Hi,

Appreciate everyone opinion / advice on this.

Scenario is as follows :

If you take up a fixed loan like HDB loan at 2.6 % for a loan amount of 350,000 dollars.

Wouldn't it be better to take the loan as long as possible since its a fixed rate loan for the next x no. of years. Also since you will be paying using future dollars, in the total amount, wouldn't you be paying lesser?

So I used a loan calculator that incorporates inflation into the total amount to validate that. Below are the results.

Mortgage Principle - S$350000

Mortgage term - 25 years

Yearly mortgage interest rate - 2.6 % fixed

Expected yearly inflation rate : 3 % flat rate every year.

Results :

-----------------

Monthly payment : $1,587.85 (Today dollars)

Falling to $749.35 (Adjusted for Inflation)

-----------------------------------------

Principal payments $350,000.00 (Today dollars)

$236,072.25 (Adjusted for Inflation)

-------------------------------------------------

Interest payments $126,352.99 (Today dollars)

$98,490.55 (Adjusted for Inflation)

------------------------------------------------------

Total payments $476,352.99 (Today dollars)

$334,562.79 (Adjusted for Inflation)

--------------------------------------------------

It seems from the results that , it would actually be better to extend the loan and pay in future dollars. The total amount I pay is lesser then what I borrowed to pay.

Now my question is.... Is there something wrong in the way I am looking at it ?? Am I missing something and the results are actually wrong?

I have attached the month by month breakdown provided by calculator if anyone in interested in the breakdown.

Appreciate if you could help correct if I am wrong in my outlook and calculation.

Thank you .

--------------------------------------------------------------------

Appreciate everyone opinion / advice on this.

Scenario is as follows :

If you take up a fixed loan like HDB loan at 2.6 % for a loan amount of 350,000 dollars.

Wouldn't it be better to take the loan as long as possible since its a fixed rate loan for the next x no. of years. Also since you will be paying using future dollars, in the total amount, wouldn't you be paying lesser?

So I used a loan calculator that incorporates inflation into the total amount to validate that. Below are the results.

Mortgage Principle - S$350000

Mortgage term - 25 years

Yearly mortgage interest rate - 2.6 % fixed

Expected yearly inflation rate : 3 % flat rate every year.

Results :

-----------------

Monthly payment : $1,587.85 (Today dollars)

Falling to $749.35 (Adjusted for Inflation)

-----------------------------------------

Principal payments $350,000.00 (Today dollars)

$236,072.25 (Adjusted for Inflation)

-------------------------------------------------

Interest payments $126,352.99 (Today dollars)

$98,490.55 (Adjusted for Inflation)

------------------------------------------------------

Total payments $476,352.99 (Today dollars)

$334,562.79 (Adjusted for Inflation)

--------------------------------------------------

It seems from the results that , it would actually be better to extend the loan and pay in future dollars. The total amount I pay is lesser then what I borrowed to pay.

Now my question is.... Is there something wrong in the way I am looking at it ?? Am I missing something and the results are actually wrong?

I have attached the month by month breakdown provided by calculator if anyone in interested in the breakdown.

Appreciate if you could help correct if I am wrong in my outlook and calculation.

Thank you .

--------------------------------------------------------------------