HDB Loan alternative

[dribee]

I''ve been on HDB's 2.6% interest rate loan for the past 11 years of 28 year loaan. Borrowed sum was $200K. If I continue the same path, I would have paid $100K of interest (ouch).

Bank loans are lower but rates float and they are merciless at reposessing your flat should yiu be unable to service your loan.

Any words of advice? Thanks much.

 

[culture_counter]

I''ve been on HDB's 2.6% interest rate loan for the past 11 years of 28 year loaan. Borrowed sum was $200K. If I continue the same path, I would have paid $100K of interest (ouch).

Bank loans are lower but rates float and they are merciless at reposessing your flat should yiu be unable to service your loan.

Any words of advice? Thanks much.

Keep the HDB loan; it's safe and interest is constantly low.

 

[Perisher]

You already know your options, can't possibly pick the meat or poison for you.
Though you can use the fund more intelligently if you are able to get more than 2.6% returns a year using other ways.

 

[Bedokian]

Capital repayment?

 

[Perisher]

Capital repayment?

I think it's wiser to use capital to earn more than 2.6% rather than paying down housing debt such that it incurs lower interest.
Afterall, housing loan is one of the cheapest loan to leverage on.

just my2cent.

 

[Trazora]

Consider refinance when banks offer promotional rates. Usually have promotional rates just before national day. Can consider those package tagged to fixed deposit rates, more stable than SIBOR/SOR and some guarantee max cap at lower than HDB rate. Note that need to incur fees for the refinancing, can use calculators online to see if worth it. Can also engage free service (they get paid by the bank) from 3rd party agencies to give you advise and take care of the admin.

 

[anfielder]

If you've already paid for 11 years, your outstanding amount is not going to be high (initial loan of 200k isn't that high to begin with anyway). Not worth the fees involved in switching, and if the loan amount is less than 100k, the bank may not even bother with you.

 

[culture_counter]

If you've already paid for 11 years, your outstanding amount is not going to be high (initial loan of 200k isn't that high to begin with anyway). Not worth the fees involved in switching, and if the loan amount is less than 100k, the bank may not even bother with you.

True, agree.

 

[Bedokian]

My $0.02.

Actually the decision is dependant on your preferences, priorities and plans (3Ps). There is no correct way since everyone's 3Ps are different.

For my case, I opted for the HDB 2.6% interest loan because during that time, bank interest rates are around that region or even higher (yes, before the 2008/2009 period). My spouse then worked out a partial capital repayment plan to clear out the loan by 1/2 the loan duration, because we could not bear to see the interest component taking up a huge chunk of our loan.

We used our CPF to do this (again, different people have different views on this, and there are a few threads in hardwarezone on this point), and using the CPF has its issues, such as the accrued interest component which one has to pay back to CPF when selling the property (no concern for us as this would be our last property). We did not switch over to the by-then-already-low-interest bank loans, as we did not know how long the zero-interest-rate-period is going to last (hindsight is always 20/20).

We decided to clear the HDB loan simply because we do not like this huge debt hanging on our heads and start to worry about maintaining should we lose our jobs. And the reason why we used CPF is because we had put into plan an investment plan for retirement using our disposal income.

 

[dribee]

Thanks much all. I learnt from your generous sharing of knowledge

 

[Sinkie]

I''ve been on HDB's 2.6% interest rate loan for the past 11 years of 28 year loaan. Borrowed sum was $200K. If I continue the same path, I would have paid $100K of interest (ouch).

Bank loans are lower but rates float and they are merciless at reposessing your flat should yiu be unable to service your loan.

Any words of advice? Thanks much.

And hdb loan, you can even pick up the whole loan anyone u want lo

 

[bjornng]

I think it's wiser to use capital to earn more than 2.6% rather than paying down housing debt such that it incurs lower interest.
Afterall, housing loan is one of the cheapest loan to leverage on.

just my2cent.

Dear all,

Sorry to hijack this thread, but I too am wondering about the HDB loan max tenure portion and also capital lump sum repayment if possible to reduce the loan. I understand that there are both sides to this:

1) max out 25 years loan @ 2.6% interest, and use additional available capital to invest to generate >2.6% returns
2) whenever can lump sum repayment, do it to reduce the loan

I understand both points have their pros and cons, but I get confused sometimes to be honest, would be good if someone can point it out?
Personally I am leaning towards point 1), STI ETF will already generate ~ 3%. Anyway, to add on to point 1), does it mean that I should use my CPF for monthly installment, and use my available capital for investment? And is there anything that I can do in my CPF (OA/SA) so it wouldn't constantly get wiped out monthly due to the installments?

I am still learning and improving my SG financial knowledge from all the gurus here, so please pardon me if I sound lost

Thank you!

 

[doody_]

Dear all,

Sorry to hijack this thread, but I too am wondering about the HDB loan max tenure portion and also capital lump sum repayment if possible to reduce the loan. I understand that there are both sides to this:

1) max out 25 years loan @ 2.6% interest, and use additional available capital to invest to generate >2.6% returns
2) whenever can lump sum repayment, do it to reduce the loan

I understand both points have their pros and cons, but I get confused sometimes to be honest, would be good if someone can point it out?
Personally I am leaning towards point 1), STI ETF will already generate ~ 3%. Anyway, to add on to point 1), does it mean that I should use my CPF for monthly installment, and use my available capital for investment? And is there anything that I can do in my CPF (OA/SA) so it wouldn't constantly get wiped out monthly due to the installments?

I am still learning and improving my SG financial knowledge from all the gurus here, so please pardon me if I sound lost

Thank you!

Step 1 when buying a house is to max out the repayment period. In current times, housing loan is THE cheapest loan available out there. Even an Ah Gong loan from your own CPF is 2.6% liao, bank loans are half of that currently.

I think your main question is whether to do lump sum repayment when you have spare cash. That's a very common question, I also ask myself the same thing. The comparison is actually between investing in stocks or repaying your CPF.

With low bank interest rates now, doing a lump sum repayment is actually the worst option, as you are saving 1.xx% only.

If you use CPF to service your mortgage, repaying the CPF you withdrew is the second best option, as you get a guaranteed 2.5% return.

The unknown is whether you can outperform that 2.5% by taking the money and investing elsewhere, like in STI ETF.

 

[shredded]

bank loan floating is yes, but there are some that are pegged to FD interest rates. that might be a safer option compared to floating SIBOR rates