Opinion – Grain in Grain: Planning is cheaper than financing

Most of the goods we consume are acquired on impulse. According to research by the Credit Protection Service (SPC Brasil) and the National Confederation of Shopkeepers (CNDL), 60% of individuals are driven to purchases because of the ease of credit.

The ease of credit to instantly satisfy a desire has consequences for the family budget, not to mention personal problems. Research shows that financial problems account for 50% of marital disputes.

A simple planning and emotional control to step back at the time of purchase, can lead you to have up to twice what you have and, possibly, greater happiness in the family.

I’ve heard from several readers about the inability to invest. But in conversation with some, I discovered that many pay mortgages for vehicles, houses and other goods.

I’ll present an example to illustrate how planning a purchase can generate more value for you.

Suppose you want to buy a property worth R$400,000 and you have R$80,000 to make a down payment.

You can finance this acquisition over 10 years at an effective interest rate of 10.5% per annum. The average monthly installment in this financing is R$ 4 thousand. At the end of the entire period, you would have paid a total amount of R$ 562 thousand.

Imagine another situation. You rent a property of the same value and invest the difference you would pay in financing. According to the FipeZap portal, the average rental rate for a property today is 0.39%. In this case, the rent you would pay is R$1,600. Assume that this rent raises inflation for the next 10 years.

If you invest the difference between the value of the financing and the rent in fixed income applications with a yield equal to the real estate loan, at the end of 10 years, you will have the value of R$ 710 thousand. Therefore, more than financing the property.

I remind you that the Selic rate is currently at 10.75% per year. There are CDBs from average banks paying a return of up to 120% of this fee. Public bonds referenced to the 10-year IPCA yield close to IPCA + 5.5% per year. Therefore, there are several alternatives to invest in this period with a yield that is even higher than the loan rate.

If you invest with a rate 10% above the loan rate, you will have at the end of 10 years the sum of R$ 832 thousand. Therefore, more than double the value of the property he intended to acquire. This capital can allow you to buy a property even better than the one you planned. In just over seven years, you would have accumulated the same amount you paid on the home loan.

Instead of working to serve the capital of others. Make your money work for you.

So, before making any purchase, plan that purchase by investing with that goal.

I emphasize that I’m not saying that it’s never worth funding, but that if this act is planned much more carefully, you can accumulate even more equity.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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