Is it worth taking the EPF to pay off the mortgage?

Many common mistakes made by elders

At the age of 55, he is feeling that life is so short...

I didn't expect to reach retirement age so soon.

Mr. Chen is a factory worker.

It took half my life to save money and frugally before I was able to save a little bit of savings and pensions.

The savings are placed in term deposits, which have about RM200k and interest of about 3% per year.

The EPF account, on the other hand, has about RM500k, and can also have dividend income of 5% to 6% per year.

Mr. Chen has a small house.

Every month, I work hard to make a contribution. Calculated up to now, it has been almost 25 years.

I didn't expect the RM300k mortgage. After so long, I still owe the bank RM130k...

At this age, no one wants to get into debt for a house anymore...

He was a little dazed.

Listening to the opinions of some friends,

So he proposed some pensions from the EPF,

I just got rid of the RM130k owed to the bank~

Although there is only RM370k left in the pension, being debt-free is less.

Mr. Chen immediately felt so relaxed!

If you are reading the article, do you also have some elders around you who like to do this?

Don't spend 10 yuan to save 8 yuan

Many people often make poor financial decisions because they lack basic financial knowledge.

Take Mr. Chen's example.

First, he wants to pay off his mortgage, and he wants to be debt-free and light. That's fine.

The problem is, he uses a pension that allows him to earn a higher income,

Get rid of the mortgage to save lower interest...

It's like you have a hen at home that lays “golden eggs” every day,

However, there are creditors from outside who want to discuss “normal eggs” with you every day,

Because you don't want someone to discuss “normal eggs” with you every day,

So you gave that golden hen, which can only lay “golden eggs,” to the creditor...

In disguise, I used 10 yuan to save 8 yuan, but I still lost 2 yuan...

Why don't you use 6 yuan to save 8 yuan?

If I don't have to pay my pension back, what should I do?

Doesn't Mr. Chen still have a fixed deposit of RM200k on his hands?

Isn't it OK to use it in exchange for a mortgage?

Many people don't realize it.

Placing money on a regular basis is equivalent to lending money to a bank.

I didn't even realize it,

You lend the bank 100 yuan, and the bank pays you 3 yuan in interest.

And you went to borrow 100 yuan from the bank because you wanted to buy a house, then the bank charged you 4 yuan in interest...

You earned 1 yuan for nothing for the bank.

At this point, you will find people who put in large amounts of cash on a regular basis while also borrowing mortgages at the same time,

Seems kind of silly.

Part of the reason for this irrational allocation is what traditional ideas tell us

A person must have a house and a deposit!

And it's safest to deposit on a regular basis!

Should I take out a mortgage if I have cash?

That doesn't have to be the case!

It depends on whether you have a way to use cash to make a profit higher than mortgage interest.

You have 100 yuan on your hands. If you can use this 100 yuan to earn 20 yuan,

Well, for the 100 yuan you need to buy a house, you should still borrow it from the bank.

Because you only need to pay 4 yuan in interest to the bank, you still have 16 yuan to put in your pocket!

To do a good job in financial management, you must at least understand the concept of “rate of return.”

If you know how to compare yields, you can make relatively correct financial decisions.

For example, if you just earned 20 yuan from 100 yuan, the yield is 20%.

What are some ways to make cash yield higher?

First, make sure you understand one thing.

Here is a list of the types of investments and the average reasonable return, risk, and liquidity they correspond to:

#EPF | Yearly Yield 5% - 7% | Close to No Risk | Ultra Low Liquidity

#ETF | Yield 7% - 15% per annum | Medium Risk | High Liquidity

The range of returns for some types of investment will be very large~

This is because it depends on the market, subcategory, etc. where it is located.

Like stocks,

The average earnings in the Malaysian market will be different from the average earnings in the US market.

Look at historical data,

In the Malaysian stock market, the average yield over the years is 6% - 7%

In the US stock market, the average yield over the years is 9% - 12%

And whether it is possible to obtain a yield that is better than that of the general market,

It also depends on the investor's own technical level and ability to manage risk.

That's all for today's sharing!

If you want to look at it from the perspective of my many years of professional research and investment

Learn more about financial management, such as

For this kind of discussion, please leave a message to let me know.

After all, this kind of very simple knowledge,

Every minute can help you save tens of thousands of yuan, or you don't have to spend tens of thousands more yuan of wrong money ~

Disclaimers:

The content shared above is for educational purposes only and personal opinions, and is not investment or financial advice. To make any investment or financial decisions, please consult a professional financial advisor first.