Guys,

I want to ask about scenario below:
Assuming I have housing loan (semi flexi) of 500k for 30 years.

Currently I have 250k cash. So if I deposit 250k cash into this housing loan, it lowers my interest rate and I should be able to pay it off quicker.
Let’s assume at current rate of paying I will be able to pay off all 500k in 5 years time.
However as the amount loan is 500k and amount parked to reduce housing loan is 400k and amount settled in 5 years is 100k, this means I have paid extra 400k.

As my housing loan is for 30 years, I still have 25 years to go.

Here’s the tricky part.
I think and believe it is better for me to keep the cash in the account (400k) and take it out if needed rather than settle it right away.

Is this doable from bank perspective or it I will be asked to settle it right away?
Is it considered wise? Current rate of interest is 4% plus plus. Is it better to do it this way?

Jason, my intention is to park it inside till I can find some use for the money. I believe fully settle it means I lose the cash cause it might be useful for many purposes.

However I'm not sure if once bank notice I am paying Zero interest they will ask for full settlement or not. As for 16 years or not, let's not dive into the length as I didn't count exact amount I have.

BTW thanks. Think I already knew the answer myself

This post has been edited by robert82: Jun 4 2015, 01:17 AM

Yes.
So assuming if you didn't park extra money, your monthly installment is 3000, it will probably be:

2000 for interest
1000 to reduce housing loan.

However if you did park some money, monthly installment is 3000, it will probably be:

500 for interest
2500 to reduce housing loan.

As such, the snowball effect will reduce ur housing loan duration and total interest paid.

My ideal scenario will be housing loan 500k, cash parked 500k.
When I need the cash only take it out, but I pay that 4%++ interest...

P/S: Sounds crazy I am raising this topic and yet answering questions lol

This post has been edited by robert82: Jun 4 2015, 03:35 PM