theory.
if house price is 300k
all paid up.

then refinance for 30 years
AIA fixed. for 216k
monthly need to pay is
1,267.39 at 5.80 % (ZMC)
one year, need to pay bank 15,208.68

step one:
get cash 216k, 200k put in ASB
16k put in ASW/ASD?

step two:
gradually use 16k to pay 1st year.
ASD/ASW now zero

step 3:
assume asb is lowest payout : 7%
you get 14k,
top up = 1208.68

repeat the ccycle for 30 years

house paid up
balance in asb = 200k?
cash put in 1208.68 * 30 = 36,260.4

if you gradually put 1208.68 in ASB every year
after 30 years, you get 123,373.64 (assuming 7% payout)

so you get 50% extra

am i making sense?

(want to try this out, but want to ask LYN financial expert first)

highly doable, but one has to have the dicipline and not use the 200k for any other purpose.

To me, the biggest advantage in this strategy is that extra liquidity that could be use to generate more than just 7% p/a.

the japanese are doing that.. exploiting the differences in interest rates versus returns.. borrowing cheap in yen and invest in other higher interest bearing instruments globally..

maybe, you want to try a malaysia ringgit carry-trades?

lwb,

are these individual Japs? Whats the rate like?

hi pai,

individuals, retail, syndicates, institutionals.. you name it.
i hope sovereign funds are not part of it... but i suspected they do

besides Refinance <-> ASB, how else is the applicable?
i tried to do the numbers on a 10 year refinance, but i got negative in ASB after 7 years.

interesting.

Wonder whats the % spread like and if whether ppl like us (technically a foreigner) could join the foray and leverage through the yen.

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Added on May 28, 2008, 10:37 pmRefinance -> get $$$$ -> invest in another prop and potentially generate 50% or even higher return p/a.



This post has been edited by Pai: May 28 2008, 10:37 PM

well, i would say its a good idea, but not exactly risk free, very hard to say that asb will continue to pay out 7% over the next 30 years. Suggest to spread the 200K to a few channels rather than relying on asb alone