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Old 01-12-2019, 09:39 AM   #1
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CPF financial enquiry

Dear all,

I (35yo) BTO a flat (336k) and due for key collection 3rd quarter 2020.
My Spouse and i each have 150k in CPF OA
we do not wish to upgrade to condo or upgrade in flat size in future.
looking to retire and depend on CPF payout.

As i was reading on accrued interest, the future is pretty scary let say i stay 20 years with a fully paid at the start and want to change flat.

But now let's say i transfer 150k (All of OA) to CPF SA before collecting my HDB key.
Then get HDB loan to pay off my flat.

If i dont sell the flat and just finance the hdb loan from OA. technically i earn 5% interest of 150k per annum right?

Is this advisable?

Last but not least, anyone can help me calculate if 30 years i use the above method how much i will have in CPF SA/ retirement fund with accrued interest of let say 5%.
My CPF SA currently have 47k
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Old 01-12-2019, 09:52 AM   #2
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whats so scary about accrued interest ?

accrued interest is pay back to your own CPF account, also not pay to the government or some other people

since u said u are looking to depend on ur CPF payout for retirement, paying back your own CPF with accrued interest will help towards that goal.

also, even if you are changing flats, the accrued interest paid back to the CPF will also be able to help towards paying off your new flat.

only people who are trying to game the system like flipping properties or trying to cash out their CPF to cash through property and so on will be scared of accrued interest.
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Old 01-12-2019, 09:58 AM   #3
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Seems like plenty of people have misconceptions about accrued interest
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Old 01-12-2019, 10:29 AM   #4
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Yea, the interested is payable to yourself. I wouldn't worry to much about it.
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Old 01-12-2019, 11:22 AM   #5
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Dear all,

I (35yo) BTO a flat (336k) and due for key collection 3rd quarter 2020.
My Spouse and i each have 150k in CPF OA
we do not wish to upgrade to condo or upgrade in flat size in future.
looking to retire and depend on CPF payout.

As i was reading on accrued interest, the future is pretty scary let say i stay 20 years with a fully paid at the start and want to change flat.

But now let's say i transfer 150k (All of OA) to CPF SA before collecting my HDB key.
Then get HDB loan to pay off my flat.

If i dont sell the flat and just finance the hdb loan from OA. technically i earn 5% interest of 150k per annum right?

Is this advisable?

Last but not least, anyone can help me calculate if 30 years i use the above method how much i will have in CPF SA/ retirement fund with accrued interest of let say 5%.
My CPF SA currently have 47k
Basically, you can pay off your HDB using:
(a) your CPF OA (opportunity cost of 2.5%, or 4% if you consider that you could otherwise transfer everything to SA); or
(b) Cash (opportunity cost of whatever you are yielding on your cash savings/investment + liquidity over CPF)

As you can see, it really depends on how much your cash is yielding for you, and how much you value the liquidity of your cash compared to your CPF.

If your cash is yielding very low returns (<1%) and you really do not foresee any liquidity needs, then maybe paying off with cash is not a bad idea. But do note that it's probably a one-way street.

If you can yield decent amount with your cash (>3%) or may need the cash (e.g. buying a car, having a child), I would rather you pay with CPF. If you decide against it subsequently, you have the option of paying off the CPF loan using cash, then transfer from OA to SA if you wish. At least the flexibility is there.
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Old 01-12-2019, 11:44 AM   #6
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CPF and HDB now allow each member of a couple to keep up to $20,000 in each of their Ordinary Accounts when they pick up the BTO keys on a HDB loan. Anything above $20,000 is "swept" into the unit. I think there's generally strong merit in transferring the amount of OA above $20,000 into SA to avoid the "sweep." That's something you can start doing now if you wish (and to start earning higher interest that much earlier). $40,000 is quite a lot of HDB loan servicing buffer, and that buffer figure can grow as compulsory contributions stream in.
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Old 01-12-2019, 12:22 PM   #7
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Yeah, and accrued interest only pay back to your own cpf when your sell you place. If you stay forever, then don't even need to think about it.
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Old 01-12-2019, 12:53 PM   #8
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Suggestions;

•move 130k to SA, keeping the min 20k in OA to service HDB loan as both of u are still working

•use cash to service HDB loan if possible, keeping the OA 2.5% (continue OA => SA if possible)

