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Old 09-07-2020, 03:23 PM   #2476
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I'd have to think it through a little more, but perhaps what the government could do is something like this:

1. Lower the OA interest rate to 2.0% for amounts above $20,000.

2. Lower the HDB loan rate to 2.1%.

"Be careful what you wish for."


No, it's NOT good for responsible savers/prudent investors to repay low cost loans any faster than they need to. Bank loans are even lower cost now than they used to be, and they used to be low cost, too.


It depends on what you value. Obviously if you want a lower down payment then the HDB loan helps. If you value payment and rate stability, the HDB loan wins again. If you are willing to accept some rate risk with the possibility (not guarantee) of reducing your interest cost, a bank can help out. It's easier to accept the rate risk when you have the ability to pay off most or all of the remaining mortgage in the event the mortgage interest rate gets unacceptably high relative to your investment alternatives -- in other words, as you accumulate greater wealth.

A fairly popular pattern is this one:

1. You get a BTO with 5 year MOP, and you get a HDB loan with a low down payment.

2. With 2 or 3 years remaining on your BTO, and with some of the HDB loan repaid, you refinance with a lower interest bank loan with a 3 year fixed interest rate period.

3. When the 5 year MOP is finished, you sell your BTO. That is, you were always quite sure (or at least reasonably sure) you were going to flip your BTO as soon as allowed, so a 3 year fixed interest rate bank loan works quite well for you in this way, especially after initial HDB loan payments and additional savings fix the down payment gap you had.
Again, thank you so much for your advice.

I think when the government reduces the hdb loan interest rate, the next thing you know is they will reduce the cpf interest rate which is not beneficial to us in the long term.

I will be getting resales hdb instead of bto. What would the popular pattern for resales be in your opinion? How long should we decide to switch from hdb to bank loan? Thank you!
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Old 09-07-2020, 04:28 PM   #2477
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I will be getting resales hdb instead of bto. What would the popular pattern for resales be in your opinion? How long should we decide to switch from hdb to bank loan? Thank you!
Naturally you wouldn't switch from a HDB loan to a bank loan unless you could lower your interest costs more than a few dollars.

The same basic scenario can apply with resale units. Let's suppose you buy a resale HDB unit with a HDB loan, but then...surprise! Your family is growing, and you or your spouse give birth to twins. Maybe your existing HDB unit isn't big enough, and maybe you can afford a bigger one, fairly soon anyway. So you decide you'll do the best you can for 2 or 3 years, but in the meantime you refinance with a lower interest bank loan to save some money for the babies. In other words, if you know you're going to sell your home within a couple years, that's one great time to take a look at mortgage refinancing with a bank. Really any scenario involving sale of the property in about 3 years (or less) works fine, because that's within the available bank loan's fixed interest rate period.

I think it's important to understand what the impact of a possible rate increase is. Let's suppose that you're financing $500,000 at 2.6% interest for 25 years. If my particular mortgage calculator is correct, that should be $2,264.81 per month.

OK, you make payments for a few years, then you decide to refinance $450,000 with a bank at 1.8% interest for 21 years with a 3 year rate lock. Now your payment is $2,144.33 per month. OK, now with about $400,000 and about 17 years to go the interest rate zooms up to 4.0%. Now your monthly payment shoots up to ~$2,698.84. These numbers are only very rough, but you get the basic idea, hopefully. When the interest rate increases you can get a fairly substantial increase in the monthly payment amount. (I picked 4.0% because that's probably right about at the level where the bank rate could be while the HDB loan rate is still at 2.6% and OA interest rate still at 2.5%. Above about 4.0% I think we'd start to see OA and HDB loan interest rates rise.)

Of course if that higher monthly payment is troublesome, one solution that may be available is to refinance to stretch out the loan term. (Maybe.)

Anyway, you can and should play with these numbers in your particular situation, but the basic idea is that you should be prepared for the possibility that a bank loan repayment amount could rise fairly significantly after the fixed interest rate period. And if your general reaction is something like, "$2264 rising to $2698? I can live with that," and if the interest cost savings is decent enough, then maybe refinancing with a bank for a lower interest rate is right for you.
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Old 10-07-2020, 10:13 AM   #2478
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Who Gets to Be Reckless on Wall Street?

Vox.com has published a really interesting article about the increasing interest in stock gambling. It seems to be a confluence of factors: COVID-19 boredom, some extra free cash sloshing around at the margins, casinos closed, professional sports not playing (and thus not available for sports betting), fairly volatile markets, commission free trading (brokers making their money in other ways), cartoonish smartphone apps that incorporate the same psychological techniques social media companies use to encourage addictive habits, supportive online forums and ďcelebrities,Ē and greater international access and participation (including from here in Singapore), as notable factors.

