CPF Housing Loan Accrued Interest - Calculation

Lifeinmotion

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I have been checking my housing loan accrued interest. The figure seems to be way higher than what I calculated base on my understanding of how CPF calculates and credits to our account.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192131&folderid=13726

It takes the lowest amount we have per month, calculates and then credits that at the end/start of the year.

https://www.cpf.gov.sg/members/FAQ/...Housing Scheme&folderid=11482&ajfaqid=2185821
How does the Board calculate the accrued interest on the amount of CPF used for my property?

Accrued interest is the interest amount that you would have earned if your CPF savings had not been withdrawn for housing. The interest is computed on the CPF principal amount withdrawn for housing on a monthly basis (at the current CPF Ordinary Account interest rate) and compounded yearly.

Since it does not reflect the interest rate for CPF housing per year in our statement, has anyone check the accuracy of their calculation? And come to a number different from what CPF is telling you?
 
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limster

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I have been checking my housing loan accrued interest. The figure seems to be way higher than what I calculated base on my understanding of how CPF calculates and credits to our account.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192131&folderid=13726

It takes the lowest amount we have per month, calculates and then credits that at the end/start of the year.

https://www.cpf.gov.sg/members/FAQ/...Housing Scheme&folderid=11482&ajfaqid=2185821


Since it does not reflect the interest rate for CPF housing per year in our statement, has anyone check the accuracy of their calculation? And come to a number different from what CPF is telling you?


If they can get accrued interest calculation wrong, shouldn't you be more worried that they might get your actual interest wrong?

Have you checked your actual interest earned, is it wrong too?
 

BBCWatcher

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By the way, it could be terrific if CPF's calculation is too high. That'd give you the option, not the obligation, to stuff more money into a weirdly high yielding (2.5% interest), government guaranteed account that turns into a piggybank at age 55 and can be used for housing before that.

So be careful what you wish for if indeed CPF's calculation is wrong. (But it probably isn't.)
 

dork32

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By the way, it could be terrific if CPF's calculation is too high. That'd give you the option, not the obligation, to stuff more money into a weirdly high yielding (2.5% interest), government guaranteed account that turns into a piggybank at age 55 and can be used for housing before that.

So be careful what you wish for if indeed CPF's calculation is wrong. (But it probably isn't.)

many people are worried abt accrued interest coz they want more cash when they sell their property.

to young people cpf oa is not very useful.

to many people, the withdrawal from oa + interest is huge. many of us are not able to pay back the full sum. adding more accrued interest does not help much.
 

chrisloh65

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When is 2.5% p.a. interest considered "weirdly high yielding"?
2.5% seems really pathetic to me, can't even beat inflation.

By the way, it could be terrific if CPF's calculation is too high. That'd give you the option, not the obligation, to stuff more money into a weirdly high yielding (2.5% interest), government guaranteed account that turns into a piggybank at age 55 and can be used for housing before that.

So be careful what you wish for if indeed CPF's calculation is wrong. (But it probably isn't.)
 

cal3135

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Bro, upon disposed of HDB... the accrued interest will be returned back to OA & able to form part of repayment for the next property.

I may not see this as too much worry... Or am missing some point.... Can u help to elaborate ... thanks



many people are worried abt accrued interest coz they want more cash when they sell their property.

to young people cpf oa is not very useful.

to many people, the withdrawal from oa + interest is huge. many of us are not able to pay back the full sum. adding more accrued interest does not help much.
 

SatkiSasuke

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I am pretty sure their calculation are accurate. You can try. I tried for the hdb loan repayment calculation

Sent from the real Queen Of EDMW using GAGT
 

polyglob

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to many people, the withdrawal from oa + interest is huge. many of us are not able to pay back the full sum. adding more accrued interest does not help much.

You buy with some cash downpayment and then service the mortgage with CPF. If when you sell, the sale is not enough to pay back what you took out of CPF that means you are selling at a loss? Then don't sell?
 

sanzhu

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By the way, it could be terrific if CPF's calculation is too high. That'd give you the option, not the obligation, to stuff more money into a weirdly high yielding (2.5% interest), government guaranteed account that turns into a piggybank at age 55 and can be used for housing before that.

So be careful what you wish for if indeed CPF's calculation is wrong. (But it probably isn't.)

CPf made Tom's of errors u know
 

yoongf

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Lets say u sell a 400k and upgrade to a 500k unit.

After settling the loans and CPF accrued interest, the nett cash proceeds may not be sufficient to meet the 5% cash + stamp duty + reno expenses for the 500k unit.

Accrued interest can be a huge amt if time period is long. 10yrs is 25% of amt used.

If upgrade/downgrade abv 55, FRS is locked up first for both owners acct.

Bro, upon disposed of HDB... the accrued interest will be returned back to OA & able to form part of repayment for the next property.

