Friday, February 15, 2008

Your Home- your asset??

Your Home- your asset?

People always think that their homes is their assets. I asked them what makes them think so. A lot of you will reply:" Of courselah, can appreciate in value ma!"

I strongly disagree that. If you are living inside your house now and still paying your home loan/mortage, I am so sorry to tell you that your home becomes the asset for the banks and a liability for yourself!

Therefore, if you are not making any money out of your house and need to pay money to stay inside, it is your liability and not your asset. You only can consider it as an asset once you settle your housing loan!

'How to settle the housing loan? Are you kidding? I am taking a RM 500k or S 300k housing loan?' some people may argue! I think one commonest mistake people make after they get their fisrt job is buying cars and houses too soon!!

Second mistake we make is buying too big car and house that we can't afford. Actually, you are recommended to buy a house that is only 3-4x your annual income. And I can tell you a truth, getting a house with that price will most probably end you up in one on the lousy flat in KL/Penang. And if you are lucky/unlucky to live in Singapore, you most probably can't even find any HDB flat that falls within your budget.

What I suggest you to do,

1) Work 2-3 years first and save up at least 20-30k before hunting your first house.

2) If your head is not so big, never try to show off to buy expensive house ( or show people how big your hat is!)

3) Settle your loan fast, pay extra every month until you settle your loan.

4) Get second cheap property and rent it out, then you only can consider it as your asset ( positive cash flow)!