Calculation 1 is correct. It's basically the bank giving you 100K with monthly payment paid by the dividens. The monthly payment is composed of interest amount and principal amount so for a one year payment of 7700, you get a return of 115K after 20 years.

That is of course, you assume that you don't touch the Dividen. I've been doing this for 5 years and trust me, there is always a reason why I need to use the dividen (kitchen cabinet lah ... house repairs lah etc etc). It's damn tempting one.

Something is not right with calculation # 2

You only started with 642 per month, by the end of the first year you will have 7704, the ASB dividen at 8.5% will only be calculated at partial of 7704 because only the first 642 ringgit has reached the 1 year, the other amount has not reached "maturity) so will not get the full 8.5 percent dividen. Doing an excel spreadsheet, at most, you will get 300K after 20 years if all the dividen is fully re-invested. Ohh by the way, if you do not use the sijil (which is the bank loans), you most likely will get 7% only as teh 1.5% is for those who has the sijil. Trust me, ask those who don't take loans and they will say that they never get the bonus dividens (you only get the extra bonus dividens after you have been in ASB for 10 years for those not using the sijil)

Now if you start with the 100K loan with the banks, you will get the full 8.5% dividen and if you re-invest the dividens, the amount after 20 years are huge as well.

In the case of ASB Loan, the question then is, if you save and re-invest, is it better than paying interest and getting a lump sum amount to start with?

Somebody must have done their calculation ...

This post has been edited by azraeil: Feb 19 2011, 03:10 PM