CPF financial enquiry

[dork32]

Yes. I believe you can. You pay back to OA, and then you can move it to SA if you have not met FRS yet.

If I'm not wrong, this also presents a way to move a significant amount of money into CPF in your later years when you want a safe way to grow at 2.5%

why dont you put it straight into sa?

 

[dork32]

ALWAYS take the longest loan term available with equal terms and conditions (interest rate, etc.)

i disagree.

i used to pay 3+4% interest on my home loan many years ago. during that time. i whack my loan like mad.

 

[BBCWatcher]

i disagree.

Why?

i used to pay 3+4% interest on my home loan many years ago. during that time. i whack my loan like mad.

Yes, and you can do that! You can ALWAYS make a longer term loan into a shorter one: just pay it down faster than scheduled. (A ~4% interest loan is a moderate cost loan, and it's much more interesting and attractive to accelerate repayment on that sort of loan. If, on the other hand, the interest rate on your loan falls to 1%, then thank goodness you took the longest term loan, because it's most probably a license to print money as you arbitrage your low cost 1% loan for reliably higher yields with your dollars elsewhere.) You cannot do the reverse without refinancing, which costs money and may not even be possible.

The ONLY reason you should take a shorter term loan than available is if there's some tangible financial advantage in doing so and if the loan is still affordable. As a notable example, if the shorter term loan has a lower interest rate, that could certainly be interesting and compelling. But if the T&Cs are identical between, say, a 10 year loan and a 25 year loan, and if there's no prepayment penalty, ALWAYS take the longer term loan.

 

[dork32]

Why?


Yes, and you can do that! You can ALWAYS make a longer term loan into a shorter one: just pay it down faster than scheduled. (A ~4% interest loan is a moderate cost loan, and it's much more interesting and attractive to accelerate repayment on that sort of loan. If, on the other hand, the interest rate on your loan falls to 1%, then thank goodness you took the longest term loan, because it's most probably a license to print money as you arbitrage your low cost 1% loan for reliably higher yields with your dollars elsewhere.) You cannot do the reverse without refinancing, which costs money and may not even be possible.

The ONLY reason you should take a shorter term loan than available is if there's some tangible financial advantage in doing so and if the loan is still affordable. As a notable example, if the shorter term loan has a lower interest rate, that could certainly be interesting and compelling. But if the T&Cs are identical between, say, a 10 year loan and a 25 year loan, and if there's no prepayment penalty, ALWAYS take the longer term loan.

you only go for a long loan if the interest rate is good. otherwise go for a short loan.

eg car. car interest is 5+%. you do not go and take a max loan at a max period. i always choose min loan, min period for car loan.

if home loan goes the way of car loan, i will choose min loan min period.

 

[BBCWatcher]

you only go for a long loan if the interest rate is good. otherwise go for a short loan.

I believe I said that. If the T&Cs are equal (which includes interest rates), and with no prepayment penalty (at least after the fixed interest rate period), and assuming you are a responsible individual, ALWAYS go for the longer term loan.

eg car. car interest is 5+%. you do not go and take a max loan at a max period. i always choose min loan, min period for car loan.

Car loans in the current environment in Singapore are different. Car loans are moderate cost -- not cheap, not particularly expensive -- so you have to treat them with some respect and manage them well. Personally I would not be taking any typical car loans in the current car loan environment (rates, terms) in Singapore. I would be paying cash for any private automobile in Singapore, in the current environment. (A private automobile in Singapore is about 99.999% of the time a pure luxury, and it's a separate, interesting question whether you should be buying this particular pure luxury at all.)

On the other hand, if the car seller is offering a 0.0% interest car loan as a sales promotion, and if you're going to buy the car (and it's not too lavish in the circumstances), then take as much of that interest free loan for the longest term available. That's a super cheap loan, and you should enjoy it, as much of it as available. Assuming again you are a responsible individual.

if home loan goes the way of car loan, i will choose min loan min period.

But it hasn't and isn't -- that's not the current mortgage and interest rate environment in Singapore. Mortgage lenders are routinely offering exactly the same T&Cs across all available loan terms, and HDB is also doing the same with its HDB loans.

 

[Calander]

any insights in reserving 20k in OA apart from the potential higher rate of return due to interest?

 

[Prof. Utonium]

any insights in reserving 20k in OA apart from the potential higher rate of return due to interest?

Buffer you payments in case out of job.

 

[BBCWatcher]

any insights in reserving 20k in OA apart from the potential higher rate of return due to interest?

Buffer you payments in case out of job.

That's right. In particular, if you're taking a HDB loan, HDB and CPF allow you to keep a maximum of $20,000 in your Ordinary Account when you pick up the keys to your new HDB unit -- up to $20,000 per spouse, that is. All OA dollars above $20,000 are "swept" into the property when you pick up the keys. Since OA dollars earn 2.5% interest and count as "emergency reserve" for purposes of servicing your home loan, that's a rather good place to keep the housing portion of your emergency reserve.

However, you're not obliged to keep as much as $20,000 in your Ordinary Account. Some people are able to keep nothing in their Ordinary Accounts, and they transfer all OA dollars into their Special Accounts, every month, until their Special Accounts have reached the Full Retirement Sum. Such people have no trouble making housing down payments and expect no trouble servicing their low interest rate mortgages using their other assets. If you're such a fortunate individual, congratulations!

 

[Versa85]

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%.

Yup still using CPF to pay loan but by using the monthly salary CPF contribution instead from the CPF OA reserve.

No cash is involved base on what i predict though.

my final plan would be wait till HLE send me letter to review my HDB Loan status then once approved will wipe everything but 20k in OA to SA.
Then wait 20 years to get the monthly payout about 1.9k so far that my goal. Shall see how the goverment plan out in the future if singapore haven't sink.

 

[dork32]

I believe I said that. If the T&Cs are equal (which includes interest rates), and with no prepayment penalty (at least after the fixed interest rate period), and assuming you are a responsible individual, ALWAYS go for the longer term loan.

no.wat i say and wat u say is different.

i say interest low, go for long loan

you say conditions same, go for long loan.