Pay back CPF or HDB first?

[Verbatin]

oh it appears that now need $500k. when i apply that time my loan only $300k
and the interest has gone up a bit too


https://www.posb.com.sg/personal/pr...an&gclid=CNCZo5CYwdoCFZVCjgodzukHsg&gclsrc=ds

 

[Yachtmaster]

I'm inclined to think that freebies are usually unpopular items that need to be cleared, not to mention the hairdrying function only worth $50 at most.

 

[bxang1986]

I would think that paying off mortgage is straightforward lower risks of any bank interests costs and refinancing in future. Real estate is good asset to make profit.

 

[fivefive]

Hi Finance guru here,

My current loan with bank is about $500,000. Lock in over liao, interest going back up to 2.08 . Looking to refinance at 1.88. Our CPF have $180,000. Should I keep in CPF to earn for 2.5% and let bank charge me $500k for 25year interest or I should clear $180k ?

Correct me if I am wrong, keeping in $180k in CPF seems nett gain of 0.62% . But bank charge the interest of 1.88% x 25 yr straight isn't it?

The bulk if installment in first few years goes to paying interest and not principle amount so which is better off?

 

[dork32]

Hi Finance guru here,

My current loan with bank is about $500,000. Lock in over liao, interest going back up to 2.08 . Looking to refinance at 1.88. Our CPF have $180,000. Should I keep in CPF to earn for 2.5% and let bank charge me $500k for 25year interest or I should clear $180k ?

Correct me if I am wrong, keeping in $180k in CPF seems nett gain of 0.62% . But bank charge the interest of 1.88% x 25 yr straight isn't it?

The bulk if installment in first few years goes to paying interest and not principle amount so which is better off?

isnt that a no brainer? pay back for what? if can go and borrow some more.

it does not matter if your installment goes into principal or interest. your money in the cpf would earn more interest than the savings on interest if you pay back

 

[sAVaGEmP5]

I lol at first few replies and im surprised no 1 said cpf.

As a savvy investor, i guess one ahld go by gerd mentality.

Go clear ur hdb loan first then!

 

[cloverpark]

Hi Finance guru here,

My current loan with bank is about $500,000. Lock in over liao, interest going back up to 2.08

Interest of 2.08% is really cheap. Already Citibank savings account can pay up to 2% interest. Mind boggling indeed.

 

[BBCWatcher]

Already Citibank savings account can pay up to 2% interest.

Actually, that Citibank account can only accumulate interest at that rate, which is a bit of a gimmick. Once you withdraw, the rate resets. And the ~2% rate isn't available until the money is parked for a year.

But yes, mortgage interest rates are still quite low, especially when comparing them to government bonds. Which suggests to me that mortgage interest rates are going to continue to be biased upward for a while.

 

[cloverpark]

Actually, that Citibank account can only accumulate interest at that rate, which is a bit of a gimmick. Once you withdraw, the rate resets. And the ~2% rate isn't available until the money is parked for a year.

A year is not too long, anyway, with 1 mth sibor at record high, the rate starts at 1.1%. The big catch in my opinion is the 150k limit.

But yes, mortgage interest rates are still quite low, especially when comparing them to government bonds. Which suggests to me that mortgage interest rates are going to continue to be biased upward for a while.

The mortgage rate is low because of the paka between banks in Singapore to offer super low savings rate.

 

[hwmook]

A year is not too long, anyway, with 1 mth sibor at record high, the rate starts at 1.1%. The big catch in my opinion is the 150k limit.



The mortgage rate is low because of the paka between banks in Singapore to offer super low savings rate.

FD rates lower than SSB, I cannot imagine any bank is more credit worthy than Singapore government.

 

[cloverpark]

FD rates lower than SSB, I cannot imagine any bank is more credit worthy than Singapore government.

FD allows you to withdraw after 1 year. Can you withdraw the SSB after 1 year at face value?

 

[havetheveryfun]

FD allows you to withdraw after 1 year. Can you withdraw the SSB after 1 year at face value?

yes why not

FD needs after 1 year to get the full interest, if u withdraw anytime before it matures u forfeit the interest completely

SSB u pay $4 in total for application and withdrawal, but u don't have to wait 1 year to get the full interest, u can withdraw it by the 1st and 2nd month and still be able to get pro-rated interest

 

[BBCWatcher]

SSB u pay $4 in total for application and withdrawal, but u don't have to wait 1 year to get the full interest, u can withdraw it by the 1st and 2nd month and still be able to get pro-rated interest

Or, you can let your SSB ride, and it'll earn promised interest that rises annually according to the upfront published interest rate schedule. You have that flexibility, too. At the end of 10 years your SSB will mature, and (at zero transaction cost) your principal will be returned to you.

There's really only one way some fixed deposits in Singapore are beating SSBs: no practical limits on placements. SSBs are limited to $100,000 per person, and they are (these days) routinely oversubscribed, meaning you might want to buy $100,000 worth of SSBs but only get allocated, say, $20,000 per month.

