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8 Habit Changes To Make Your Home Loan More Affordable
As another weekend comes to a close, we can expect more robust sales data from new launches of private properties. It has becomes the norm and it seems that if a week goes by without any “80% sold” or “90% sold” tag lines being broadcasted, Singapore would lose it’s national identity. Since any number of experts who play down the property prices and any amount of cooling measures the government implements is unable to defeat the property fever, it is time we accept that there is “genuine demand” for mass market properties.
However, whether “genuine demand” refers to first time home buyers or those who legally game the system is still a debate unless demographic data is released on these buyers who are buying like there is no tomorrow. For example, if a married couple buys a property each under their own individual names fully intending to live in one and rent the other, is that considered “genuine demand” or gaming the system? This topic alone can be written into a book by itself for students to study in Universities 20 years from now. It is a relief that this article is not about that.
The trend these days is to obtain the absolute maximum financial leverage from a bank for your purchase. So if you have done that, you might be aware that the current affordable home loan interest rates are still hovering around it’s all time lows. How will your monthly repayments look like if interest rates spike 300%? The loan may appear very affordable now as interest rates are radically low. But when it rises, you could be up to your neck in repayments. It is not a matter of whether it will happen but a matter of “when”. Surely you would have given at least 2 minutes to think about that. Well you can save that 2 minutes now. Here are what you can do to make your home loan more affordable.
1) Long term mentality. Instead of planning your personal finances for the next 6 months or 1 year, start looking at your finances on a long term perspective. The average lifespan in Singapore is up to age 84 anyway. Determine what are your priorities for the next 20 years at least. A paradigm shift of mindset alone can fully steer you in another direction like a cruise in open waters. If you had always been a short term planner like budgeting for your monthly expenses, start budgeting for bi-annual or annual expenses. You can slowly work your way up.
2) Eliminate fancy meals. A normal plate of nasi lemak can cost $3 in a hawker centre. And $6 in a fancier eating house with exactly the same stuff, maybe even a smaller portion. This effectively cuts down your meal expenses by half. There are countless examples that can show the ridiculous amount of money you can save up by eating practical. You might think that you cannot sacrifice that as you are too posh to eat in a hawker centre. Let’s see if you will change you mind when interest rates explode.
3) Cancel half of your credit cards. As painful as this can sound, it could be necessary if you happen to be a credit freak. The beauty of the credit card is that you can pay with money that you will have in advance. But if you are like me, you would have lost count of the number of times feeling dizzy after opening up your monthly bill in the mailbox. If you are someone who is paying interest on credit bills, you must already know the exuberant interest rates banks lavish on you. The best way to manage this is to stay on a strict regime of cash only expenses. Only when you pay by cash will you feel somewhat guilty of your zealous spendings. Pay up half your cards and cancel them. Then start making full payments each month on the remaining cards to avoid the high interest charges that they come with.
4) The car factor. I would usually associate those who say that a car is a necessity is trying to be cute by playing the role of a pampered man being a victim of society. The fact is that Singapore is well connected by public transport. But a car just makes things much more convenient especially if you are just the resident passenger. Owning your own family vehicle for transport can be very useful. But if the cost of the car is as much as the down payment for your house, you are probably spending above your means. Before assessing whether you can upgrade your car, you should think about upgrading your home as a bigger priority. Stop spending on modifications that give you better performance that you do not practically need. A car after all is a liability unless you operate a car rental business.
5) Eliminate bad habits. Have you thought about how much your spend each year on alcohol, cigarettes, bars, etc? If you add them up, it will not be a surprise to most people when the annual sum comes up to the thousands. It can be a little extreme to ask that you cut them out completely immediately. Set a target to half these vice spendings for a start. You becomes healthier and your bank account will be better off too.
6) Stop buying retail items at regular prices. This can be the most miserable sacrifice you have to make if you have a medical condition that requires constant retail therapy. Withdrawal symptoms can include salivating uncontrollably, trembling hands and a running nose with a pinch of high fever that comes and goes without warning. Going cold turkey can cause mental instability. So administer retail therapy only when there is a sale going on and you are sure that the discounts are real. You can very often find premium brands selling in outlet stores at less than half price. Shop smart instead of shopping hard.
7) Pre owned furniture. Furniture are like car in that they usually depreciate quickly in value. You can often find great bargains if you look hard enough. Remove the mental block about owning someone else’s furniture. Antique furniture are worth millions of dollars and they are owned by many other people before. The same with cars, second hand cars are as popular as used cars with car buyers.
8) Less traveling. One of the most popular hobbies of people in Singapore is traveling. You wouldn’t expect less as anyone can proudly claim to have seen the whole of Singapore within 3 days. Adventure lies in traveling to foreign land. The average person in Singapore would likely get on 2 long holidays overseas each year. If you really have to hit your quota of 5 per year, don’t exclude the option of budget airfare and budget accommodation. Traveling can costs many times cheaper if you embrace budget traveling.