Accrued interest in CPF

[skyver]

I had been servicing a HDB housing loan and recently just finished paying everything. Currently, there is a 50K accrued interest. What should I do with it? Ignore and leave it there accumulating or try to pay it with spare cash?

 

[Okenba]

I had been servicing a HDB housing loan and recently just finished paying everything. Currently, there is a 50K accrued interest. What should I do with it? Ignore and leave it there accumulating or try to pay it with spare cash?

Accrued interest only comes into play when you sell the property that you used CPF money to buy. At that point, whatever you got from selling the property would have to be put back into your CPF OA including the accrued interest.

After this, if you are buying another property, you can use your CPF OA to buy it. So whatever you put in, can be used again by you.

 

[rizhal]

Deleted. Sorry

 

[tangent314]

There are two cases where it may make sense to pay back your accrued interest and the amount that you have withdrawn for your property.

1. You intend to upgrade your property with the spare cash, so whatever you put in now will then go towards paying for the new property.

2. You don't need the money until age 55, so you just want some place to park the money paying you 2.5% interest until that age. For this however, there are better options out there. First, if your CPF MA is not yet at the BHS, you should top up your MA first which will provide you with tax relief. Secondly, if your CPF SA is not yet at FRS and you haven't already made your annual CPF SA topup of $7000 that qualifies for tax relief, then you should do that first. Third, if you are self-employed, you have the option of making voluntary contribution to CPF that qualifies for tax relief. If you can no longer do the 3 above, then paying back your accrued interest becomes a viable option, optionally transferring from OA to SA after that.

 

[skyver]

There are two cases where it may make sense to pay back your accrued interest and the amount that you have withdrawn for your property.

1. You intend to upgrade your property with the spare cash, so whatever you put in now will then go towards paying for the new property.

2. You don't need the money until age 55, so you just want some place to park the money paying you 2.5% interest until that age. For this however, there are better options out there. First, if your CPF MA is not yet at the BHS, you should top up your MA first which will provide you with tax relief. Secondly, if your CPF SA is not yet at FRS and you haven't already made your annual CPF SA topup of $7000 that qualifies for tax relief, then you should do that first. Third, if you are self-employed, you have the option of making voluntary contribution to CPF that qualifies for tax relief. If you can no longer do the 3 above, then paying back your accrued interest becomes a viable option, optionally transferring from OA to SA after that.

Thanks for the detailed explanation. I am not self-employed and have already exceeded the BHS and FRS for MA and SA respectively.

 

[cal3135]

Leave as is till HDB sale..... or
To refund cpf HDB loan if u tend to treat OA as 2.5% FD & withdraw when @55.

I had been servicing a HDB housing loan and recently just finished paying everything. Currently, there is a 50K accrued interest. What should I do with it? Ignore and leave it there accumulating or try to pay it with spare cash?

🍎xsmax HardwareZone Forums app

 

[romeo88]

Interest accrued is just like the money you "owed" to your CPF (OA) account. The accrued interest will roll and will get more.

If you don't have better use for your cash (i.e. earning more than 2.5%), you should think about redeeming it too.

I had been servicing a HDB housing loan and recently just finished paying everything. Currently, there is a 50K accrued interest. What should I do with it? Ignore and leave it there accumulating or try to pay it with spare cash?

 

[s0crates]

Something like oneself own ownself hahaha

Interest accrued is just like the money you "owed" to your CPF (OA) account. The accrued interest will roll and will get more.

If you don't have better use for your cash (i.e. earning more than 2.5%), you should think about redeeming it too.

 

[nexis9]

For your case, if you do nothing the CPF accrued interest will keep running. As long as you pay back the money used from your CPF, it is similar to hailing a cab and keeping the meter running till you fully pay it.

There are a few things you may choose to do:

1. Since you have finished paying your loan, you may be discipline to slowly put small amounts back to the CPF. Doing so will "reduce" the accrued interest bit by bit. However, the downside is that you are putting your monies on the flat that you cannot take out.

2. Do nothing. But do note, you must start planning your retirement funds seperately. As most of your CPF are now locked in the flat and it is not really appreciating. What most do is probably rent out their rooms when older to have "passive income".

These are just some of the not so major changes type of solution.

