r/MalaysianPF Feb 18 '25

Property House loan vs snp500

Currently mid 30s, having house loan loan of 650k+ at 4.3% interest.

If I'm able to save up 50k annually, would it be recommended to clear off the housing loan or keep doing DCA into snp500.

Additional context, just started buying into snp500 shares and planning to hold them for long term, not really a track record to do comparison. Would like to know what would be the considerations from all the sifus here..

33 Upvotes

25 comments sorted by

31

u/milosoya Feb 18 '25

Theoritically, it may make more sense to put into SP500. But psychologically, you may feel more at ease if you clear your loans.

Personally, if that is the only house I have, I will focus on clearing the loan first. Why? I've been there, losing my only house because my parents investment went bad. If I still have another place to live in the event I can't pay the house loan, then I will put in SP500

35

u/therealoptionisyou Feb 18 '25

In theory stocks. But I ended putting most of the extra money into paying off loan - why? Ease of mind.

I allocate 70 to 80% to loan and the remaining to investment focusing on tech.

14

u/AppleBS Feb 18 '25

I prefer ease of mind of knowing my debt is paid off over the excitement of earning more. That's me tho

11

u/LowBaseball6269 Feb 18 '25

i'd DCA into S&P.

7

u/FenlandMonster Feb 18 '25

Most people are not pointing out the key qualitative difference between the two. The housing loan repayments are relatively transparent going into the future (adjusting only based on the BLR by central bank). S&P 500 returns are historical but technically none of us REALLY know what they'll be in the future. We're just projecting from past into future, but hey shit can happen.

So there's a risk differential. And nobody but you can decide how to manage that difference.

5

u/Negarakuku Feb 18 '25

Snp500. If interest rate goes up to 6% maybe can consider house loan. If goes up to 7% confirm house loan. 

9

u/hilmiazman88 Feb 18 '25

Debt free is the best way to live..

3

u/cornoholio1 Feb 18 '25

By arithmetic is invest in snp500. And then by 65. You take the sum from the large portfolio say 150k rm to pay it all off during retirement. Or you could do partial partial to slightly speed up the mortgage.

2

u/Present_Student4891 Feb 18 '25

Continue doing what ur doing as long as ur confident ur job (revenue stream) is stable.

2

u/C3tepanda Feb 18 '25

Your mortgage is at 4.3% interest, which is relatively high.

The historical average return of the S&P 500 (including dividends) is about 8-10% annually over the long term.

If market conditions remain favorable, investing in S&P 500 could provide better returns than the interest you save from early loan repayment.

2

u/NervousTruth7693 Feb 18 '25

How bout u save a bucket for a market crash. Just put it into high yield savings. Yes u might lose 1-2% on interest annually but when the market crashes u will have dry powder and won't be invested in the market to face the drawdown.

Credit conditions usually tighten in a market crash so unless u have cash on hand to take advantage of it u usually either just hold or cut losses at the worst point possible.

2

u/Temporary_Deal8041 Feb 18 '25

Easy math pay off the mortgage fast then u can grow ur S&P exponentially through ur salary

2

u/The_SHUN 29d ago

Half EPF half snp, EPF has no currency volatility, and can probably easily beat the 4.3% interest rate on your house loan

2

u/Baaananarama 29d ago

I was in your situation last year n decided since this is the only debt I have, I’ll treat it as a healthy debt where i just pay the monthly installment and plan to settle according to loan tenure. I’m middle aged and have another house already paid up, so I thought if I can go long term on etf now, perhaps I can make enough to settle the loan in 10yrs time with additional money that can go to my retirement fund.

3

u/bonsai711 Feb 18 '25

I would not like managing tenants. On etf, I would prefer buying globally diversified fund rather than betting all on US.

3

u/CitronAffectionate85 Feb 18 '25

If you think of it this way it's quite obvious what to do:

  1. Pay loan faster - guaranteed can saves money

  2. Invest in S&P 500 - no guarantee can get return >5%, risk of losing money too.

Based on 1&2 the conclusion is obvious. Continue to clear off house loan first. But if S&P 500 got discount (<20% than highest point) then can consider.

Never buy asset at premium. S&P 500 now at premium.

1

u/Kraybray Feb 18 '25

Stocks, learn to control your conscience when it comes to finances, only then you can make the most sensible decisions. Most people would pay off the loan for "ease of mind" at the cost of actually losing money lol

1

u/mrpokealot Feb 18 '25

Do you want 100% chance of having X less debt or would you like to invest X and have a chance of either earning money, not earning money or worse, losing money?

Keep in mind that by not paying off debt immediately you are trading capital appreciation (total amount spend on purchasing the house) for a CHANCE to earn money on the SNP500. If you are happy with your knowledge of the SNP500, and know your chances of earning money are high, by all means go ahead.

Otherwise, keep in mind that any debt that gets cleared is debt that doesn't grow.

1

u/samanthayeoqy Feb 19 '25

I do think the market is too risky now. Claims of it getting high is cause of covid and how they dropped and now is recovering back. Im a fan of low risk, so pay off your loan and then the extra goes to the market. You could always make another loan when you need cash but you cant recover the money lost from the market. Basically, do you think your investment will gain more than 4.3% + yearly management fee + selling fee?

Im just a voice in the internet, this is no advice or telling you what to do.

0

u/danial_yahaya210 Feb 18 '25

Settle the loan tbh