Ever wondered how much interest do we pay for a RM500,000 home at the end of the loan tenure? Remember many people shared that the interest we pay could even be more than the loan amount we took? Well, those were the days when the interest rates were much higher. Specifically, if it’s a RM500,000 home and the tenure is 30 years and the interest rate is 5.35%, then by the end of the tenure, the interest we paid is MORE than the amount we borrowed.
What’s the current rate?
These days, any new home loan may have a rate of around 3% or thereabouts depending on the loan amount and the borrower’s credit score. Here’s one latest sample of typical rates for a RM500,000 home and 10% downpayment from loanstreet.com.my
What’s the total interest?
Will the interest we pay be higher than the loan amount we took? Let’s look at some calculations by using calculator.com.my We use the typical interest rate of 3% for the calculation yeah. We can see from the second image that the interest rate for the RM450,000 which we borrowed will come up to RM233,000 at the end of 30 years. So, the interest we paid is only around half of the amount we borrowed. This is a huge reduction from the time when the home loan rate was 5.35% and which would have meant interest paid is higher than our loan amount.
Should we proceed to buy then?
If the decision is based on just how much interest do we pay, then of course it is a firm YES. Then again the decision to buy a home needs to also take into consideration many other reasons. 4Ps (Price, People, Policy and Preference) would be the more important considerations. Briefly, buy if the price meets our expectations and is not overpriced, buy if the demand for property in the area is established, buy if there are positive policies supporting the growth and lastly, the property is a preferred property by your targeted potential future buyer / tenants. Here’s that earlier article: Deciding to buy a property? Think of the 4Ps
Happy deciding and do note that for the question of how much interest do we pay, it’s no longer true that interest rate will be more than the loan amount at the end of loan tenure yeah.
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