QUOTE(gark @ Jul 30 2010, 08:36 AM)
I suggest you calculate it again in terms of compounded interest, if you pay the installments directly to ASB you will get more returns, with the simple reason that you do not need to pay the bank interest. Not to mention BLR has already increased 2-3 times already...
Added on July 30, 2010, 9:01 amHere is a sample calculation for those who not able to calculate compounded returns.
Using Maybank- ASB loan financing Table
Calculation 1 : ASB Loan
Loan Amount : RM 100,000
Repayment : 20 years @ BLR-1.65%
Monthly Payment = RM 642 x 12 = RM 7,704 per year
Total payment after 20 years = RM 154,080
Expected Dividend = 8.5% (Based on last year dividend + bonus)
Dividend per year = RM 8,500 x 20 = RM 170,000
Total Returns after 20 years = RM 100,000 + (Rm 170,000 - RM 154,080) = RM 115,920
Calculation 2 : ASB Investment
Monthly Investment : RM 642 x 12 = RM 7,704 per year
Expected Dividend = 8.5% (Fully reinvested)
Total returns after 20 years = RM 404, 375
Well it's your choice if you want to pay the banks or pay yourself?
Calculation 1Added on July 30, 2010, 9:01 amHere is a sample calculation for those who not able to calculate compounded returns.
Using Maybank- ASB loan financing Table
Calculation 1 : ASB Loan
Loan Amount : RM 100,000
Repayment : 20 years @ BLR-1.65%
Monthly Payment = RM 642 x 12 = RM 7,704 per year
Total payment after 20 years = RM 154,080
Expected Dividend = 8.5% (Based on last year dividend + bonus)
Dividend per year = RM 8,500 x 20 = RM 170,000
Total Returns after 20 years = RM 100,000 + (Rm 170,000 - RM 154,080) = RM 115,920
Calculation 2 : ASB Investment
Monthly Investment : RM 642 x 12 = RM 7,704 per year
Expected Dividend = 8.5% (Fully reinvested)
Total returns after 20 years = RM 404, 375
Well it's your choice if you want to pay the banks or pay yourself?
let me get this straight as I think you are doing the wrong calculation here.
we only pay RM7,704 (for the 1st year) and use the dividend to pay for 2nd - 20th years. At 8.5% We will also make a profit of (RM8,500 - RM7,704)= RM796 per year for 19 years which equals to (RM796 x 19)= RM15,124. Our total returns by the 20th year is (RM100,000 + RM15,124) = RM115,124!!!
You said the total payment is RM154,080 but the truth is we only pay RM7,704 from our own pocket money. The rest are paid by don't know who, maybe from your income tax? LOL. So technically for an investment of RM7,704 ONLY we will have a return of RM115,124 in 20 years. That is 1494.34% profit my friend. Equivalent of 74.71% per year. THAT IS HUGE.
Calculation 2
Our own pocket money RM7,704 x 20= RM154,080.
Total returns after 20 years = RM404, 375.
% return = 404,375/154,080 = 262.44% or a mere 13.12% per year.
Now of course if you compare the TOTAL return of calculation 2 is more that calculation 1 but we always compare ROI and if you compare the ROI of loan vs ROI of no loan, don't lie to your self. you now know which is profitable right?