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Paying down HDB loan using CPF?

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Old 05-12-2018, 10:34 PM   #1
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Paying down HDB loan using CPF?

Is it a good idea to pay down HDB loan with CPF whenever a lump sum is accumulated? Assuming i just keep 20k in OA given it's higher interest rate.

Any downside to this idea?
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Old 05-12-2018, 11:08 PM   #2
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depends on whether u are confident to get returns of more than 2.6% with that lump sum of money instead...
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Old 05-12-2018, 11:19 PM   #3
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I have already reached the max allowable limit for shares and I’m not interested in UT so thought it would be a better idea to start paying down to save on interest.

depends on whether u are confident to get returns of more than 2.6% with that lump sum of money instead...
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Old 06-12-2018, 01:50 AM   #4
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Is it a good idea to pay down HDB loan with CPF whenever a lump sum is accumulated? Assuming i just keep 20k in OA given it's higher interest rate.

Any downside to this idea?
Why need to keep 20k in OA, unless MA + SA total is less than 60k?

If confident of servicing the loan without the reserve, dump it into SA for 4% than repaying the loan to save 2.6%.
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Old 06-12-2018, 05:58 AM   #5
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r u taking hdb loan? the difference is only 0.1%. i have worked out previously using a 300k loan for 30years vs 15years. U can work out something similar for lump sum payment.


the conclusion drawn, for my example, was that paying 15years provides insignificant savings as compared to 30years. I highly suspect you would get comparable results for lump sum payments, given the minute difference of 0.1%.


Last edited by chopra; 06-12-2018 at 06:46 AM..
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Old 06-12-2018, 07:05 AM   #6
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Thanks for the reminder. I forgot that It’s 60k across. Just kept remembering that first 20k in OA extra interest

Confident of servicing the loan, reason why I don’t wanna go to SA is that I may want to get another property so I can either use the money again if I sell it off, or if I can fully pay off this one I can get another loan with higher quantum

Why need to keep 20k in OA, unless MA + SA total is less than 60k?

If confident of servicing the loan without the reserve, dump it into SA for 4% than repaying the loan to save 2.6%.
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Old 06-12-2018, 07:06 AM   #7
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Do you share this excel? Where can I download?

r u taking hdb loan? the difference is only 0.1%. i have worked out previously using a 300k loan for 30years vs 15years. U can work out something similar for lump sum payment.


the conclusion drawn, for my example, was that paying 15years provides insignificant savings as compared to 30years. I highly suspect you would get comparable results for lump sum payments, given the minute difference of 0.1%.

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Old 06-12-2018, 07:13 AM   #8
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Yes it’s a HDB loan. I also suspect savings is small, but I’m just thinking if it would make any difference in terms of the total interest paid towards the place and I’m really doing nothing with the money there.

r u taking hdb loan? the difference is only 0.1%. i have worked out previously using a 300k loan for 30years vs 15years. U can work out something similar for lump sum payment.


the conclusion drawn, for my example, was that paying 15years provides insignificant savings as compared to 30years. I highly suspect you would get comparable results for lump sum payments, given the minute difference of 0.1%.

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Old 06-12-2018, 08:53 AM   #9
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Confident of servicing the loan, reason why I don’t wanna go to SA is that I may want to get another property so I can either use the money again if I sell it off, or if I can fully pay off this one I can get another loan with higher quantum
I don't think that argument really makes sense, though.

If you've got more money working harder for retirement, starting now, then you can sensibly and prudently afford to ease back slightly on your non-CPF retirement savings flow. Most money is fungible, and there's nothing stopping you from using greater non-CPF wealth however you wish.

And you're not making a great argument for skipping all OA to SA transfers. You can choose exactly how many dollars you wish to transfer. It's not an all or nothing decision. But 4% sure beats 2.5%, a lot.

If you're not saving for retirement (beyond CPF), and if you're solely focused on shorter term objectives, that's probably a bigger problem.

As a scenario, let's suppose you're currently saving $1,000/month outside CPF toward retirement. You have $30,000 sitting in OA (let's suppose), and you could transfer all or some of it to SA. Let's also assume you are already collecting maximum CPF bonus interest, so we can leave that out of the picture. An extra 1.5% interest on $30,000 would generate $450/year (before compounding), which equals roughly half a month of your retirement savings flow -- or a couple electric bills with a lot of air conditioning if you prefer to think of it that way. It's real money. So if you transfer $30K to SA you could ease back to $965/month in your non-CPF retirement savings and achieve exactly the same financial outcomes -- or even slightly better outcomes. Put the extra $35/month that you've liberated toward your dreams of real estate tycoon-ism if you wish.

