6 Reasons Why You Should NOT Repay Your Housing Loan Early

I think this is a very insightful read especially for those who are getting a flat soon.
It was surfaced in Yahoo before and I chanced upon it again so I must make it a point to share so that you can ponder over it.

An extract below:

Click here for more:
http://www.bigfatpurse.com/2009/01/6-reasons-why-you-should-not-repay-your-housing-loan-early/

1) It is the cheapest loan
Housing loan is the cheapest loan you can ever get from banks. The interest is about 3-4% and you compare it to car loan (7%), unsecured personal loan (14%) and credit card loan (24%). You can see the contrasting difference! Don’t you think you should leverage on the cheapest loan available to you?

2) Your networth remains the same
Repaying your housing loan early does not increase your net worth. This is because you are just taking your cash from your bank and putting it into the house. Worse, you are actually freezing your cash.

3) Losing your life and money
Having a mortgage insurance can help you in the event of death or total disability, where your loan will be paid off by the insurance. The cash or CPF monies can be left for your beneficiaries. If you have repaid the loan using your cash and CPF, you would have lost this advantage.

4) Opportunity Cost
With the cash in hand, you can invest and generate better returns. Rather than being cash strapped, you have the purchasing power to pick up real bargain stocks when the market crashes. Again, it will not be possible if you have your money locked in the house.

5) Use Interest Offset Loan
With an interest offset loan, you can earn interest on your cash to offset 100% of your housing loan interest you pay on your loan. This equates to repaying your loan, but with the liquidity of your cash where you can deploy when good investment opportunity arises.

6) Buy Single Premium Endowment
If you do not know how to invest and would want to avoid all ‘risky’ products, you can buy a single premium endowment, maybe for 20 years at 3.5% annual return. This would be able to offset your housing loan interest.