Should i use Cash or CPF to pay my monthly mortgage

[sherry0321]

Hi,

My husband and I are considering if we should use Cash or CPF to pay for EC's monthly mortgage.

Currently we are paying the monthly mortage all by CPF. With that we can save about $6000 in cash each month.

We also have sufficient emergency fund in both our UOB One Account at 50k each which also earn the 2.4% PA interest.

If we now pay the monthly mortgage all in cash, which means we can only save about $3500 each month. As our monthly mortgage is about 2.5k.

May I know which one would be a better option? My concern of paying monthly mortgage all by CPF is when selling the EC we will need to pay back CPF the accrued interest.

Thanks a lot in advance

 

[crimsontactics]

Hi,

My husband and I are considering if we should use Cash or CPF to pay for EC's monthly mortgage.

Currently we are paying the monthly mortage all by CPF. With that we can save about $6000 in cash each month.

We also have sufficient emergency fund in both our UOB One Account at 50k each which also earn the 2.4% PA interest.

If we now pay the monthly mortgage all in cash, which means we can only save about $3500 each month. As our monthly mortgage is about 2.5k.

May I know which one would be a better option? My concern of paying monthly mortgage all by CPF is when selling the EC we will need to pay back CPF the accrued interest.

Thanks a lot in advance

Are you planning to invest the cash if you use your CPF to pay?

Sent from . using GAGT

 

[sherry0321]

Are you planning to invest the cash if you use your CPF to pay?

Sent from . using GAGT

We don't really know how to invest. We are just thinking buying a conercial property 2 yrs later or just put it into SSB.

 

[naro]

Hi,

My husband and I are considering if we should use Cash or CPF to pay for EC's monthly mortgage.

Currently we are paying the monthly mortage all by CPF. With that we can save about $6000 in cash each month.

We also have sufficient emergency fund in both our UOB One Account at 50k each which also earn the 2.4% PA interest.

If we now pay the monthly mortgage all in cash, which means we can only save about $3500 each month. As our monthly mortgage is about 2.5k.

May I know which one would be a better option? My concern of paying monthly mortgage all by CPF is when selling the EC we will need to pay back CPF the accrued interest.

Thanks a lot in advance

whats your current mortgage interest rate?

 

[sherry0321]

whats your current mortgage interest rate?

1.38%. I just done my repricing.

 

[crimsontactics]

1.38%. I just done my repricing.

We don't really know how to invest. We are just thinking buying a conercial property 2 yrs later or just put it into SSB.

In that case just use cash to pay. Your CPF OA earns a guaranteed 2.5% to 3.5% interest. The maths is in the favor of using cash.

 

[alt2015]

1.38%. I just done my repricing.

Can share this is this fixed rate/variable. Which bank?

 

[tamago_]

Can share this is this fixed rate/variable. Which bank?

variable, likely UOB

 

[TabascoSauce]

Cash

10char

 

[sherry0321]

In that case just use cash to pay. Your CPF OA earns a guaranteed 2.5% to 3.5% interest. The maths is in the favor of using cash.

may i ask if we continue using CPF to pay the mortgage, what would be the opportunity cost by not using cash?

thanks

 

[sherry0321]

variable, likely UOB

yes you're correct!

 

[crimsontactics]

may i ask if we continue using CPF to pay the mortgage, what would be the opportunity cost by not using cash?

thanks

CPF interest rate vs loan rate.

 

[deepblueli]

If you have build up enough emergency fund or OA account is less than 20K, then paying by cash sounds like a better option.
If you are able to invest your cash above 2.5%, then paying by CPF is better option.

I would prefer to keep 20K in OA, apart from it can earn extra 1% interest is that this is also money that you can use to repay your mortgage when you run out of cash.

 

[sherry0321]

If you have build up enough emergency fund or OA account is less than 20K, then paying by cash sounds like a better option.
If you are able to invest your cash above 2.5%, then paying by CPF is better option.

I would prefer to keep 20K in OA, apart from it can earn extra 1% interest is that this is also money that you can use to repay your mortgage when you run out of cash.

We actually have enough emergency fund (50k each) and i myself also already have more than 20k in OA account.

In that case i should just use cash to pay my monthly mortgage?

 

[Jupiter2017]

We actually have enough emergency fund (50k each) and i myself also already have more than 20k in OA account.

In that case i should just use cash to pay my monthly mortgage?

The maths is certainly in favour of using cash to pay monthly mortgage.
Just a word of advice - Life is full of uncertainties, and sometimes also opportunities. Cash (especially larger amount) comes in very handy in certain situations. Your should try to achieve a higher cash fund on hand (eg. $150k or more, each) before you switch to using cash to pay monthly mortgage.

 

[Purplestars]

We actually have enough emergency fund (50k each) and i myself also already have more than 20k in OA account.

In that case i should just use cash to pay my monthly mortgage?

1) Couple with no kids? Perhaps the first thing you can do is to reduce spending, as $1000 a month alone on credit cards seems excessive, especially if you have no car.

2) Do yourself a favor and start learning how to invest. It is really not that hard to beat 2.5% interest per annum on average through investing. And the 2.5% in CPF doesn't come free, it is locked down for the next 30 or so years so you can't even use it when you want to in the future or reinvest it better once is grow more financially savvy.

There is absolutely no reason for young people like you to be accumulating money in CPF. The opportunity cost of locking down your money so early is huge. It gets wiser as you grow older, but for now the best thing you can do is to get a financial education.

 

[Purplestars]

The maths is certainly in favour of using cash to pay monthly mortgage.
Just a word of advice - Life is full of uncertainties, and sometimes also opportunities. Cash (especially larger amount) comes in very handy in certain situations. Your should try to achieve a higher cash fund on hand (eg. $150k or more, each) before you switch to using cash to pay monthly mortgage.

Meh. You are comparing putting money in a bank vs leaving money in CPF which gains interest, so the math will definitely favor the option that actually brings a return.

However there is plenty you can do with cash other than parking it all in a bank account. Most of the options beat the measly 2.5% which comes with many terms and conditions.

Look at this in another way. Will anyone voluntarily top up $2500 into their CPF OA every month with their hard earned cash? No, especially for youngsters far from retirement. Remember you are not even getting any tax relief here.

 

[sherry0321]

1) Couple with no kids? Perhaps the first thing you can do is to reduce spending, as $1000 a month alone on credit cards seems excessive, especially if you have no car.

2) Do yourself a favor and start learning how to invest. It is really not that hard to beat 2.5% interest per annum on average through investing. And the 2.5% in CPF doesn't come free, it is locked down for the next 30 or so years so you can't even use it when you want to in the future or reinvest it better once is grow more financially savvy.

There is absolutely no reason for young people like you to be accumulating money in CPF. The opportunity cost of locking down your money so early is huge. It gets wiser as you grow older, but for now the best thing you can do is to get a financial education.

yes we are a young couple with no kids. My average monthly credit card bill is about 2.5k and my husband owns a car.

 

[Purplestars]

yes we are a young couple with no kids. My average monthly credit card bill is about 2.5k and my husband owns a car.

I hope the 2.5k is the total CC bill for the both of you. If you alone spend $2.5k a month, changing your lifestyle will lead to a healthier retirement

 

[TabascoSauce]

y so concern how much they spend when they are still saving a decent amount each month? its not like they are borrowing to spend anyway.