I may not see this as too much worry... Or am missing some point.... Can u help to elaborate ... thanks
 

Lifeinmotion

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not here to discuss whether 2.5% is a lot or not.

Take a look at this
https://www.areyouready.sg/YourInfo...est-on-Your-CPF-Savings-Used-for-Housing.aspx

1) They do not even dare to use a longer time frame. For someone who bought at 500K or more at 20 or more years loan, the accrued interest will be huge.

2) This is extremely simplified, if you have to pay installment from your CPF monthly, it adds up monthly loan/compound interest. e.g (150K downpayment + $1000 monthly) x 0.25% of that month's low /12. Add all interest to the beginning of the year. Repeat for that year till the loan amount is paid off, plus continuous compound interest monthly add on to the year.

Anyway, all I want to know if any bro or sis has check on their statement and did a calculation if their accrued interest or a monthly/yearly basis? Those using CPF to pay for housing.

Remember, they should always compound on the lowest figure one has in any date of the month (for normal CPF interest), so like wise, it should be the same for our accrued interest on amount use. What I am discovering is, this is not the case.
 

polyglob

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Lets say u sell a 400k and upgrade to a 500k unit.

After settling the loans and CPF accrued interest, the nett cash proceeds may not be sufficient to meet the 5% cash + stamp duty + reno expenses for the 500k unit.

How about this scenario: You are buying your first property. You realize you don't have enough cash to cover downpayment, stamp duty, reno expenses, and so on. Then you either take a bridging loan to cover the gap, or you buy a more affordable property.

No diff.
 

XGZ1503

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I have been checking my housing loan accrued interest. The figure seems to be way higher than what I calculated base on my understanding of how CPF calculates and credits to our account.

https://www.cpf.gov.sg/members/FAQ/...s&group=Others&ajfaqid=2192131&folderid=13726

It takes the lowest amount we have per month, calculates and then credits that at the end/start of the year.

https://www.cpf.gov.sg/members/FAQ/...Housing Scheme&folderid=11482&ajfaqid=2185821


Since it does not reflect the interest rate for CPF housing per year in our statement, has anyone check the accuracy of their calculation? And come to a number different from what CPF is telling you?

Did you take into consideration of compounding interest?
 

Lifeinmotion

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yes, as mentioned earlier, the compounded interest only adds at the end/beginning of the year.

"Accrued interest is the interest amount that you would have earned if your CPF savings had not been withdrawn for housing. The interest is computed on the CPF principal amount withdrawn for housing on a monthly basis (at the current CPF Ordinary Account interest rate) and compounded yearly. "
 

BBCWatcher

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Lets say u sell a 400k and upgrade to a 500k unit....

How about this scenario: You are buying your first property. You realize you don't have enough cash to cover downpayment, stamp duty, reno expenses, and so on. Then you either take a bridging loan to cover the gap, or you buy a more affordable property.

No diff.
Right, I'm not sure I understand the problem here, or at least not the special problem. If you sell a $400K home then up to $400K is returned to your CPF Ordinary Account, still available for housing. Importantly, you're not required to pay any shortfall in accrued interest. And you still have to find $100K more (plus expenses) to buy that $500K home -- nothing changes there. A more expensive home is a more expensive home.

If the issue is a cashflow problem, OK, but the whole point of being able to use CPF Ordinary Account funds to service a mortgage is that you don't have to use cash. Thus you have that much more cash available to save. Your cash (prudently invested) should beat the 2.5% interest rate, a little anyway.

If you're spending every penny of earnings and servicing your mortgage from Ordinary Account funds, then yes, in certain cases you might have a cashflow problem if you try to flip homes. So try to accumulate some savings that are prudently invested. And if you cannot do that, polyglob is exactly right: you've probably bought a home that's beyond your means. Don't do that either.

Anyway, maybe CPF got this calculation wrong, but let's just state in words what the correct calculation should be. It should be principal plus the accrued interest that that principal would have otherwise earned in a CPF Ordinary Account if never withdrawn.

Let's suppose you pay $500 from your Ordinary Account toward your home loan on November 10. That means you've lost interest on that $500 for the whole month of November. The interest loss is "backdated," in other words, and that's an important point. In this case there's an "extra" $1.04 of interest loss, compounded annually. You also have to add the extra "terminal" month on the repayment side, because repaying into a CPF Ordinary Account on November 10 only starts earning interest from December 1.
 
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chrisloh65

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Real inflation rate for me is like 4% p.a. for past 10 years because I keep everything the same.
Obviously you can say cut back this cut back that or buy cheaper substitutes, then you are not measuring real inflation rate.
And when GST goes up another 2%, you can expect real inflation rate to go up 4% or more to reflect GST increases. It has always been like that isn't it? Businesses take opportunities to jack up prices.

What is the real inflation rate and from what sources?
 
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