Upgrading to a Condo is not Always Feasible
I had a chat recently with a friend who has indicated she wants to upgrade to a private condo.
She is a 57-year-old single mother with a university-bound daughter. Currently owned a colossal jumbo flat that is worth about $750k.
I did some calculations to see the amount of sales proceeds she will get from the flat. Besides, I also assessed her financial resources and checked on her maximum loan amount. Our conclusion is that upgrading to a condo is not the best thing for her to do. It would be too stretching for her.
Why is upgrading to a private property not always feasible for everyone.
Age is one big factor.
At age 57, to take up a housing loan with only 8-year loan tenure will mean high monthly mortgage payment. Loan amount will also be limited.
At this age, in most cases, it is not the time to build your property portfolio or to upgrade…unless you have a lot of cash in your piggy bank.
This season of life should be harvest time, not sowing time. Age 28 to 45 is the best time for property wealth creation; 45 to 60 for property wealth accumulation; thereafter possibly property wealth distribution.
There is a season for everything.
If my friend were 20 years younger, based on the same monthly income of $5,500, she would be able to borrow up to $706,000. But at her current age she is only eligible for $276,000. That is a huge difference.
Property wealth creation should start as young as possible.
Age versus Loan Amount (based on $5,500 monthly income)
To illustrate the importance of starting young, take a look at the table above.
Assuming someone with a monthly gross income of $5,500. If he or she has no other loan commitments, the maximum amount of loans eligible are shown in this table.
Since the maximum loan tenure is 30 years or up to the age of 65, age 35 is the critical age. After 35, the maximum loan tenure starts to diminish from 30 years, and the amount of loan also reduces in tandem.
Comparing a 40-year-old and a 55-year-old, the eligible loan amount is about halved. As such it is important to start as young as you are able to.
Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.
Danny has a genuine interest in people and firmly believes in personal integrity. While helping homeowners with their property needs, their interest always takes precedence over his personal gains. Hence, Danny has consistently earned his clients’ complete trust and loyalty. Many of them have become his personal friends.
Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.
Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.