There are plenty of human activities that are prudent and even beneficial. To pick a timely example, free/fair/regular democratic elections are extremely important. Then some people gamble on practically anything (legally or illegally), including election results. That doesnít mean elections are bad, but the gambling isnít great. Some people gamble as a form of entertainment and can handle it, financially and otherwise. Many cannot. Wall Street has always served problem gamblers, and it looks like that particular segment is growing.

This phenomenon doesnít really mean much for long-term investors, except that I agree with Jim Cramer (!) that future recovering addicts could be effectively shutting themselves out of the boring, mechanical, long-term, low cost stock index fund investing that they should be doing. And thatís both predictable and sad, although itís a most hypocritical observation coming from Cramer specifically.
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Old 10-07-2020, 11:46 AM   #2479
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Hi BBC, saw your reply regarding DII on ST thread.

I understand that DII covers based on the outcome instead of the chosen criteria (ECI or CI). Currently I have a TPD/ECI/CI plan, and paying quite high amount for it. I have questions and would like to cover any blind spots I have regarding DII.

1) What if I get a chronic illness but I can still do my job and get paid fully? But my risk of getting a critical illness/death is higher now. And I have to pay maybe ~100/month for medications.
The ECI/CI plan should be able to provide me with the money to pay for the medications right?

Can I request to have a FAQ regarding DII vs ECI/CI/TPD? So you don't have to keep answering us about this. I think currently in the insurance industry, a lot of fresh grads has been introduced whole life, ECI/CI and ILP plans.
I know the disadvantages of Whole life and ILP but still not so sure about ECI/CI.
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Old 10-07-2020, 01:56 PM   #2480
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1) What if I get a chronic illness but I can still do my job and get paid fully? But my risk of getting a critical illness/death is higher now. And I have to pay maybe ~100/month for medications.
The ECI/CI plan should be able to provide me with the money to pay for the medications right?
Maybe, maybe not. It depends on whether the chronic illness is on the list of claimable ailments (and whether it's preexisting or not). If there's no insurance payout then you have that much less money available to pay for your ~$100/month medication because you paid higher insurance premiums.
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Old 12-07-2020, 07:14 PM   #2481
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Hey BBC,

My wife wants to setup an investment (brokerage) account for our two kids who are US persons in their early teens. The amount isn’t that much, above the FBAR limit but below the gift tax limit. I really doubt we will qualify for financial aid when they start college in 4-6 years, so I’ve gone ahead and opened them both up a Schwab One custodial account this morning. I see that they can earn $1,050 in dividends, etc. annually before the kiddie tax kicks in. Before we fund this account, is there anything else to be aware of?
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Old 12-07-2020, 07:52 PM   #2482
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My wife wants to setup an investment (brokerage) account for our two kids who are US persons in their early teens. The amount isnít that much, above the FBAR limit but below the gift tax limit. I really doubt we will qualify for financial aid when they start college in 4-6 years, so Iíve gone ahead and opened them both up a Schwab One custodial account this morning. I see that they can earn $1,050 in dividends, etc. annually before the kiddie tax kicks in. Before we fund this account, is there anything else to be aware of?
Have you considered 529 plans? If they are Singaporean citizens or Permanent Residents then CPF MediSave top ups (and 5% interest) could potentially be interesting.

I think the unearned income threshold is now $1,100 (2019 and 2020 tax years at least).
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Old 13-07-2020, 12:10 AM   #2483
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Naturally you wouldn't switch from a HDB loan to a bank loan unless you could lower your interest costs more than a few dollars.

The same basic scenario can apply with resale units. Let's suppose you buy a resale HDB unit with a HDB loan, but then...surprise! Your family is growing, and you or your spouse give birth to twins. Maybe your existing HDB unit isn't big enough, and maybe you can afford a bigger one, fairly soon anyway. So you decide you'll do the best you can for 2 or 3 years, but in the meantime you refinance with a lower interest bank loan to save some money for the babies. In other words, if you know you're going to sell your home within a couple years, that's one great time to take a look at mortgage refinancing with a bank. Really any scenario involving sale of the property in about 3 years (or less) works fine, because that's within the available bank loan's fixed interest rate period.

I think it's important to understand what the impact of a possible rate increase is. Let's suppose that you're financing $500,000 at 2.6% interest for 25 years. If my particular mortgage calculator is correct, that should be $2,264.81 per month.

