Dec 5 2019, 03:40 PM
QUOTE(hksgmy @ Dec 5 2019, 02:25 PM)
The home loan is a floating loan and a special rate because of the quantum involved. The FD is a fixed rate for 12 or 18 months.
Essentially the logic of my calculation is as follows:
1.25% pa FD on $3m comes up to $37,500 interest per year or $3,125 per month
0.8% (floating, adjuster every 3 months according to the prevailing SIBOR rates + margin) pa mortgage on $5,850,000 following the amortisation schedule of 20y comes up to $45,809 even if I took into consideration that there was no adjustment for the entire first year, or $3,817 per month
The figure is even more eye-watering when you take into consideration the amount I would have paid over 20 years - total additional interest of nearly $485,000.
Based on that closed system calculation, it was better over all for me to reduce the overall loan quantum than for me to do an offset.
I suspect... that's because you did not factor in the compounding interest of $3m FD for the next 20 years (while the effective rate for house loan has already factored that in).Essentially the logic of my calculation is as follows:
1.25% pa FD on $3m comes up to $37,500 interest per year or $3,125 per month
0.8% (floating, adjuster every 3 months according to the prevailing SIBOR rates + margin) pa mortgage on $5,850,000 following the amortisation schedule of 20y comes up to $45,809 even if I took into consideration that there was no adjustment for the entire first year, or $3,817 per month
The figure is even more eye-watering when you take into consideration the amount I would have paid over 20 years - total additional interest of nearly $485,000.
Based on that closed system calculation, it was better over all for me to reduce the overall loan quantum than for me to do an offset.
Anyway I'm just voicing out my 1cent... compared to you and your wife I have measly financial/accounting background. Thanks a lot for sharing your experience here though.
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