Facts
Mortgage: Should You Take It Or Not?
February 27, 2023 •
2 min read
Mortgage is a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property. However, the condition that the conveyance of title becomes void upon the payment of the debt.
One obvious reason would be the fact that the person who wants to buy a property don’t have enough funds yet to pay cash for the whole amount.
Another reason would be for cash-flow.
Many rich people all over the world still take out mortgages to buy a property. Even though, they have the capacity to pay the whole thing directly. Some famous people you may recognize are Robert Kiyosaki and Grant Cardone.
Since they just have to pay the down payment in usually only 10-20%, they can allocate the rest of the budget for other forms of investment with great return. It will be an ideal situation if the ROI (Return of Investment) they get from other investments is higher than the interest rate from the bank.
What do you need to consider?
Mortgage rate at 4.5% and below is considered very good, while 8% is the acceptable rate to consider. This way, you can invest the rest of the fund in an index fund or anything else. You may consider something that can give you a 10-15% return per year and get something from the gap.
Average mortgage rate in Indonesia for its citizens is still above 8% as per 2021 and reported to be way higher for Foreign citizens.
With that being said, Indonesia might not be an option to use mortgages for Real Estate Investment.
After reading this article, do you want to discuss or consult for best payment plans for your investment? Contact us for free consultation!
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Type of property ownership dedicated for local investors or foreigners under legal cooperation in Indonesia. The freeholder of a property owns it outright, including the land it is built on. If you buy freehold, you’re responsible for maintaining your property and land, so you’ll need to budget for these costs and taxes.
Surat Hak Milik (SHM) / Surat Hak Guna Bangunan (SHGB)
Lifetime, or until it’s sold to a new owner
Indonesian individual only or foreigner who has a company in Indonesia (PMA) to buy the property under that company’s name
Type of property ownership for foreign investors who are willing to purchase the property as an individual. With leasehold, you own the property (subject to the terms of the leasehold) for the length of your lease agreement with the freeholder. When the lease ends, ownership returns to the freeholder, unless the contract states guaranteed lease extension at future market price.
Akta Sewa / Right to use – Right to rent
Average 20-30 years, with possible extension. Maximum 99 years
All people including Indonesian and foreigner with KITAS-Visa status
