Agents Must Understand the Cost of Interest — It Changes How You Advise Clients
Most agents can explain price per square foot. Very few can explain interest cost over time. Yet interest is often the largest hidden expense in a buyer's life — and understanding it is what separates a transaction pusher from a real advisor.
Not All Debt Is Equal
Debt is not just about the amount borrowed. It is about interest rate and tenure. Here is the reality most people never calculate:
- Credit Card
Interest: ~15%–18% per year
Tenure: Revolving, no fixed end
Compounding: Extremely aggressive - Personal Loan
Interest: ~4%–12% per year
Tenure: up to 10 years
Monthly repayment: Heavy - Car Loan
Interest: ~2.5%–4% flat
Tenure: up to 9 years
Asset value: Depreciates - Housing Loan
Interest: ~3%–4.5% (variable)
Tenure: up to 40 years
Asset value: Historically appreciates over time
This is the cheapest, longest-duration financing instrument available to most individuals. No other consumer instrument comes close.
Why Property Is Financially Unique
Property is not just a place to live.
It has three rare characteristics combined in one instrument:
- Low interest rate
- Very long tenure
- Asset appreciation potential
That combination does not exist in:
- Credit cards
- Personal loans
- Cars
- Consumer financing
This is why property is powerful — not because of speculation, but because of structure.
The Refinancing Reality Agents Must Understand
Here is a real-life scenario agents see often:
A person:
- Bought a property many years ago
- Has enjoyed capital appreciation
- Now carries high-interest debt (credit card / personal loan)
That person may be cashflow-stressed, not asset-poor. In legitimate cases, property refinancing can be used to:
- Consolidate high-interest debt
- Replace 15%–18% interest with ~4% housing loan interest
- Stretch repayment over a longer tenure
- Reduce monthly burden
Used correctly, this is financial optimisation, not abuse. Property has this function. Most assets do not.
The Line You Must Never Cross
There is a dangerous misconception some people spread:
- "Just inflate valuation."
- "Use fake SPA."
- "Cash out more and pay slowly."
This is not strategy. This is fraud.
Manipulating valuation, fabricating transactions, or using false documentation to extract cash is illegal and exposes:
- The borrower
- The agent
- The valuer
- The banker
to criminal and civil liability. No commission is worth that risk. Agents must be very clear: Refinancing is a legal tool — falsification is a crime.
What a Responsible Agent Actually Does
A professional agent:
- Understands relative interest costs
- Knows why housing loans are structurally different
- Explains refinancing as an option, not a shortcut
- Refuses to participate in document manipulation
- Works with bankers and valuers transparently
Your role is not to "find loopholes". Your role is to protect the client while improving their position.
Final Reality Check
Property is powerful not because it is risky — but because it is the cheapest long-term leverage most people will ever access.
Used properly:
- It reduces financial stress
- Improves cashflow
- Creates stability
Used dishonestly:
- It destroys careers
- Ends licenses
- Creates lifelong consequences
Agents who understand interest understand value. Agents who don't — only push transactions. Choose which one you want to be.
