CPF Accured Interest

[keiichiro]

Regarding the CPF accured Interest, the CPF used and accrued interest are paid back after the house / flat is sold.

Paying off the housing loan will reduce the interest incurred for the housing loan and duration.

Does it make sense or is there a way to pay off the CPF loaned amount via cash ,instead of the housing loan, on a monthly basis to reduce the final accrued interest?



Example

CPF used > 100,000
Accrued interest 2.5% > $86,703

Instead of paying cash to the loan repayment, i pay cash to the CPF used.
CPF Used > $100,000 - $1000 =$99,000
Accrued Interest 2.5% > $85, 836


Apologies if i ask a noob question.

 

[teerance85]

Yes.

You can do a voluntary refund for your property. You can use extra cash to pay back into your CPF.

But it doesn't make sense if your loan is still outstanding.

 

[henrylbh]

Regarding the CPF accured Interest, the CPF used and accrued interest are paid back after the house / flat is sold.

Paying off the housing loan will reduce the interest incurred for the housing loan and duration.

Does it make sense or is there a way to pay off the CPF loaned amount via cash ,instead of the housing loan, on a monthly basis to reduce the final accrued interest?



Example

CPF used > 100,000
Accrued interest 2.5% > $86,703

Instead of paying cash to the loan repayment, i pay cash to the CPF used.
CPF Used > $100,000 - $1000 =$99,000
Accrued Interest 2.5% > $85, 836


Apologies if i ask a noob question.

Your CPF page will show -
(a) Principal amount withdrawn
(b) Accrued interest

(a) + (b) is the amount that you need to return to your CPF when you sell your flat.

When you start to settle the outstanding loan with CPF, (a) and (b) will increase. Same applies when you pay monthly instalment with CPF. The monthly instalment will be added to (a). (b) will the interest calculated on (a) on monthly basis and compounded annually and on (b) annually based on previous year's amount.

When you start to settle the outstanding loan with Cash, (a) will stop increasing but (b)will keep increasing.
Same applies when you pay monthly instalment with Cash.

Let me confuse you a little. FYI, if I remember correctly, while you are still servicing the outstanding loan monthly, you can use cash to pay off (a) and (b) anytime but that would terminate your rights to use CPF to service the outstanding loan. To reinstate the your rights to continue using CPF to service the loan, you will need a lawyer to make application. But if you use cash to settle (a) only, you can continue to use your CPF to service the loan. In this case (a) will start increasing from zero as you have refunded cash to zero (a).

 

[bigpelican]

on topic with CPF Accrued interest.

i am not sure if my understanding is correct in this scenario.

assume the following:

- i have $100k in cpf which will be earning 2.5% interest p.a.
- i took $100k private bank housing loan at 2.6% interest p.a
- so i earn 2.5% interest and pay 2.6% interest for the loan, in total it cost me 0.1% for the loan.

if i dont take bank loan and use my CPF instead,
- i need to pay 2.5% "interest" (accrued interest) to myself after selling my house.

that means, tradeoff of the 0.1% p.a interest is to lock more money back into cpf.

if bank loan rate is lower than 2.5%, isnt it better to not use CPF at all and loan maximum from bank. When bank interest rate increase beyond 2.5% then use cpf to pay the bank housing loan (not sure about this).

 

[Bedokian]

Either way you look at it, as long as the amount from your CPF is withdrawn for housing since day 1, accrued interest on the withdrawn amount starts. One way to avoid this accrued interest thing would be to pay your loan by cash totally (but this is not practical, though possible).

A way to mitigate the accrued interest effect would be to pay the loan as it is, i.e. no early repayment, provided that you are one who moves every few years or so. Else if you felt that the property you are living at is the "one" for life, then the accrued interest thing will not be a concern.

IIRC the accrued interest will "disappear" once you reach age 55 when the Retirement Account kicks in, but it will still come back if you decide to sell your property after that age (correct me if I am wrong).

 

[Sinkie]

quick question

so stocks bought with cpf, if sold, do we need to pay back accrued interest too?

 

[RoLanTo]

stocks no need.

can partial repay the cpf u took for housing.
partial repayment will cover the principal first, after your principal is fully repaid then your partial repayment will cover the accrued interest..

1) partial repayment which covers principal first, then accrued interest
2) lump sum full repayment for principal
3) lump sum full repayment for accrued interest (only applicable if 2 is completed)
4) full repayment of principal + interest

 

[RoLanTo]

i not sure if the accrued interest got compounding effect anot, Or it is calculated based on principal loan only...

dont know if repay off principal, the outstanding accrued interest will "Grow" in subsequent years or not?

 

[anfielder]

quick question

so stocks bought with cpf, if sold, do we need to pay back accrued interest too?

No. When you sell, it all goes back to CPF, unlike for property where you can get the proceeds in cash after paying back the amt used + accrued interest.

 

[Sinkie]

No. When you sell, it all goes back to CPF, unlike for property where you can get the proceeds in cash after paying back the amt used + accrued interest.

ohh, so they won actually return lesser to OA, the accrued interest into medi portion? kk thanks

 

[anfielder]

ohh, so they won actually return lesser to OA, the accrued interest into medi portion? kk thanks

Don't get you. Sales proceeds for investments go back to whichever account the money came from in the first place.