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[Don’t Be a House Slave Series 2] Case Study on How to Reduce Mortgage Payment for 10 Years! What are the risks of premium financing?
In the previous video, we talked about the different benefits of premium financing, including shortening the mortgage term and reducing the payment amount. The self-occupied property can still be rented, and the rented floor can be doubled or even free of charge. Floor for floor! They also use real cases to share how to tighten the mortgage amount. This video will use other cases to explain the above benefits. It will also talk about the actual risks of premium financing and what should be paid attention to. If you haven’t seen my previous video, you can watch it in the upper right corner first. Because it is closely related to what I am about to talk about, remember to read to the end to understand its benefits, risks and things to consider!
Let’s talk about the rental cases of self-occupied properties first. Mrs. Ho has a one-story property in Causeway Bay with a market value of 8.5 million. The first floor has been sold out and it is self-occupied. If he lived there himself, his property would not be able to help him generate any cash flow, so Mrs. He mortgaged the property that had already been paid off for premium financing. The entire application process can be viewed in the previous video. , we jump directly to the results. Many times when buying a large endowment insurance policy, you will receive a cash rebate. In Mrs. He’s case, she received a cash rebate of $285,000. She does not have to pay out the money every month, but can also make contributions. Collecting interest of $17,000 is like tightening the rent on the property where he lives. After ten years, he surrenders the policy, uses the money from the policy to pay off the mortgage he applied for premium financing, and collects another 3 million in cash. The total profit in ten years Department $5.325 million!
Let’s talk about another real case. Ms. Li has a one-story property in Tsuen Wan with a market value of 6 million. The floor has been sold out. Ms. Li rents out the property and charges $13,000 per month. After Ms. Li did premium financing, we jumped directly to the results. Ms. Li could get a cash rebate of $200,000 and receive an interest of $12,500 every month. After ten years, the plan is completed, the mortgage loan is paid off with the insurance policy, and another 2.5 million in cash will be obtained, with a total profit of 4.2 million! I don’t remember that Ms. Li’s property also tightened the rent to $13,000 per month!
I have just talked about two examples, both of which have already paid for the floor. Here are real examples of reducing the mortgage term. Mr. Jiang owns a property in Saigon with a market value of 12 million. The monthly payment is $28,000. There are also three years of requirements, which means the net minimum payment amount is $1,008,000. Mr. Chen later engaged in premium financing, and the result was: he paid off the remaining mortgage immediately, received a cash rebate of 200,000, and received $12,000 interest every month. The first two cases are about the results after ten years. This time it is shortened by half. After five years, the total profit is planned to be $1.928 million!
The above three real examples are not very complicated things, they are just effects that can be achieved by flexibly using the assets at hand. Many people will ask whether premium financing is safe and what are the risks?
The expected return period of premium financing is four years, that is, the return of capital begins in the fourth year. The average annual return after deducting the cost of borrowing money is more than 9%. Is it so safe? Banks are actually relatively conservative when it comes to lending money, and they also have very strict requirements for insurance policies before they are willing to borrow money for premium financing. The main reason and consideration is that the characteristics of savings policies are guaranteed principal protection and coverage. Guaranteed growth, so the risk of investment is very low, which has become the reason why banks are willing to lend money. For users, it is also because it guarantees capital preservation and its risk is also very low.
Let’s talk about the risks of premium financing. The biggest risk is interest rate changes. We have entered the interest rate increase cycle, and mortgage interest rates have also increased, but they are generally H+1.3%. If you don’t know what Hibor is, please leave a message. Or PM me and I will explain to you, so if the interest rates keep rising, will I have to pay more and more money? In fact, general loans have capped interest rates. Taking the three plans mentioned above as examples, their capped interest rates are 2.5%. What impact will this have?
Take the case of Mr. Chen in the previous article as an example. He makes a monthly payment of $30,000, and there are ten years of requirements. The total payment amount is $3.6 million! After she did premium financing, her monthly payment was $15,000. Because the bank's mortgage required $22,000 per month, and the premium financing payment was $12,000. The total payment required was $34,000/month, but the interest received was $20,000. So the monthly payment is $14,000; in the worst case scenario, the interest rate is increased to the highest capped interest rate of 2.5%, what will happen? The payment amount goes from $34000 to $41000, and the interest received is $20000, so the monthly payment is $21000.
Compared with paying $14,000 per month, if the worst-case capped interest rate payment goes to $21,000, the monthly payment will be $7,000 more. I remember that if he didn’t do premium financing, Mr. Chen’s monthly payment would be 30,000 yuan a month. Even if he made money, he would still make less money. So in summary, the biggest risk of premium financing is changes in interest rates, but because it guarantees principal protection, this will affect whether he earns more or less.
Speaking of which, it's almost the same. If you go through our website to make an appointment with a premium financing professional consultant to receive supermarket cash coupons, you can learn more and think carefully before deciding whether to go for it. Finally, put on a helmet first, borrow it or not, borrow it first if you get it! These are my personal opinions and not investment advice. Investment involves risks! Everyone should think independently!
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