The more you borrow, the longer you borrow, the more you pay " home interest " increases Is it true? This may be something many have known for a long time, but they have never seen serious numbers showing how significant the difference in home interest really is. TerraBKK would like to present a simple case study to compare the amount of home interest that consumers have to pay when deciding to apply for a bank loan to buy a house at different price levels and loan durations. This time, we will conduct a preliminary calculation under the following conditions:

  • House prices range from 1 million baht to 10 million baht.
  • Self-funding is approximately 10% of the house price as a down payment.
  • Loan principal from the bank is approximately 90% of the house price.
  • Home interest is set at a calculated MRR-1 rate or about 6% per year on a reducing balance basis throughout the loan term, without refinancing and without promotional interest rates during the first 1-3 years.
  • Loan terms include 5 years, 10 years, 15 years, 20 years, 25 years, and 30 years.


           

            TerraBKK found that home interest increases as the principal amount rises. For example, if you borrow for 5 years and buy a house priced below 3 million baht, after using 10% of your own funds for the down payment, the remaining loan principal from the bank will be 90%, and you will have to pay home interest of no more than 500,000 baht. In contrast, purchasing a house priced from 7 million baht and above will require paying home interest of around 1 million baht.

            Additionally, home interest increases with longer loan terms. For instance, if you decide to buy a house priced at 10 million baht with a bank loan principal of 90% after using 10% of your own funds for the down payment, you will have to pay home interest of no more than 5 million baht if you borrow for 15 years, but if you borrow for 30 years, the home interest will rise to as much as 10 million baht.

            In conclusion, it is viewed that buying a house through bank loans is a necessity in today's world, as property prices tend to rise continuously along with long-term inflation rates. The longer you wait, the higher the prices will go. TerraBKK recommends that you should buy a house at a price level that is appropriate for your repayment capability and the shorter the loan term, the more you can reduce the burden of home interest itself. ---TerraBKK

Article by: TerraBKK Investment Tips
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