You're leaving money on the table, basically. I wouldn't, at least not all of it.
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Old 06-12-2018, 09:32 AM   #10
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punker, you do not have to believe everything that bbc says.

you are right. money in oa can be used for your next property. if you move all into sa, it will set u back tens of thousands of dollars.

also if you need 150k in cpf oa for a downpayment, this 150k does not appear overnight. it takes years to accumulate. if you are still a distance from your target, you probably would not have a very specific property target. you will not know exactly how much you need for that purchase.

if you are eyeing your next property with oa, do not do any transfer.

bbc is not local. he probably did not even buy a property here. most of us are here for good. most of us believe in owning property. of course he does not care about the oa.

if you follow the insight in sunday times, you realize most of the people make their best investment through their properties.

even for my own property, it has appreciated twice the amount i bought. and i get to stay in it. lets see you stay in your cpf sa account.
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Old 06-12-2018, 09:56 AM   #11
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punker, you do not have to believe everything that bbc says.

you are right. money in oa can be used for your next property. if you move all into sa, it will set u back tens of thousands of dollars.

also if you need 150k in cpf oa for a downpayment, this 150k does not appear overnight. it takes years to accumulate. if you are still a distance from your target, you probably would not have a very specific property target. you will not know exactly how much you need for that purchase.

if you are eyeing your next property with oa, do not do any transfer.

bbc is not local. he probably did not even buy a property here. most of us are here for good. most of us believe in owning property. of course he does not care about the oa.

if you follow the insight in sunday times, you realize most of the people make their best investment through their properties.

even for my own property, it has appreciated twice the amount i bought. and i get to stay in it. lets see you stay in your cpf sa account.
Fully agreed. HDB loan LTV is at 80% while private is 75%.

Thus, deposit for private is up by 5% to 25%. More cash/CPF is required.

A private today is easily 1mil to 1.2mil. Translate into 50k to 60k more deposit.
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Old 06-12-2018, 10:41 AM   #12
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I used to play the game of invest rather than pay down housing loan. But back then returns were more predictable.
These days, the risks are so much higher and returns lower.
For greater peace of mind, i am deleveraging, paying down loans.
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Old 06-12-2018, 10:52 AM   #13
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Donít pay back lah. Keep it in OA. CPF can use your money to lend others who donít have money.
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Old 06-12-2018, 11:41 AM   #14
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Good grief.

I'll repeat: if you have more money for retirement -- and you surely will if you have more savings earning 4% instead of 2.5% -- then you can dial down your retirement savings flow and achieve exactly the same financial outcome. That means more current cashflow available for ANY purposes, including for real estate down payments if you wish.

It's simple financial optimization, and you can decide, to the exact dollar and every month, exactly how you want to optimize. There is nothing magical or necessarily optimal about CPF's default allocations across your OA, MA, and SA. You get to decide, for you, what makes sense. But 4% interest is better than 2.5% interest, a lot better. And you're raising this question within the context of trying to decide whether to accelerate repayment of a 2.6% mortgage using 2.5% earning money. Evidently because you can't think of anything better to do with your OA, and it's piling up. This is a common, happy problem to have.

Well, there is something a lot higher yielding: 4% SA. How about at least some of that? It's certainly not a silly or crazy idea. Plenty of people do it, including many people in this forum. I do it, my spouse does it.... It's rather popular among those people who have absolutely no problem with housing down payments and mortgages.

The more savings (and better yielding savings) you have for retirement, the less you have to save for retirement to achieve an equal retirement outcome. This is just basic financial math, REALLY basic. And the math is correct: 4% is more than 2.5%. 4% is also more than 2.6%.

Now, if you're not saving anything for retirement at present, that's (a) most probably a problem, and (b) a limit on your ability to time-shift cashflows and savings to take advantage of 4% interest. Or, to the extent you would have problems managing housing costs, you may need to hold back some OA. But YOU decide what makes sense for YOU. CPF only sets the minimum SA allocation. If you want to transfer every OA dollar into SA (up to the FRS) every month, you can. (My spouse and I do exactly that, and many people do the same.) It's up to you and your personal financial circumstances, but...4% is most definitely, assuredly, higher than 2.5% and 2.6%. No question, no rational argument to the contrary.
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Last edited by BBCWatcher; 06-12-2018 at 11:48 AM..
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Old 06-12-2018, 12:16 PM   #15
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Good grief simi sai when u urself agree that OA to SA transfer may not always be the holy grail depending on the TS situation ?

"Now, if you're not saving anything for retirement at present, that's (a) most probably a problem, and (b) a limit on your ability to time-shift cashflows and savings to take advantage of 4% interest. Or, to the extent you would have problems managing housing costs, you may need to hold back some OA"
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