HLE Loan Advice

[busybeeman]

Hello all!

My wife and I will be collecting my SBF house keys tomorrow and with that comes the start of owing HDB hundreds of thousands dollars.

But before that I want to get advice and thoughts on my plan from those who are more experienced in this.

To be fully transparent-

Our house price - $314k
Paid downpayment (5%) - $15.7k
Next downpayment (5%) - $14.95k
Remaining after dp - $283.3k

We have over $135k in OA total.

Our plan is to go for 25 years loan period and pay lumpsum of $100k from our CPF and $50k in cash leaving us with $133k remaining loan balance when we walk out of the hub tomorrow.

We’ll pay the outstanding with $2000 monthly from our OA + $2000 cash and hopefully clear all loans in 3.5-4 years.

I do have a question, when we lock in 25 years loan tenure, does the interest gets locked in over 25 years too? Or are the loan interest calculated monthly based on outstanding?

Many of you may ask, why rush to pay off my loan when I could be using the cash for investment or OA to SA for the 4% interest to offset?

Well I grew up really poor and my family were always in debts. We had to move across SG constantly just avoid paying rent so having loans hanging over me are pretty much a PTSD trigger for me. My wife and I have pretty stable jobs with decent pay but you never know when things like another massive layoff might happen again. We do have around 1-1.5 year salary worth of savings if worst comes to worst and we regularly invest in T-Bills as well.

So we felt having a peace of mind after paying off the biggest loan we’ll ever take is worth it.

I know it might seemed like I have it all planned out but it’s always nice to have second opinions as well.

Let me know your thoughts brothers and sisters!

P.S - This post might come off as showboating but I promise you I’m not flaunting in any way. I have never in my life spend more than 2k on anything so the loan we’re taking tomorrow is so much that it’s scary to us

 

[anthonygreenisreal]

Hello all!

My wife and I will be collecting my SBF house keys tomorrow and with that comes the start of owing HDB hundreds of thousands dollars.

But before that I want to get advice and thoughts on my plan from those who are more experienced in this.

To be fully transparent-

Our house price - $314k
Paid downpayment (5%) - $15.7k
Next downpayment (5%) - $14.95k
Remaining after dp - $283.3k

We have over $135k in OA total.

Our plan is to go for 25 years loan period and pay lumpsum of $100k from our CPF and $50k in cash leaving us with $133k remaining loan balance when we walk out of the hub tomorrow.

We’ll pay the outstanding with $2000 monthly from our OA + $2000 cash and hopefully clear all loans in 3.5-4 years.

I do have a question, when we lock in 25 years loan tenure, does the interest gets locked in over 25 years too? Or are the loan interest calculated monthly based on outstanding?

Many of you may ask, why rush to pay off my loan when I could be using the cash for investment or OA to SA for the 4% interest to offset?

Well I grew up really poor and my family were always in debts. We had to move across SG constantly just avoid paying rent so having loans hanging over me are pretty much a PTSD trigger for me. My wife and I have pretty stable jobs with decent pay but you never know when things like another massive layoff might happen again. We do have around 1-1.5 year salary worth of savings if worst comes to worst and we regularly invest in T-Bills as well.

So we felt having a peace of mind after paying off the biggest loan we’ll ever take is worth it.

I know it might seemed like I have it all planned out but it’s always nice to have second opinions as well.

Let me know your thoughts brothers and sisters!

P.S - This post might come off as showboating but I promise you I’m not flaunting in any way. I have never in my life spend more than 2k on anything so the loan we’re taking tomorrow is so much that it’s scary to us

interest get lock over 25 years. So what you are gonna be paying is already factored in.

 

[busybeeman]

interest get lock over 25 years. So what you are gonna be paying is already factored in.

Oh man, so its better if I go for a lower loan period?

 

[anthonygreenisreal]

Oh man, so its better if I go for a lower loan period?

I feel like it doesn't matter because there is still accrued interest for the amount you took from CPF to pay for the BTO.