•for not paying off HDB loan fully there will be a protection to either of the spouse to heritage others CPF + HDB house fully paid by HPS (in an unfortunate event)

•130k in SA will give ~277k against ~209k in OA for 18yrs when u are 55 n able to withdrawal from SA/OA after satisfy FRS)

•use CPF as basic retirement needs + u need oso cash/ investment savings for retirement

•do discuss with your spouse n read thru forum for other options

Dear all,

Last but not least, anyone can help me calculate if 30 years i use the above method how much i will have in CPF SA/ retirement fund with accrued interest of let say 5%.
My CPF SA currently have 47k
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Old 01-12-2019, 01:36 PM   #9
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Actually if you have the money to fully pay off the housing loan, you should have gotten a bank loan for your hdb.

You will pay less interest and if interest rates rises above hdb loan interest then just pay off the loan fully.

The money in OA will enjoy the 2.5% interest while you use it to pay the bank housing loan. Better than all taken away by hdb when you take the hdb loan.
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Old 01-12-2019, 04:25 PM   #10
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Dear all,

I (35yo) BTO a flat (336k) and due for key collection 3rd quarter 2020.
My Spouse and i each have 150k in CPF OA
we do not wish to upgrade to condo or upgrade in flat size in future.
looking to retire and depend on CPF payout.

As i was reading on accrued interest, the future is pretty scary let say i stay 20 years with a fully paid at the start and want to change flat.

But now let's say i transfer 150k (All of OA) to CPF SA before collecting my HDB key.
Then get HDB loan to pay off my flat.

If i dont sell the flat and just finance the hdb loan from OA. technically i earn 5% interest of 150k per annum right?

Is this advisable?

Last but not least, anyone can help me calculate if 30 years i use the above method how much i will have in CPF SA/ retirement fund with accrued interest of let say 5%.
My CPF SA currently have 47k
1. SA pay 4% interest so I don't know where did your 5% interest came from. If you transfer the money from OA to SA then you would be earning 4% PA on that amount.

2. Base on your age and CPF amount. I am quite certain that you will be able to meet the FRS by 55 thus accrued interest is never going to be a problem for you. You only need to pay back to your own CPF up to the amount you sold your HDB for so what is so scary about that? After you pay it back, it's still yours and you can use it for another property or simply withdraw it when you reach 55.
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Old 01-12-2019, 04:26 PM   #11
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Actually if you have the money to fully pay off the housing loan, you should have gotten a bank loan for your hdb.

You will pay less interest and if interest rates rises above hdb loan interest then just pay off the loan fully.

The money in OA will enjoy the 2.5% interest while you use it to pay the bank housing loan. Better than all taken away by hdb when you take the hdb loan.
Early repayment will incur penalties which make it not worthwhile.
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Old 01-12-2019, 04:28 PM   #12
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Early repayment will incur penalties which make it not worthwhile.
I'm pretty sure there are deals from banks that allows full repayment after you fulfill a number of years.
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Old 02-12-2019, 07:13 PM   #13
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Thanks for the advice.

i think i understand liao.

If i fully paid with CPF OA then my accrued interest will start accumulating.
I will lose out the CPF SA 4-2.5= 1.5% interest.
(yes i know accrued interest is my money after all but is not the same when i am paying back to my OA when i sell my flat vs government paying it to my SA
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Old 03-12-2019, 08:59 AM   #14
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Source A or source B doesn't matter.

Emotionally yes, rationally no.

Essentially yours.
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Old 03-12-2019, 10:56 AM   #15
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Thanks for the advice.

i think i understand liao.

If i fully paid with CPF OA then my accrued interest will start accumulating.
I will lose out the CPF SA 4-2.5= 1.5% interest.
(yes i know accrued interest is my money after all but is not the same when i am paying back to my OA when i sell my flat vs government paying it to my SA
If you do not use CPF to pay loan then you need to use cash, did you consider the amount you would have lost by using cash as now your cash can't be used for generating returns? If you are happy with just 4% returns then so be it but it's definitely not a 4% vs 0% comparison, DBS multipler give up to 3.8%, BOC smartsaver up to 3.5%. If you invest in equities, index ETF easily >4%.

Last edited by hwmook; 03-12-2019 at 10:58 AM..
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