Would P2P Crowd Funding turn into sub-prime crisis of the US? Part 2.
Assuming that you still can prolong the duration of watch and wait… you continue staying there while paying off the 20% loan, what would happen?
Give another 5 years and 10 years has passed. Your total payment is RM72,218.40 which is near to RM80,000. You completely pay it off the 20% loan with your savings! Now, you take over the entire property converting it to conventional mortgage. Assuming the annual growth is 6% your property originally at RM400,000 is x 1.06^10 = RM716,340 in 10 years. Life goes on paying the mortgage of 700,000*.
Another scenario. By 10 years, you need a bigger space – after all life should be better now. Your neighbour (still own by P2P) is selling. This is a bigger unit (3+1 rooms at 1,400 sqf) but at RM1mio market value (10 years into the future). Now, you need not take a loan but use the 1st house to pay for it. You sold the first house at RM700,000, sharing the profit at 50% – ie. RM350,000. You still need RM650,000 to pay off this RM1mio. Life goes on paying the mortgage of RM650,000.
You don’t own any property. You basically paid rental for the last 5 or 10 years. This scheme is only good for the developers. Because developer will keep on building and selling at higher base price because crowd funding can keep on buying from them! The market value will keep on going up as whatever built is taken up!
*The actual mechanism is not yet detailed. I would hope that if at 10 years is RM800,000, owner should take over only paying for the 80%, not the 100%.