement for a cable box. While there are dozens of brands on the market, the major names include Amazon Fire TV, Apple TV, Chromecast and Roku.

Final Thoughts

Now that you have a better idea of your options, you now know which services can best suit your tastes in media. You will need a streaming device to enjoy them on a screen bigger than your phone, tablet or monitor (Read More: How To Save On Big Ticket Purchases). You can safely cut that cord and still find plenty of entertainment to consume with friends and family.

(Read more: The Ultimate 4 Quadrants Shopping Guide Especially If You Are 28 and Older)

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

Retirement Calculator Singapore

Retirement Calculator Singapore: How Much You Need To Plan For

by with One Comment Investment AccumulationMoney ManagementPersonal FinanceRetirement

In 2022, I having more conversations with my clients whether they should increase their retirement sums due to inflation. I begin to realize that it is not easy for them to project their future needs when they don’t know the perimeters needed.

Hence, I have build up a quick calculator for them to calculate in less than 1 minute how much they need and how much they have to invest NOW to achieve their retirement goals.

Retirement Calculator Singapore
Retirement Calculator Singapore

The Assumptions

Behind every model requires a few assumption. I will go through the ones that require more thought process.

  • Replacement Ratio

This is the percentage of income to maintain lifestyle. Most studies suggest aiming for a target of between 70 and 85 percent of pre-retirement income. Typically, most of us spends a certain portion of our income to maintain our lifestyle. Some of us will spend more, some of us will spend less. To most of us, our spending habits will stay with us for a long period of time.

For Example: Peter earns $6K monthly and spends $4K every month on household needs etc. This means his replacement ratio is roughly 67%.

  • Inflation Rate

Though this is well defined, it is not easy to determine a meaningful figure especially when inflation has been going up in the last few months. From the graph below, you can see that we have spikes in inflation previously. However, it has been maintained at a certain level for prolong periods of time.

While, MAS does not have an explicit inflation target. The MAS has concluded that, on average, a core inflation rate of just under 2%, which is close to its historical mean.

I would think to err on the side of planning, we can use a inflation rate of 3%.


source: tradingeconomics.com

  • Expected Investment Rate

This is the rate that you want your investment to grow yearly to reach your goals. For this to be effective, it would be easier to attribute it to your risk profile which will then lead you to the appropriate investment instrument you will find suitable.

If you are someone who is risk adverse, you might consider fixed deposits which typically gives around 1% per annum. For Singapore bonds investment, the yield typically is around 2% to 3% depending on the tenure of the bond.

For those that are more adventurous, the SPDR Gold Trust (SGX: O87) annualized 10 Years Performance is 1.29%. Straits Times Index (SGX: ES3) annualized 10 Years Performance is 4.4%. SPDR S&P 500 (SGX: S27) annualized 10 Years Performance is 12.96%. Average yields are a reference point and can be used as a pinch of salt.

Taking a pause here, all forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone. With an additional disclaimer, the above doesn’t represent a buy/sell/hold recommendation.

The Retirement Calculator

 

Final Thoughts

I think planning beyond 2022 will be an interesting discussion as we are in midst of existing developments (Russian-Ukraine, China-Taiwan, Monkeypox, COVID19). However, we should let it stop us to plan consistently for the future.

If realised you have a retirement shortfall, congratulations! It is time to do something about it. There are various instruments available and I will be glad to have an open conversation with you on how to do that with you.

If you feel like something needs to be done, the next place you need to go to is here (to read more) or simply contact me using the information below.

I wish you all the best! Take care.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.