 

[wenguang]

Firstly, your expected outstanding loan is about 135k. I assume you are taking HDB loan 2.6%. The monthly repayment will be about $613 for 25years.

https://www.hdb.gov.sg/cs/infoweb/residential/servicing-your-hdb-housing-loan/loan-matters/payment
If you intend to repay more monthly, you will definitely reduce the payment period and the interest incurred. (with no consideration of other investments), $4k monthly will take 3years to complete.


dun bother about the accrued interest if you are not flipping to earn.

 

[mp4005 help]

personnel i will just take the max term first with HDB @ 2.6%.

why? because HDB loan can partial pay anytime and fully redeem.

For HDB loans, there is no lock-in period, so there will be no penalty if you wish to pay off your loans early. This also means that you have the option to refinance your loan with a bank anytime, if you wish to tap on any lower interest rates.

in current market - CPF OA can buy T bills to earn higher interest. when the time comes - you can easily just lump sum partial pay back to HDB loan without penalty. I won't be so quick to full everything if you are on HDB loan.

whereas bank loans - got penalty to partial pay or fully redeem within the lock in periods and the time to act is 3 months notice versus HDB 1 month notice.

 

[sohguanh]

personnel i will just take the max term first with HDB @ 2.6%.

why? because HDB loan can partial pay anytime and fully redeem.

For HDB loans, there is no lock-in period, so there will be no penalty if you wish to pay off your loans early. This also means that you have the option to refinance your loan with a bank anytime, if you wish to tap on any lower interest rates.

I have the same exact thinking as you many years ago. But what I did not see was the longer period means you owe your own "cpf" more interest. When you want to sell the HDB flat you need to "pay back" this to "yourself". So in the end me and spouse decide to take the middle path. Somewhere mid-way we pay two more times lump sum to complete paying. Now as and when I pay back some for the voluntary housing refund amount wow I borrow so much previously!!!

 

[mp4005 help]

I have the same exact thinking as you many years ago. But what I did not see was the longer period means you owe your own "cpf" more interest. When you want to sell the HDB flat you need to "pay back" this to "yourself". So in the end me and spouse decide to take the middle path. Somewhere mid-way we pay two more times lump sum to complete paying. Now as and when I pay back some for the voluntary housing refund amount wow I borrow so much previously!!!

yes but is at 2.5% rate. and it is still your money.
all go in, can still use to buy house or at 55 can take everything out except BRS with pledge / FRS.

really depends what you want to use your CPF for since it is quite limited usage when you are in your 20s 30s. 40s - can smell the money soon. 55 onwards - no difference anymore. what goes in can come out.

 

[Mephist0pheLes]

Well I grew up really poor and my family were always in debts. We had to move across SG constantly just avoid paying rent so having loans hanging over me are pretty much a PTSD trigger for me. My wife and I have pretty stable jobs with decent pay but you never know when things like another massive layoff might happen again. We do have around 1-1.5 year salary worth of savings if worst comes to worst and we regularly invest in T-Bills as well.

u r not spending away ur money meant for repaying your housing loan if u dont rush to repay ur debt rite? and u r investing in safe assets like T-Bills, whats the worry? u can always pay down ur loan when they safe assets such as T-bills no longer pay interest higher than 2.6%.

And if ur worry is a massive layoff, then u sld be keeping the cpf instead of pushing everything into repaying ur loan asap. what if u pushed everything in and got lay off next year then how?

 

[zeroX26]

First off, congrats on your purchase. The nice thing about HDB loan is that you can do partial repayment anytime without incurring penalty. So whenever you get your bonus, just take a chunk of it to pay off.

Whether to pay off ASAP or view it as a "good debt" while you invest your money in instruments that give you better returns or not depends on your psychology actually. If having a debt looming at the back of your head will affect you mentally / emotionally, then no matter how sound the "good debt" theory is, its still better to just pay down your mortgage asap. Those who can divorce their emotions from their money are those who can take good advantage of "good debt" to make more $, but we also have to recognise this doesn't work for everyone.