You may read some info here:
Understanding your CPF
https://aspiringpropertyinvestors.c...interest-rates-and-how-to-use-them-correctly/

Why CPF will eat away your sales proceeds
https://aspiringpropertyinvestors.com/cpf-accrued-interest-the-silent-killer-of-sales-proceeds/

 

[elf108]

Need to pay off the nett OA amount used before can pay off accrued interest right ?

 

[skpuppy]

Actually accrued interests doesn’t matter right? You just don’t get cash and every cent goes back into cpf. That amount can be used to buy another condo/ HDB. Just that you don’t really make cash from the sales

 

[dork32]

Need to pay off the nett OA amount used before can pay off accrued interest right ?

is it very important to differentiate it between principal and interest?

 

[dork32]

Actually accrued interests doesn’t matter right? You just don’t get cash and every cent goes back into cpf. That amount can be used to buy another condo/ HDB. Just that you don’t really make cash from the sales

this will occur if you are below 55.

if after 55, you dont have frs, then part of it may be stuck at the ra.

 

[BBCWatcher]

For your case, if you do nothing the CPF accrued interest will keep running. As long as you pay back the money used from your CPF, it is similar to hailing a cab and keeping the meter running till you fully pay it.

It’s not at all similar to a taxi; that’s a bad analogy. These funds are only “owed” to yourself.

 

[YouHeypiCanLiao]

Accrued interest only comes into play when you sell the property that you used CPF money to buy. At that point, whatever you got from selling the property would have to be put back into your CPF OA including the accrued interest.

After this, if you are buying another property, you can use your CPF OA to buy it. So whatever you put in, can be used again by you.

so if staying on this house for life . Can safely ignore ?

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[YouHeypiCanLiao]

There are two cases where it may make sense to pay back your accrued interest and the amount that you have withdrawn for your property.

1. You intend to upgrade your property with the spare cash, so whatever you put in now will then go towards paying for the new property.

2. You don't need the money until age 55, so you just want some place to park the money paying you 2.5% interest until that age. For this however, there are better options out there. First, if your CPF MA is not yet at the BHS, you should top up your MA first which will provide you with tax relief. Secondly, if your CPF SA is not yet at FRS and you haven't already made your annual CPF SA topup of $7000 that qualifies for tax relief, then you should do that first. Third, if you are self-employed, you have the option of making voluntary contribution to CPF that qualifies for tax relief. If you can no longer do the 3 above, then paying back your accrued interest becomes a viable option, optionally transferring from OA to SA after that.

Actually to think of it, max bank loan is better than owe ownself / use cpf oa for housing

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[ahboy_ahboy]

Actually to think of it, max bank loan is better than owe ownself / use cpf oa for housing

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In the past, OA must be fully wipe out.
I just wipe out my OA to buy this new BTO and pull 25 years HDB loan to minimize the monthly repayment amount. monthly repayment to hdb loan is now $300. the rest let it earn back the 3.5% interest in OA.

 

[dork32]

In the past, OA must be fully wipe out.
I just wipe out my OA to buy this new BTO and pull 25 years HDB loan to minimize the monthly repayment amount. monthly repayment to hdb loan is now $300. the rest let it earn back the 3.5% interest in OA.

the interest in oa is 2.5%.

the extra 1% will never end up in your oa

 

[Okenba]

the interest in oa is 2.5%.

the extra 1% will never end up in your oa

extra 1% is up to 60k.
if SA is less than 60k, the extra 1% will overflow to OA.
Up to maximum of 20k in OA can enjoy the additional 1%.

Edit: Based on CPF FAQ quoted below, First 20k in OA will always get the extra 1%.
After which SA, then MA will be considered.

 

[IcYFl4mEz]

extra 1% is up to 60k.
if SA is less than 60k, the extra 1% will overflow to OA.
Up to maximum of 20k in OA can enjoy the additional 1%.

can you pls share more on how does this really works?
lets say if combined total is over 60k.
but SA and MA is very little. OA alone over 60k liao.
how does the interest works? first 20k of OA, and all of SA and MA will earn extra 1% now?
example 10k SA 10k MA .
so if top up MA or transfer OA to SA. (e.g 20K OA , 40K SA , 10k MA) will earn extra 1%? rest of the balanced OA earn the usual 2.5%?

and assuming if no need to pay income tax due to kids, topping up of SA better(xfer from OA) ? compared to MA( using cash )?