Q&A - To Invest Or To Shorten?

(source: StarProperty.com)

Dear Azizi Ali,

I recently bought a condominium for RM236,000.00 in Bandar Sri Permaisuri. My monthly loan repayment is around RM1,000 for a tenure of 30 years. Currently it’s rented out, hence my monthly loan repayment is being taken care of. My question is, if I step up in my career and earn an additional RM2,000 per month, should I use the money to invest or to pay off my home loan so that I shorten the loan tenure?

Thank you for your kind advice.


Dear Emily,
The answer will depend on what you want in your life, Emily. Generally speaking (and I’m generalising big-time here), there are two groups of people when it comes to money matters: (1) those who want a simple life, and (2) those who want to be seriously wealthy.

All that the first group wants, which by the way forms the majority of the earth’s population, is to have a couple of properties, some money in the bank, do a little bit of traveling and be debt-free. In short, they don’t need much and they don’t want much. By the way, there is nothing wrong with this; it is a perfectly fine way to live life.

If this is the group that you are in, then the answer is to use the extra income (that I have no doubt that you will be making in the days to come) to pay off your mortgage so you can be debt-free as soon as possible. More importantly, you will be happy doing so as it matches your life’s philosophy.

However, the answer will be different if you fall into the second group – the folks who want to have so much money until it gushes out of their ears! Here you will not be paying off the mortgage earlier. Instead, you will be using the extra money as seed money for other investments which may include buying more properties. As the plan here is to build serious wealth, you will need to invest most, if not all of your capital for higher gains. In fact, it is likely that you will be using OPM (Other People’s Money) – another way of saying that you will be borrowing lots of money – to multiply the wealth faster and needless to say, further.

No prizes for guessing which group I fall into!

Azizi Ali

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