OK, you make payments for a few years, then you decide to refinance $450,000 with a bank at 1.8% interest for 21 years with a 3 year rate lock. Now your payment is $2,144.33 per month. OK, now with about $400,000 and about 17 years to go the interest rate zooms up to 4.0%. Now your monthly payment shoots up to ~$2,698.84. These numbers are only very rough, but you get the basic idea, hopefully. When the interest rate increases you can get a fairly substantial increase in the monthly payment amount. (I picked 4.0% because that's probably right about at the level where the bank rate could be while the HDB loan rate is still at 2.6% and OA interest rate still at 2.5%. Above about 4.0% I think we'd start to see OA and HDB loan interest rates rise.)

Of course if that higher monthly payment is troublesome, one solution that may be available is to refinance to stretch out the loan term. (Maybe.)

Anyway, you can and should play with these numbers in your particular situation, but the basic idea is that you should be prepared for the possibility that a bank loan repayment amount could rise fairly significantly after the fixed interest rate period. And if your general reaction is something like, "$2264 rising to $2698? I can live with that," and if the interest cost savings is decent enough, then maybe refinancing with a bank for a lower interest rate is right for you.
Thanks BBCW for the enlightenment! It is because the loan duration is long, there is a lot of uncertainty in the interest rate though it is very attractive now to go with bank loan as the interest rate is as low as 1.2% but no one knows when this low interest rate will last and if it really increases to 4% after 3 years, I will be stuck for my remaining loan unless I refinance it. So I guess it really depends on individual preference, affordability and the risk appetite. Not sure if it makes sense to use OA to wipe off part of the purchase price and reduce the loan amount so I can save some of the 2.6% hdb loan and AI assuming I use cash to service the now lower monthly loan, or transfer OA to SA to earn 4% and use cpf to service the remaining hdb loan?
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Old 13-07-2020, 12:32 AM   #2484
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Have you considered 529 plans? If they are Singaporean citizens or Permanent Residents then CPF MediSave top ups (and 5% interest) could potentially be interesting.

I think the unearned income threshold is now $1,100 (2019 and 2020 tax years at least).
Good thoughts. I had suggested 529 this morning but she doesn’t want the money locked up or restricted, and she also wants to give the kids some exposure to investing, with around a 10 year time horizon. I guess this will work, just wanted to make there weren’t any gotchas.
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Old 13-07-2020, 07:17 AM   #2485
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Not sure if it makes sense to use OA to wipe off part of the purchase price and reduce the loan amount so I can save some of the 2.6% hdb loan and AI assuming I use cash to service the now lower monthly loan, or transfer OA to SA to earn 4% and use cpf to service the remaining hdb loan?
No, I donít think that paying more principal than you need to with todayís low interest rates makes sense, assuming you are a responsible individual. You can keep up to $40,000 combined (per couple) in your OAs when taking a HDB loan. The amount above can go into your SAs.

I had suggested 529 this morning but she doesnít want the money locked up or restricted, and she also wants to give the kids some exposure to investing, with around a 10 year time horizon.
You can do some of both. The lesson with 529s is that youíre saving for a particular goal, and thatís a great lesson, one would think.
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Old 14-07-2020, 07:35 PM   #2486
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Over the weekend I re-read the prospectus for S27. One interesting feature is the ability to transfer the ETF shares from CDP to DTC in the US and sell them as SPY on the NYSE. Back in 2015, SRS rules changed to allow withdrawals of shares rather than cash by way of transfer to CDP. That could help defer realizing the capital gains until it makes sense, and in the amount that makes sense... without leaving it to grow and become more taxable inside SRS.
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Old 14-07-2020, 09:06 PM   #2487
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Over the weekend I re-read the prospectus for S27. One interesting feature is the ability to transfer the ETF shares from CDP to DTC in the US and sell them as SPY on the NYSE. Back in 2015, SRS rules changed to allow withdrawals of shares rather than cash by way of transfer to CDP. That could help defer realizing the capital gains until it makes sense, and in the amount that makes sense... without leaving it to grow and become more taxable inside SRS.
Interesting! I wonder if it'll actually work when the time comes.
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Old 14-07-2020, 09:51 PM   #2488
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Hi BBCW, need some insurance advise. Been speaking to different brands insurance and each of them have different opinion / beliefs (some recommend me to go whole life or term life etc )

Mind giving me some solid advise? Thanks

Some profile
- 26 non smoker
- forever alone. Don’t have dependent or much responsibilities
- want to be well covered if CI or disability hits me and have some money to tide over
- have Aviva GTL 280K Life + 100k PA
- have AIA PrimeLife (wholelife) with 30k cash value. Passed down from parents
- don’t have ISP

Looking at a well balanced health insurance coverage.

