Housing loan using CPF...should we use cash to pay back housing loan?

[ekardo]

with bank interest rate at rock bottom, if you have spare cash, should I try to pay back the HDB housing loan with cash and return the loan back to CPF to earn the 2.5% ? is it even possible ?

 

[compro_1975]

ya imho, try not to touch cpf cos the pap will hunt you for the interest..... when it is my own money.....

 

[reddevil0728]

ya imho, try not to touch cpf cos the pap will hunt you for the interest..... when it is my own money.....

Actually don’t get the logic.

It’s precisely your own money, that’s why there’s no harm paying it back no?

 

[BBCWatcher]

Let's suppose you're age 54, you have gobs of money in your CPF accounts, and you have gobs of cash sitting in what are now low interest bank accounts. Should you pay your mortgage using cash or CPF OA? Well, your OA is earning 2.5%, and your bank cash most probably isn't. (Maybe 1% if you're lucky?) At age 55 your OA becomes liquid, so you shouldn't have any liquidity concerns. So yes, you'd use cash in this scenario....

....But the core problem here is you have too much cash idling in low interest bank accounts. It seems to be a common affliction in Singapore. It means you're probably not properly allocating savings to long-term investment objectives -- you're "dragging" too much cash, which has an opportunity cost.

Anyway, if you just don't want to fix that core problem, OK, pay your mortgage from cash. In fact, assuming you maintain at least adequate liquidity, maybe you'd even accelerate repayment on that ~1.5% interest mortgage to the extent your cash is earning less than ~1.5% (yes, probably) since that's the "best" you're willing to do, even though it's pretty terrible.

 

[ekardo]

.so the logic is, if you can better do with your cash (be it any kind of investment that can return > 2.5%), dont bother about returning to CPF..


so for a super low risk appetite person, should really consider pumping $ back to CPF ? cos even reits doesnt promise 2.5% right?

 

[reddevil0728]

.so the logic is, if you can better do with your cash (be it any kind of investment that can return > 2.5%), dont bother about returning to CPF..


so for a super low risk appetite person, should really consider pumping $ back to CPF ? cos even reits doesnt promise 2.5% right?

yep..........

 

[CaptainTeo]

Can I ask now if hdb bank loan monthly example 1000. Can I adjust to 2k monthly?

 

[reddevil0728]

Can I ask now if hdb bank loan monthly example 1000. Can I adjust to 2k monthly?

You mean you want to repay more each month? check with your bank

 

[BBCWatcher]

.so the logic is, if you can better do with your cash (be it any kind of investment that can return > 2.5%), dont bother about returning to CPF..

so for a super low risk appetite person, should really consider pumping $ back to CPF ? cos even reits doesnt promise 2.5% right?

It’s a little more complicated. First of all, repaying OA isn’t necessarily the only way to push funds into CPF. If you have any other way to get more funds into CPF, the effective interest rate will be at least a little higher than 2.5%.

Second, CPF assets are liquidity constrained, particularly before age 55. You only need to maintain adequate liquidity, but it’s a factor to consider.

Can I ask now if hdb bank loan monthly example 1000. Can I adjust to 2k monthly?

Maybe, but why do you want to pay a ~1.5% bank loan any faster than you’re required to? For one thing, you take more cash flow risk. The ONLY way you’re getting that money back, even one dollar of it, is by selling your HDB flat. And if you happen to die (or become totally and permanently disabled) while under the Home Protection Scheme, congratulations, you completely f***ed up because the HPS would have paid off your entire remaining share of the mortgage. The amount in excess of minimum payment would be completely wasted in that event.

Don’t do this! Put that extra money in 2.0% Singlife, 2.5% CPF OA, or best of all your long-term, prudently invested savings.

 

[apriliasiao]

Actually don’t get the logic.

It’s precisely your own money, that’s why there’s no harm paying it back no?

u sound like a broken record player.

we use our money but kanna charged to payback interests which is behaving like an insurance policy loan but CPF is not an insurance product.

One day bank charged u interests for withdrawing money out from your saving account, u song bo?

 

[polyglob]

u sound like a broken record player.

we use our money but kanna charged to payback interests which is behaving like an insurance policy loan but CPF is not an insurance product.

One day bank charged u interests for withdrawing money out from your saving account, u song bo?

