Grateful for your reply. Yes we have very little in OA and SA. Have regular payment to MA which is a must for self-employed.
Now that we can afford a small house without loan. Will start to look to add into OA and SA for next move....
I want to focus a moment on this comment you made, that you will be able to afford a ~$300K HDB resale flat without a loan. That's great, congratulations! But that doesn't mean you should pay all cash for your HDB resale flat. You really shouldn't, not if you're a financially responsible couple. Last I checked (recently) you can borrow money from DBS at 1.5% interest with a 5 year rate lock -- pretty impressive for Singapore, actually. If you were to borrow $250K (i.e. the flat costs $333K with 25% down) with a 25 year mortgage then your monthly payment would be under S$1K. Even if you were to put that S$250K in Singapore Savings Bonds you could pay a S$1K/month mortgage for over 20 years! You maintain S$250K more liquidity, which is very nice indeed. You're prepared for lots of family emergencies,
and you can stay in your flat for a long, long time.
OK, so let's suppose you were to (foolishly, in my view, in these market conditions) pay all cash. What happens when there's a family emergency? Well, you have S$250K less liquidity. That means if you don't have enough other cash -- and remember, you're embarking on an unpaid educational sabbatical, so there's no more income from work coming in presumably, so you're drawing down assets -- you'll be forced to sell the HDB resale flat you just bought, maybe quickly. You cannot borrow against HDB leasehold equity. Once it's in the flat, the only way to get it back out is to sell the flat.
In my view the much smarter play is to take the cheap loan, and the 5 year rate lock also matches up well with your M.O.P. and your educational sabbatical, presumably. Then invest the ~S$250K. Invest it prudently, in an age and risk appropriate way, in a couple low cost vehicles, and with ample diversification, I'd advise. Over the medium to long term you should have absolutely no trouble whatsoever beating 1.5% interest. Heck, even your CPF Ordinary Accounts beat 1.5% like a drum, albeit with less liquidity than general investing (still with housing liquidity, though). This way you'll have much more liquidity to deal with any family emergencies, you're far more likely to become wealthier faster,
and you're far less likely to be forced to sell your home to cope with an emergency.
If interest rates were to soar after the 5 year rate lock, no problem, you've got the liquidity to pay off the loan
if it makes sense. "Soar" doesn't mean 2.0%, for example -- that's still cheap money.
