Cash or CPF for hdb?

[DragonKnightMaster]

Seeking advise from financial gurus here. I have around 400k cash and 300k in cpf.

Planning to buy a resale hdb for stay of around 400k. Would prefer not to touch my cpf to earn the risk free interest and withdraw the excess after minimum sum when hit 55. Already moved maximum OA to SA. i believe the interest itself will cover any increase in the minimum sum. so any excess in OA will be available for withdrawal after 55. As for paying for the hdb, I intend to take bank loan while slowly using my cash to earn around 2% - 3% interest (low risk bonds or deposits such as dbs multiplier).

Not intending to go into investment as it is not my style. Anyone have a better financial advise for me?

 

[zoneguard]

Seeking advise from financial gurus here. I have around 400k cash and 300k in cpf.

Planning to buy a resale hdb of around 400k. Would prefer not to touch my cpf to earn the risk free interest and withdraw the excess after minimum sum when hit 55. As for paying for the hdb, I intend to take bank loan while slowly using my cash to earn around 2% - 3% interest.

Not intending to go into investment as it is not my style. Anyone have a better financial advise for me?

1. No investments means ruling out potential returns.
2. Risk of rising interest rate with a bank loan.
3. Simply not possible to earn 2-3% return on cash in current low interest climate without investment. If you have such lobang, please share as we are interested to know.
4. The low risk solution will be to buy the resale with cash. But I don't think you'll accept it anyway.

We wait for others to comment.

 

[A Better Tomorrow]

Ask youself, buy for own stay or investment?

 

[reddevil0728]

Ask youself, buy for own stay or investment?

can buy HDB for investment 1 meh. if buy HDB now means it will be the first property purchase what no?

 

[BBCWatcher]

Seeking advise from financial gurus here. I have around 400k cash and 300k in cpf.

Planning to buy a resale hdb of around 400k. Would prefer not to touch my cpf to earn the risk free interest and withdraw the excess after minimum sum when hit 55. As for paying for the hdb, I intend to take bank loan while slowly using my cash to earn around 2% - 3% interest.

Not intending to go into investment as it is not my style. Anyone have a better financial advise for me?

There are a couple things that don’t add up here. In particular, where are you going to earn 2%-3% interest on ~$300K cash? You probably aren’t. I would assert that you are investing, albeit in a relatively low yielding, ultra conservative way.

You could do this. In these circumstances you would/should push your OA dollars into SA for the higher interest, as early and as much as allowed probably. You’ve got gobs of liquidity and have the mortgage fully covered should interest rates spike, so no problem there. I wouldn’t be quite so conservative on the investment side (and am not), although in a real sense I’m more conservative since I’m in pretty great shape no matter what happens to the Singapore dollar’s value. In other words, a reasonable degree of global investment diversification makes a lot of sense to me, and I don’t think zero is reasonable at your level of wealth. Otherwise, congratulations really.

 

[BBCWatcher]

4. The low risk solution will be to buy the resale with cash. But I don't think you'll accept it anyway.

No, I disagree about that idea. Right now you can get a bank loan with a fixed, low interest rate for 3 years, with no prepayment penalty thereafter, and reliably earn greater than the bank rate across those 3 years. Even CPF OA does that (earns more than the bank rate). In the meantime you preserve liquidity. All of that adds up to much lower risk than plonking down personal cash up front. At the end of the 3 years you then decide what you’d like to do. If mortgage interest rates are significantly higher, and you feel that the best available choice is to accelerate mortgage repayment, great, you can do that. In the meantime you’ve printed free money and preserved liquidity for “black swan” events.

 

[A Better Tomorrow]

can buy HDB for investment 1 meh. if buy HDB now means it will be the first property purchase what no?

There are people who use their HDB bto to upgrade to condo. Not sure if it is possible now.

However the bto lottery enables the couple to move more towards outskirt of Singapore if they are able to secure a good location unit at mature estates. Or there are people who game the system and mutually part off with benefits.

 

[zoneguard]

No, I disagree about that idea. Right now you can get a bank loan with a fixed, low interest rate for 3 years, with no prepayment penalty thereafter, and reliably earn greater than the bank rate across those 3 years.

https://forums.hardwarezone.com.sg/128696767-post2552.html
Your advice to the other guy.

So bank loan for an insurance policy not OK because of rising interest rate but bank loan for a property OK because fixed low interest rate?

Please enlighten me on your logic so that we can all learn together, thank you.

 

[Entry Level PC]

Seeking advise from financial gurus here. I have around 400k cash and 300k in cpf.

Planning to buy a resale hdb of around 400k. Would prefer not to touch my cpf to earn the risk free interest and withdraw the excess after minimum sum when hit 55. As for paying for the hdb, I intend to take bank loan while slowly using my cash to earn around 2% - 3% interest.

