People would buy or build a big house above their means to make them stand out in society. Sometimes, these houses are actually acquired through debt, which transcend up to, I don’t know, 30 years to pay or so. That PHP 10 million house you have today which you are paying PHP 1,000 monthly for 30 years would be fully depreciated before you even finish the loan. By the time you finish the loan, your kids would have been done with their studies and would have been starting their own capital building.
Everyone is aware of the concept of interest—the total amount of cash you will disburse for your house today in that 30 years is way higher than PHP 10 million. By paying it monthly, it will be just like an automatic cashout which you will be accustomed to, for the next 30 years. Once you compute the total value, you would realize the amount of interest you could have saved if you were able to prepare for that dream house through your own capital.
That one-time disbursement today would make your funds cry right after your wedding ceremony. But once it’s over, your monthly income would go to satisfy your family needs and give you a nicer life, rather than narrowing your family budget for the next 30 years with the risk of getting your house foreclosed.
I know that this is really difficult in real life. It’s sad. Just saying what could be.
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