Buying a home: on credit or for cash?

If you want to buy a home for cash, in the current low interest rate environment, you may want to borrow more and invest the remaining money in a savings home.

According to the master plan, the apartment savings will expire in four years, and you will repay the loan and benefit from it.

Let’s see if this works in practice and if so, how?

Let’s say you buy real estate for $ 20 million

In the first case, you pay in cash and you’re done.

In the second case, you pay 12 million in cash and borrow for 8 million for 3 or 5 years at a fixed rate.

There are more things to look for here

There are more things to look for here

The first is that many banks give you an opening discount, you don’t have to pay a lot of start up costs. However, in many places, if you prepay within 3 or 5 years, you will need to pay back the initial waiver, which can be as high as $ 150-200,000 for a loan of this size. It doesn’t matter if x is 3 or 5, you’ll see why.

The other is to take a fixed rate loan for a minimum of 3 years, and even more for 5 years. Lower interest periods have lower interest rates, but you run the risk of rising interest rates every 3 or 6 months, which can easily start up quickly at any time. (About this article) In the event of a storm, you pay too much for an increase in interest, which is protected by a 5-year non-rising interest rate. (Of course, when the big problem is, the cash is there, you can pay off the loan, but then the apartment savings will stay on your neck. Instead, count on a 5 year fixed rate loan.)

Currently, you get about 3.5-4.2% of such credit. So you have $ 8 million left for the sake of this example, you borrowed 3.7% interest, and you have to pay $ 83,336 a month for a 9 and a half year loan.

To keep enough debt in the fourth year

To keep enough debt in the fourth year

Because otherwise you will not be able to use the home savings as planned. Therefore, in this example, take out a loan for 9.5 years, in which case the interest may also be lower because the loan installment will make up a smaller portion of your salary. If you take out a loan for 5 years, you will not have enough capital to pay off when your home savings expire. Specifically, you will only have 1.7 million remaining capital.

Over four years, you will have $ 4.97 million in outstanding capital due to monthly repayments, and you have paid $ 987,000 in interest until then.

(What you need to be aware of is that there is a cut-off time for home savings, and not all four-year home savings are actually four years old. )

There are banks where home savings can be repaid free of charge, and elsewhere typically charge between 1% and 1.5%. That doesn’t matter either.

So the closing fee is a maximum of 75 thousand HUF (if you have one at the bank), you pay 50 thousand for this (assuming an opening action, which is almost always the case).

You also need to open up four home savers

cash

There are also costs, but you can reduce them wisely. Either you are looking for an opening promotion or you are betting on the minimum, but you pay the maximum, or you may be able to share. (Article: What You Need to Know About Home Savings and Sharing Home Savings)

If you’re good and lucky, your opening fee will be $ 30, with a little clever spending, and if you do it completely wrong, you’ll spend $ 110.

With interest, you paid between $ 1 million and $ 1.2 million, depending on how good you were at opening and closing costs. But you don’t really have to count interest, because it is included in your monthly installment.

So, if you ignore it now, your cost will be between $ 0 and $ 300,000 with your borrowing, depending on how skillfully you choose a bank and a savings bank.

You get back $ 4.97 million from your four home savings in 48 months, so you will have zero credit in 48 months.

(You need to set the loan repayment amount and the duration of your home savings neatly so that you get exactly the amount of your home savings that you have in the given time.)