How we close the loan early with the help of investments
In the financial planning activity we start the discussion from the medium and long term financial objectives. Such a financial objective can be represented by the early closing of the credit for the house: either the first house, or mortgage / real estate.
Most people, on the other hand, ask me: "What can I invest in?" "Why?" is my question. "Give me an objective, let's talk about the goal and then talk about investments, if it's the best solution to invest and then what is it." Thus: what is your goal for those investments? Early termination of credit can be one of the answers.
There are several solutions for early termination of the home loan: you can go to the bank to give the money in advance: to shorten the period or to reduce the amount borrowed or you can invest the money you have available and accumulate the necessary amount to become owner.
After finding out that the home loan is for a sufficiently long period: 15 years plus these things we found out from the analysis of the objective and the financial situation, we can look for the most suitable investment option.
The financial situation also concerns the analysis of the individual budget of incomes and expenses, in order to be able to establish a monthly amount that can be directed towards extinguishing the credit.
This is after we have an emergency fund. The emergency fund differs from person to person, from 3 to 12 months of expenses. Only after this stage is accomplished can we talk about investing money. The accumulated profit from investing these constant amounts helps to collect the amount in order to close the loan.
This investment involves depositing an amount in an investment account. Which is exactly, I cannot specify it in a valid general article, but I will specify certain aspects, characteristics that this money investment solution will fulfill.
So, after establishing that there is an emergency fund, we must also consider the other solutions for closing the loan: early repayment at the bank and finding the characteristics and consequences of each. Too many I will not specify here, they were specification in a previous article.
Category: Investing