I recently borrow a book on MORTGAGE Free in 6 years. I was attracted to the title of the book that i can potentially retire with 2 fully paid private properties. After i read the book, i understand that the Author wanted people to embrace using debt (for private property) and margin in the stock account to create wealth. Also to unlock equity every 6 years so that the equity that is unlocked will be able to pump into the stock (REITS) to produce more dividend income. My mind was definitely opened up.
As i will be 48 this year. Based on Darrren Goh's assumption that for private property you can borrow till you are age 75 which means i can have a loan at age 49 with 26 years of loan to repay a property. If i am going to purchase a property of $1 million dollars. I would need to come up with the seed fund of $250k (both CPF and cash) assuming i clear my hdb loan by this year. And to come up with $110k. Total upfront outlay will be $360k in order to leverage.
On paper it is not easy to come up with such money. Unless i sell away my HDB and use the proceeds to fund for my private property. This will in turn unlock equity in my HDB and i can use the proceeds to go for this strategy of Mortgage free in 6 years time. It shows promise as long as i can stomach the loan and also the trading strategies.
The trading strategies are using margins in the stock account to purchase in terms of leverage 1:1 whereby $110k will double up to $220k which in turn will generate potential 10% interest in REITS in Singapore. This sounds really plausible if i can stomach the ups and downs of stock market. That means ignoring the ups and downs of the market and focus more on the dividends i gain from the 2 REITS.
After every 6 years assuming a 30 years loan for a young couple, it is definitely possible to have 2 (1 house fully paid up) Reits portfolio that generate passive cash flow, potential up to $200k per year. This will set most of the people free and to financial freedom.
1. Loan-to-Value (LTV) Ratio
The LTV ratio determines how much of the property price you can borrow:
| Number of Outstanding Home Loans | Maximum LTV Ratio | Minimum Downpayment |
|---|---|---|
| 0 (First Home Loan) | 75% (if tenure ≤ 30 years & age ≤ 65) | 5% cash, 20% CPF/cash |
| 1 (Second Home Loan) | 45% (if tenure ≤ 30 years & age ≤ 65) | 25% cash/CPF |
| 2 or more loans | 35% (if tenure ≤ 30 years & age ≤ 65) | 25% cash/CPF |
- If your loan tenure exceeds 30 years or extends past age 65, the LTV drops further (55% for the first loan, 25% for the second, 15% for the third).
- You must pay Buyer's Stamp Duty (BSD) and Additional Buyer's Stamp Duty (ABSD) if applicable.
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