Why I do not buy an apartment on credit
I often hear arguments about buying a home on credit, ostensibly "the whole world / Europe / America lives on credit," "if you can afford it, buy it." But how! I can afford to pull the hryvnia out of my wallet and burn it, but for some reason I don’t do it :) Loans are the same as comrade Bender said, hussardry.
Rule number 1 . It is profitable to take a housing loan if and only if the net loan amount (i.e., the difference between the cost of housing and the down payment) does not exceed R * 1200 / i , where R is the amount you pay next month for rent, and i - percentage (annual) for which the loan is taken.
Example. You have $ 25K, an apartment costs $ 125K, a rental of a similar apartment is $ 500, the interest rate is 12% per annum (you still have to look for this). 500 * 1200/12 = 50K, so you need to accumulate another 50K, and not to bother 100K * 12/1200 = 1K per month only one percent . Taking such a loan right now, next month you just throw away $ 500 to the wind. For this money you will not get anything . It is better to invest this money somewhere so that they work for you, not you for them.
')
Rule number 2 . The term of the loan does not solve anything.
No matter how long the loan period is - 25, 30, 40, and at least 100 years, you still pay the same amount of interest next month. Delaying the repayment of the loan body - scanty compared to interest - only prolongs your financial dependence until the specified term, especially in the case of annuity (see below). Interest at 12% per year is 1% per month, and the body of a 25-year loan is one-third of a percent, that is, one-fourth of the total payment.
Rule number 3 . Annuity - aggravation of dependence.
An annuity is the principle of equal payments every month, that now, that in (N-1) years. With such a scheme, in the first month a slightly smaller amount is paid than with the standard one, due to a decrease in the share of the loan body in it. Thus, in the second month you will have to pay more interest - because the unpaid amount will be higher! The amount of interest with the standard scheme decreases in proportion to the remaining period, that is linear, and with annuity with a delay, in an arc, and if you draw these two lines on the chart, you get a bow that the bank shoots at you, dear client: (. a little bit more, you would easily cover the difference between the first standard payments and the first annuity payments, and in the second half of the term you paid almost pennies.
Rule number 4 . Credit apartment will become your property only after N years.
Some people amuse themselves with illusions, they say, living in a “private” apartment is not at all something that is rented, even if you have a huge loan. What kind of "property" is this? If you do not pay the landlord, it is fraught with maximum loss of collateral (usually costing a month) and the need to look for a new apartment and pay a new mortgage. With an adequate approach, the landlord is usually a living person, a private person, and agreeing with him about the compensation of inconvenience is not so difficult. The banking bureaucracy is quite another matter. With it, you can lose all the already "acquired" part of the apartment, since the bank will let it go cheaply with a hammer. The risk of a loan is directly proportional to its term.
Rule number 5 . You can take a loan only for the period for which you have plans.
Here, for example, I have absolutely no idea what I will do in 2038, where I will live, how many descendants I will have, and what age at which time they will have habits. Maybe dvushki enough, and maybe 4 is not enough. In addition, what will be life at all by this time, what will be the balance of prices, what technologies will appear, the economic, political situation, what will be in demand, and what will not be needed for nothing - as long as you can only guess. To drive oneself into the framework of a hypothetical plan for such a long time is to ruin one’s life, to become the Bank's servant. The maximum period for which I can build any real plans is 5 years, and then in general terms. This means that the loan will be taken when rule 1 is fulfilled, and so that I will repay it for 5 years, even if a larger number is written in the contract. Before that, I see no point in any credit.
The objection that the cost of housing is growing faster than any interest is swept aside by common sense - this bubble cannot inflate for a long time, and now it seems that it has swelled to the limit. One should not confuse a short-term speculative tendency with a long-term objective one. If the bubble bursts, the price may fall even lower than the amount for which you took out a loan, like in Japan in the early 1990s or from last year in the United States, and then in case of problems even selling credit housing will not save you from having to pay for a long time with the bank. All these risks are not insured by anyone! The bank forces you to insure your life, since it is interested in your being able to pay it off; he doesn't care about your financial prospects. Are you ready to turn into shit N years of life for momentary Ponte pseudo-owner?
Finally, rule number 6 . Loan without the possibility of early repayment - slavery in the naked form. Such a loan is not worth taking even for 5 years. It will create more problems for you than it solves.
Thus, you can safely forget about the housing loan before accumulating about 60% of the amount and getting the opportunity to regularly pay the amount of almost 2 times the rent (one half interest, the second loan body). Let there be someone else for long periods and low initial contributions, and even better, when there are no such deposits, then the banks will quickly die of their appetites and the loan will become more profitable. The difference between the loan payment and the rent can be much better used. Now, if the rent will rise in price by 2 times, all other things being equal, or the interest will decrease by 2 times, or both of these indicators will meet somewhere halfway - then the first rule will lose relevance, now it is far away.