Not same what. Bank charge you interest = you pay the bank. Insurance policy loan charge you interest = you pay insurance company. CPF accrued interest = you pay yourself, if you do pay back.

 

[zachary123]

u sound like a broken record player.

we use our money but kanna charged to payback interests which is behaving like an insurance policy loan but CPF is not an insurance product.

One day bank charged u interests for withdrawing money out from your saving account, u song bo?

It's simply because CPF has a savings objective to meet ur retirement needs. Hence repaying is just to go towards that objective.

 

[reddevil0728]

u sound like a broken record player.

we use our money but kanna charged to payback interests which is behaving like an insurance policy loan but CPF is not an insurance product.

One day bank charged u interests for withdrawing money out from your saving account, u song bo?

Well if it is something that make sense, then there's no harm hearing more of it. But if it something that doesn't make sense, I rather not hear it at all.

The primary objective of CPF is for retirement. For better or for worse, we have been given the opportunity to use it for other purpose, e.g. housing.

If we don't use it for housing, and the money remains inside, we get interest paid by CPF that is meant to build up our retirement funds

However, if we use it for housing (which is a perfectly legitimate use) and we don't get interest paid by CPF (on the portion we take out from CPF) for our retirement, then there is "opportunity cost", i.e. had we not take out, we would have the interest that goes to fulfil our basic retirement needs.

If you ever sell your house which you used CPF money to buy, of course you odd to repay P+I to your CPF which you use to fund your house purchase in the first place as your CPF (think back to its primary objective) is meant for your retirement. I don't see why is it so bad to pay yourself money??

Nobody say you cannot use it again and if you make a loss, you don't have to top up the difference.

----

and your analogy about bank charging me interest for withdrawing my own money has no relation to this and doesn't make any sense.

I put money with the bank cause i need somewhere to put my money and also earn some interest in the process.

If I am not getting interest when i put money with them and on top of that they are charging me a fee (in this case interest) for withdrawing my own money, why would I put money with them to begin with?

so i don't get your logic.

 

[reddevil0728]

Not same what. Bank charge you interest = you pay the bank. Insurance policy loan charge you interest = you pay insurance company. CPF accrued interest = you pay yourself, if you do pay back.

classic example of criticise for the sake of criticising without understanding the logic of that.

 

[ekardo]

ya..conclusion is that, no matter how, the money is still your own money..

1) whether you wanna put the $ back to CPF (pay back housing loan using cash) since bank interest is low, but once $ is in, you have to wait till retirement age to withdraw (opportunity lost), or
2) that you have better avenue to earn $ out of your cash, then just maximise your CPF for housing loan... (the only other way to use your CPF apart from investment)

I think we have to weigh ourselves..

 

[havetheveryfun]

It's simply because CPF has a savings objective to meet ur retirement needs. Hence repaying is just to go towards that objective.

should request govt to stop allowing people to use CPF to pay for their housing. CPF should only be solely for retirement purposes. Then no one will complain or argue about accrued interest anymore.

 

[reddevil0728]

should request govt to stop allowing people to use CPF to pay for their housing. CPF should only be solely for retirement purposes. Then no one will complain or argue about accrued interest anymore.

Then you will see the outrage also over not being able to touch their cpf at all haha.

Ppl really need to learn rather than just shoot.

 

[dork32]

with bank interest rate at rock bottom, if you have spare cash, should I try to pay back the HDB housing loan with cash and return the loan back to CPF to earn the 2.5% ? is it even possible ?

yes, bank interest is at all time low. but hdb interest got change? cpf interest got change? i do not see any logic in linking paying back hdb loan or cpf withdrawal with bank interest rate.

 

[dork32]

should request govt to stop allowing people to use CPF to pay for their housing. CPF should only be solely for retirement purposes. Then no one will complain or argue about accrued interest anymore.

yes, and half the singaporeans will be sleeping in the streets

 

[polyglob]

yes, bank interest is at all time low. but hdb interest got change? cpf interest got change? i do not see any logic in linking paying back hdb loan or cpf withdrawal with bank interest rate.

What's current mortgage rate? Not coming down?

According to my records, Jun 2009 I was paying 3.75%, in Jul 2009 after repricing rate became 2.66% with 2-year lock in, then in Jul 2011 repriced again became 1.38%.