Some questions off my mind
- I’m fine with Public hospital but have been recommended to go for Private + riders because I can choose to downgrade in future. So is private + riders really the better option even though I can afford
- DII, looking at Aviva riders for it but it’s only 50%. GE covers 75%. Usually for DII which will you recommend?
- PA wise, if covered by company so should I go for it? Good to have but not necessary to have kind of products?
- Whole life vs term life.. gosh I’m really can’t make up my mind.. I’m thinking what if something happens after 65 or 75 and **** hits me, will whole life better?
- if goes for whole life, should I stretch the payment period ?
- which brand is more value for each of the case above?


Apologies if there are too many question. Lost sheep here

Posted from PCWX using iPhone10,5
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Old 14-07-2020, 10:31 PM   #2489
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Hi BBCW, need some insurance advise. Been speaking to different brands insurance and each of them have different opinion / beliefs (some recommend me to go whole life or term life etc )

Mind giving me some solid advise? Thanks

Some profile
- 26 non smoker
- forever alone. Donít have dependent or much responsibilities
OK, so this part means you don't need life insurance of any sort. You don't have any dependents. That's easy.

- want to be well covered if CI or disability hits me and have some money to tide over
- have Aviva GTL 280K Life + 100k PA
- have AIA PrimeLife (wholelife) with 30k cash value. Passed down from parents
- donít have ISP

Looking at a well balanced health insurance coverage.

Some questions off my mind
- Iím fine with Public hospital but have been recommended to go for Private + riders because I can choose to downgrade in future. So is private + riders really the better option even though I can afford
No, that's silly. If you're fine with public hospital care, then just insure to that level. If you're a Singaporean citizen then I suggest Great Eastern's Supreme Health B Plus, optionally with their Classic-B rider. That's an Integrated Shield plan designed to cover public hospital B1 ward on an "as charged" basis.

- DII, looking at Aviva riders for it but itís only 50%. GE covers 75%. Usually for DII which will you recommend?
If you want DII coverage to 75% then yes, you could buy it all from Great Eastern ("PayAssure"). I believe it's also possible to buy the MINDEF/MHA group DII policy to 50% then "top up" to 75% (+25%) with Great Eastern or with AIA. But please check the policy conditions to make sure that's allowed, particularly Aviva's policy letter. You don't want Aviva to knock down its payout by half (from 50% to 25%) if/when you're also claiming from Great Eastern.

I'm not fond of Aviva's lack of tolerance for periods of unemployment. However, they generally have a relatively low premium. You get what you pay for, I suppose.

- PA wise, if covered by company so should I go for it? Good to have but not necessary to have kind of products?
I don't think PA is particularly important.

- Whole life vs term life.. gosh Iím really canít make up my mind.. Iím thinking what if something happens after 65 or 75 and **** hits me, will whole life better?
You have no dependents, and evidently you don't have any plans to have any. Are you planning to spend Singapore dollars in your afterlife? That might be hard.

If you're "forced" to take life insurance in order to get some other policy you actually need and like -- and if the total premium is still attractive -- OK, so be it, but then you'd make that bundled life insurance as small and as inexpensive as allowed.
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Old 15-07-2020, 10:59 PM   #2490
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Updated Global Demographic Forecast

Fertility rates are falling across most of the planet, which suggests that the global human population will peak at about 9.7 billion around 2064. Then if the same or similar trends continue we should see about 8.8 billion people by 2100.

Countries will vary in how soon and how much their populations will decline. For example, it looks like Japan's population peaked in 2017 at 128 million and will fall to 53 million by 2100. These demographers estimate 23 countries will see their populations more than halve by 2100, including Spain, Thailand, Italy, Portugal, and South Korea. China will probably peak at 1.4 billion in 2024 then fall to 732 million by 2100. If it hasn't already, India will very soon pass China as the world's most populous country.

These are demographic projections, not guarantees. These changes are fairly rapid in human demographic terms, so in that sense they'll be fairly disruptive. But they're not "bad" as such. In terms of the global environment and climate change these trends are rather favorable, actually.

Singapore may have some relative advantages here, for a couple or more decades anyway. Singapore's total fertility rate is already either the lowest or among the very lowest in the world. However, Singapore's total population is stable or even rising. That's because Singapore has significant net inward migration, and Singapore seems to be managing its net inward migration at least fairly well. Many other countries struggle with their immigration policies for a variety of reasons.

Importantly, the world's largest economy, the United States, is currently projected to see a relatively stable total population with a slight increase expected by 2100. Nigeria will likely be the country that most bucks the global trend with its population expected to more than triple by 2100.

Demographic trends can have a tremendous impact on investment results. For example, if a country's population halves, what impact will that have on real estate valuations? It probably isn't a bullish factor.

Last edited by BBCWatcher; 15-07-2020 at 11:07 PM..
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