How to judge whether you are suitable to pay off your mortgage early?
We often say that a mortgage loan is the largest amount of money, the lowest interest rate, and the longest period of time that ordinary people can borrow. And with the release of currency and the inflation of and , the later it is, the more cost-effective it is.
But a strange phenomenon has appeared recently: many people have posted their experiences of "paying off their mortgage in advance" on social platforms such as Douban, Xiaohongshu, etc. What is going on?
"On May 20, the central bank lowered the 5-year LPR interest rate by 15 bp to 4.45% at one time." This may be the most direct trigger for this wave of repayments. This wave of operations by the Central Bank is the largest reduction in LPR over 5 years since the establishment of the new LPR mechanism.
In this case, if you choose to repay the loan early, you might be able to save money on a BMW !
For example, you bought a house in Shenzhen with a loan of 2 million yuan, the interest rate is 5.7%, and the total interest is 2.17 million. If you repay 200,000 in advance, based on the current interest rate of 4.45%, the total interest you have to repay will only be 1.46 million.
In other words, if you choose to repay your loan early when the LPR interest rate is reduced, you can save 710,000 in interest alone! If you choose to shorten the repayment period, you can save a lot of money.
As a result, posts on social platforms such as "Pay off the mortgage early and stop working for a bank" and "Isn't this more profitable than a fund? Pay off the loan early and save 400,000" are flying all over the place.
In fact, the reduction in LPR interest rates is only the inducement for this wave of loan repayments. Most people make this decision because their income is affected by the epidemic.
For example, we can clearly feel that the stock market is highly volatile and fund returns are not as good as in previous years. Bank time deposit product interest rates have been cut, and there may also be pressure to cut wages and layoffs during the epidemic. At this time, everyone will feel that instead of leaving the money in their hands to depreciate, it is better to pay off the mortgage in advance, which can save money and reduce stress.
The question is, is everyone suitable to pay off their mortgage loan early?
Not necessarily. Early repayment also requires comprehensive consideration of multiple factors.:
For example, Do you have financial pressure after paying off your mortgage? If you don’t have much cash on hand, rashly using all the cash to pay off the mortgage in advance may increase the family financial risk . In this era of black swan and flying everywhere, it is recommended that when planning early repayment, you should keep some cash to deal with emergencies and serve as capital for investment appreciation.
For another example, Which type of loan does yours belong to? If it is a provident fund loan , the interest rate itself is low, and the loan interest rate for more than 5 years is only 3.25%. It is not recommended to repay the loan early; if it is a provident fund + commercial combination loan, you can consider repaying a commercial loan with a high loan interest rate in advance. Part, provident fund loan part will be repaid slowly on schedule.
There is also the simplest and clearest criterion, that is, can your investment ability outperform the mortgage interest rate? Whether you want to pay off your mortgage in advance actually depends on whether the same amount of money in your hands can create higher returns than the mortgage interest rate.
If you can, don't repay it in advance, so that you can get high returns and ensure liquidity; if you currently don't have better investment channels and your investment capacity is lower than the loan interest rate, you can choose to repay it in advance.
In fact, it is very convenient to repay in advance, and some can be operated directly on the APP. However, the regulations of each bank and region are different. It is recommended to call the bank in advance to consult the relevant policies and ask questions such as penalty interest penalty, repayment amount requirements, etc.
Of course, we are not encouraging you to repay the loan early, because it seems to save a lot of interest, but we must also consider the issue of currency purchasing power under the influence of inflation. So you still have to look at it based on your actual situation.
Only by comprehensively considering various factors such as family income structure, debt situation, future income expectations, etc. and doing a self-assessment of risk tolerance in advance can you make the choice that best suits you.
Taiyi Holding Group believes that regardless of whether they choose to repay their mortgage in advance, everyone should learn to think about "how to make the most beneficial asset allocation decision ?" The reason is simple: let professional people do professional things. We can seek professionals to help us with wealth management to resist the risks brought by black swans and get higher investment returns! Written by
| Edited by Zhong Shijin
| Editor and reviewed by Zheng Zhengshang
| Leyla
