Another perspective to paying back the home loan
There is always confusion about whether we should repay the home loan faster or just keep doing only the minimum and invest the remaining in other things. I keep getting this question in my mind, too. The final conclusion I usually reach is to pay back the home loan as soon as possible, and I keep pushing for the extra money whenever it is possible.
One thing that we know for sure is that if we need some cash flow, having a home loan is the best because nobody else gives a loan at 8 percent interest. If we have to get a personal loan, the interest rate is more than 12 percent. So even if we have to invest our money in something, the investment provides 7 percent returns, so the difference is only 1 percent, which is very small. So, considering all these facts, it might look like we have to hold off sending more money to our home loan and complete it, but my thought process is going to be a little contradicting to this.
I think that paying off the loan faster is good. The first main reason is that we cannot be sure how long we can keep working. There is a huge dependency that we have to somehow continue working just to cover the EMI cost. So, coming out of debt is good for people who would like to retire early and be debt-free. The next reason that I see is that if we complete one loan, we can always go for another home loan or another investment. I have seen many people moving from one property to another.
I know a person who bought multiple houses, and the returns he is generating from the home itself take care of the EMI to be paid to the bank. This is a great thing. If we have multiple sources of that passive income, our future can be left safe and we don't have to worry about liquidity in the future.
Another reason why paying off the loan amount is good and being debt-free is that we cannot be sure how long we will be healthy. There can be some unexpected emergency in the family for which we might have to spend the money. If something like that happens, we have to be sure that we have enough funds, and having a huge loan at that time is not a good thing. We might find it hard to manage all the expenses together.
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I agree with you that paying off a home loan early can bring peace of mind, especially when thinking about retirement, health, or even unexpected emergencies.
Also, investing might seem smart in the short term. Being debt-free gives long-term security and freedom. Debt has a way of getting someone unfulfilled, particularly if it is a debt that doesn't guarantee profit like a real estate investment.
I agree, repay house first is the best, you never know what happens in life, if you can't pay the monthly amount a few times you will lose the house
i don't like loan when it comes to building house.
8% interest sounds very high to me, when we bought our current house we fixed our interest rate at 1.75% for 10 years, 8% interest sounds really high to me, when we bought our current house we fixed the interest rate at 1.75% for a 10 year period, currently it's around 4%.
We also pay extra to have a lower mortgage faster
Well I am really optimistic about the perspective on the future as regards this which you have talked about today
https://www.reddit.com/r/Finanzen/comments/1k4mqd6/another_perspective_to_paying_back_the_home_loan/
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The person has a good idea. Imagine me paying my home loan with the rent fee I’m getting from it
It’s really cool
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I had never take a home loan yet, although I did took another type of loan, but in a shorter periode of installment, and yeah, repaying the debt early is always good when you have some spare money, rather than keeping it to yourself, with all of the mentioned reasone above, and the other thing is that most of the time (especially for me) when I have the money on my possesion, I tend to blow it up rather quickly.
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High interest rates are a problem with taking out loans, so it's important to pay off the loan quickly.
With my experience with loans, I will never participate in anything called loans
Focusing on being debt free can indeed safeguard us against unforeseen circumstances.
I have already debated this sometimes with my brother (he is an economist) and we reached the conclusion that it is not a good an idea to repay the home loan soon, at least here in Portugal.
The home loan is the loan in the lowest interest rate normally (3%/4%) depending on European Central Bank.
If we invest the extra money in other things link ETF or something, we will have a higher interest rate, and we will have to accumulate some money for the future.