Rule number 1 . It is profitable to take a housing loan if and only if the net loan amount (i.e., the difference between the cost of housing and the down payment) does not exceed R * 1200 / i , where R is the amount you pay next month for rent, and i - percentage (annual) for which the loan is taken.
Example. You have $ 25K, an apartment costs $ 125K, a rental of a similar apartment is $ 500, the interest rate is 12% per annum (you still have to look for this). 500 * 1200/12 = 50K, so you need to accumulate another 50K, and not to bother 100K * 12/1200 = 1K per month only one percent . Taking such a loan right now, next month you just throw away $ 500 to the wind. For this money you will not get anything . It is better to invest this money somewhere so that they work for you, not you for them.
')
Rule number 2 . The term of the loan does not solve anything.
No matter how long the loan period is - 25, 30, 40, and at least 100 years, you still pay the same amount of interest next month. Delaying the repayment of the loan body - scanty compared to interest - only prolongs your financial dependence until the specified term, especially in the case of annuity (see below). Interest at 12% per year is 1% per month, and the body of a 25-year loan is one-third of a percent, that is, one-fourth of the total payment.
Rule number 3 . Annuity - aggravation of dependence.
An annuity is the principle of equal payments every month, that now, that in (N-1) years. With such a scheme, in the first month a slightly smaller amount is paid than with the standard one, due to a decrease in the share of the loan body in it. Thus, in the second month you will have to pay more interest - because the unpaid amount will be higher! The amount of interest with the standard scheme decreases in proportion to the remaining period, that is linear, and with annuity with a delay, in an arc, and if you draw these two lines on the chart, you get a bow that the bank shoots at you, dear client: (. a little bit more, you would easily cover the difference between the first standard payments and the first annuity payments, and in the second half of the term you paid almost pennies.
Rule number 4 . Credit apartment will become your property only after N years.
Some people amuse themselves with illusions, they say, living in a “private” apartment is not at all something that is rented, even if you have a huge loan. What kind of "property" is this? If you do not pay the landlord, it is fraught with maximum loss of collateral (usually costing a month) and the need to look for a new apartment and pay a new mortgage. With an adequate approach, the landlord is usually a living person, a private person, and agreeing with him about the compensation of inconvenience is not so difficult. The banking bureaucracy is quite another matter. With it, you can lose all the already "acquired" part of the apartment, since the bank will let it go cheaply with a hammer. The risk of a loan is directly proportional to its term.
Rule number 5 . You can take a loan only for the period for which you have plans.
Here, for example, I have absolutely no idea what I will do in 2038, where I will live, how many descendants I will have, and what age at which time they will have habits. Maybe dvushki enough, and maybe 4 is not enough. In addition, what will be life at all by this time, what will be the balance of prices, what technologies will appear, the economic, political situation, what will be in demand, and what will not be needed for nothing - as long as you can only guess. To drive oneself into the framework of a hypothetical plan for such a long time is to ruin one’s life, to become the Bank's servant. The maximum period for which I can build any real plans is 5 years, and then in general terms. This means that the loan will be taken when rule 1 is fulfilled, and so that I will repay it for 5 years, even if a larger number is written in the contract. Before that, I see no point in any credit.
The objection that the cost of housing is growing faster than any interest is swept aside by common sense - this bubble cannot inflate for a long time, and now it seems that it has swelled to the limit. One should not confuse a short-term speculative tendency with a long-term objective one. If the bubble bursts, the price may fall even lower than the amount for which you took out a loan, like in Japan in the early 1990s or from last year in the United States, and then in case of problems even selling credit housing will not save you from having to pay for a long time with the bank. All these risks are not insured by anyone! The bank forces you to insure your life, since it is interested in your being able to pay it off; he doesn't care about your financial prospects. Are you ready to turn into shit N years of life for momentary Ponte pseudo-owner?
Finally, rule number 6 . Loan without the possibility of early repayment - slavery in the naked form. Such a loan is not worth taking even for 5 years. It will create more problems for you than it solves.
Thus, you can safely forget about the housing loan before accumulating about 60% of the amount and getting the opportunity to regularly pay the amount of almost 2 times the rent (one half interest, the second loan body). Let there be someone else for long periods and low initial contributions, and even better, when there are no such deposits, then the banks will quickly die of their appetites and the loan will become more profitable. The difference between the loan payment and the rent can be much better used. Now, if the rent will rise in price by 2 times, all other things being equal, or the interest will decrease by 2 times, or both of these indicators will meet somewhere halfway - then the first rule will lose relevance, now it is far away.
Source: https://habr.com/ru/post/26104/
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