Not intending to go into investment as it is not my style. Anyone have a better financial advise for me?

Buy a Freehold Shoebox instead?

 

[reddevil0728]

There are people who use their HDB bto to upgrade to condo. Not sure if it is possible now.

However the bto lottery enables the couple to move more towards outskirt of Singapore if they are able to secure a good location unit at mature estates. Or there are people who game the system and mutually part off with benefits.

yea but my point is, if you buy a HDB, for the first 5 years u can't actually rent it out right? So is either you stay in there or leave it empty for 5 years?

 

[zoneguard]

Buy a Freehold Shoebox instead?

Average asking price is $500K? Which is above OP's budget unless he wants to raise it.

 

[A Better Tomorrow]

yea but my point is, if you buy a HDB, for the first 5 years u can't actually rent it out right? So is either you stay in there or leave it empty for 5 years?

You CAN rent rooms within the MOP period but cannot rent the ENTIRE unit out until MOP.

 

[reddevil0728]

You CAN rent rooms within the MOP period but cannot rent the ENTIRE unit out until MOP.

ok la. fair point. but

 

[Entry Level PC]

You CAN rent rooms within the MOP period but cannot rent the ENTIRE unit out until MOP.

Property is a very lousy investment.
Come I do Maths for you.
Assuming 400k.
You rent out and get 2k a month.
You need around 20 years of rent to break even. (inflation, interest, maintenance fees)

Compare to say I throw stock market index.
10years double.

20 years later = 400%.
400k become 1.6 million in stock market for 20 years
vs
Break Even after 20 years via rental income of 2k per month.



Also no guarantee rental market will continue to be rosy for next 20 years.

 

[Entry Level PC]

not intending to rent out. purely for stay.

Then if I were you,
I will top up 100k,
go 500k and get myself a Freehold (999 Years) Shoebox.

HDB, Lease 0 = Value 0.
Gahment say one.

 

[Entry Level PC]

i’m not really into investment. don’t really care what happens 99 years later. just want to maximise my money for retirement. i’m sure i won’t outlive my apartment lease. by the way i forgot to mention i have one wife and one kid. so this hdb is for us to stay.

HDB, Lease 0 = Value 0.
Wait for price adjustment next year if you going to buy resale.

 

[yongsaver]

Seeking advise from financial gurus here. I have around 400k cash and 300k in cpf.

Planning to buy a resale hdb for stay of around 400k. Would prefer not to touch my cpf to earn the risk free interest and withdraw the excess after minimum sum when hit 55. Already moved maximum OA to SA. i believe the interest itself will cover any increase in the minimum sum. so any excess in OA will be available for withdrawal after 55. As for paying for the hdb, I intend to take bank loan while slowly using my cash to earn around 2% - 3% interest (low risk bonds or deposits such as dbs multiplier).

Not intending to go into investment as it is not my style. Anyone have a better financial advise for me?

actually yours is the model answer liao given current situation. When situation change again, you can adapt easily.

 

[peppermint7]

actually yours is the model answer liao given current situation. When situation change again, you can adapt easily.

But current enviro where to place 400k into low risk which fetch 2 to 3%?

TS will soon discover there's no such haven now..

75k DBS multiplier
10k singlife
Mayb add in dashearn
+ some endowment plan here n there

He'll have to think hard in order to fit in 400k

 

[yongsaver]

But current enviro where to place 400k into low risk which fetch 2 to 3%?

TS will soon discover there's no such haven now..

75k DBS multiplier
10k singlife
Mayb add in dashearn
+ some endowment plan here n there

He'll have to think hard in order to fit in 400k

after paying for 20% down payment with cash, balance about 300+K cash. he said he has some in SSB bought earlier, DBS multiplier will consume another 100K...some here and there...i think still can get around 2% la.

me always have a simple philosophy - low rate sucks but lose money suck more. me also dont like to invest just for the sake of investing.

if one works hard, money dont really have to work hard la. me no choice. me no work, so i make sure my money work.

 

[dork32]

Property is a very lousy investment.
Come I do Maths for you.
Assuming 400k.
You rent out and get 2k a month.
You need around 20 years of rent to break even. (inflation, interest, maintenance fees)

Compare to say I throw stock market index.
10years double.

20 years later = 400%.
400k become 1.6 million in stock market for 20 years
vs
Break Even after 20 years via rental income of 2k per month.



Also no guarantee rental market will continue to be rosy for next 20 years.

my property value more than doubled in 20 years. this is not to mention that my property provided a shelter over my head. i could have rented it out and collected rental. the value would have gone many times over.

i really like see people stay in their stock market indices

also no guarantee that stock market will remain rosy all the while.

yes i do play stocks. but i also have a nice roof over my head