I received yearly bonus of RM20k this year.
Now I am in dilemma on how to use the money.
Option 1: Put the 20k in ASN (amanah saham) – assuming 5% interest per annum.
Option 2: Pay housing loan principal (current outstanding amount: RM298,xxx), remaining years: 29-30 years. Profit rate: 3.1% (monthly installement: RM12xx)
Can you provide some insight on this please?
It is quite straightforward to compare the opportunity cost here:
- ASN – earn 5% return
- Pay off mortgage – save 3.1% interest
Which one has better return? It is the ASN because 5% beats 3.1%.
I will go with ASN.
Moreover, you still have the money in ASN and can deploy it elsewhere when opportunity arise.
Imagine in the future say mortgage rate increases to 10%. Then you can liquidate your ASN and pay off mortgage.