In short, you should favor SSBs over fixed deposits, unless you exceed SSB subscription and per individual maximums. Then fixed deposits might start to become interesting.

 

[chopra]

no charges. POSB absorb lawyer fee. and they also give me a Dyson vacuum cleaner.

the best thing is mthly instalment no need to be $2k to receive home loan rebates of $30 for wife and myself. so long repayment is above $1k both will get $30 each per month from POSB bonus savers

wtf so gd. they charged me 1.6k legal n hundreds for valuation. i changed 2yrs back

 

[chopra]

Fyi POSB requires 3 months notice in advance if you wish to redeem your housing loan early.

At the end of the loan period, you'll need to engage your own lawyer to write in to POSB for the redemption of your loan in order to collect your title deed. Else POSB charges $300/year to safe-keep for you.

HDB stores title deed for you for free at the end of the loan period. And you don't need to engage a lawyer to do the paperwork.

Some pointers to consider before into POSB housing loan.

sorry can elaborate on this?
we r jus renting 99yr from hdb.
so basically the cheaper way is to engage a lawyer to write to dbs to get title deed?


i suppose dont need to do so if refinancing or if we r selling hse?

 

[cloverpark]

Or, you can let your SSB ride, and it'll earn promised interest that rises annually according to the upfront published interest rate schedule. You have that flexibility, too. At the end of 10 years your SSB will mature, and (at zero transaction cost) your principal will be returned to you.

There's really only one way some fixed deposits in Singapore are beating SSBs: no practical limits on placements. SSBs are limited to $100,000 per person, and they are (these days) routinely oversubscribed, meaning you might want to buy $100,000 worth of SSBs but only get allocated, say, $20,000 per month.

In short, you should favor SSBs over fixed deposits, unless you exceed SSB subscription and per individual maximums. Then fixed deposits might start to become interesting.

Ok, thanks. So SSB is just like Citibank Maxigain, step up rate savings account rather than a bond.

$1.8K per year for $100k is interesting, but how much can u guys get since the bond is oversubscribed?

 

[BBCWatcher]

So SSB is just like Citibank Maxigain, step up rate savings account rather than a bond.

No, they're not at all the same. SSBs do not take one year to step up to a higher interest rate. SSBs step up every year. SSBs step up annually to interest rates that are published right up front and are guaranteed by the government. The interest rates are not based on variable interest rates. All SSBs are 100% government guaranteed and are not subject to $50,000 deposit insurance limits. You can redeem any portion of your SSBs (in $500 increments), and you do not suffer an interest rate reset on your remaining SSBs. SSB terms are guaranteed for 10 years if you wish to hold them to maturity, and they are not subject to the marketing whims of a bank that could end or modify its account offer at any time. SSBs are not subject to $15,000 minimum "Total Relationship Balance" requirements to avoid monthly charges -- you can buy as little as $500 of SSBs at a time.

 

[cloverpark]

No, they're not at all the same. SSBs do not take one year to step up to a higher interest rate. SSBs step up every year. SSBs step up annually to interest rates that are published right up front and are guaranteed by the government. The interest rates are not based on variable interest rates. All SSBs are 100% government guaranteed and are not subject to $50,000 deposit insurance limits. You can redeem any portion of your SSBs (in $500 increments), and you do not suffer an interest rate reset on your remaining SSBs. SSB terms are guaranteed for 10 years if you wish to hold them to maturity, and they are not subject to the marketing whims of a bank that could end or modify its account offer at any time. SSBs are not subject to $15,000 minimum "Total Relationship Balance" requirements to avoid monthly charges -- you can buy as little as $500 of SSBs at a time.

Thanks. So this makes SSB even more similar to savings account, in that you can withdraw with no penalty unlike Citibank. The $500 min sum is good, can earn $10 interest a year! Still better than nothing.

 

[GeraldineT]

Hi All,

Would need advise on which is the better choice.

My partner and I recently BTO and it cost us 285,800
Our grant is 70,000.

From what I understand, when we use CPF to pay our BTO, there is an accured interest of 2.5% till we put back the money to CPF.

so can I say that
1) the 5% downpayment of $ 14,290 and stamp fee/conveyancing fee which we also use CPF.
Total amount of 18403 from CPF will have the interest till the day we sell our HDB?


Assuming our house will be ready in 2021 July, which means we have $ 271,510 payment left on the house. When we take our key, we have to pay another 5% and fees which amount to $15160.85
2) This amount of $15160.85 will also have accrued interest of 2.5% till we sell our HDB?


So assuming that our combine CPF is $173,778 when we take our keys after minus off the 5% and fees of $15160.85, the balance would be $158,617 and given that the 90% balance of house is $271,510- our CPF balance, we will still need $112,893
3) Would the HLE loan be exact amount $112,893 or would it be a round up/down value?


If we loan 113k from HDB, our monthly instalment would be $760.
4) Would it be better to pay the monthly instalment by cash or CPF?
I did a calculation, I could be wrong, do correct me if so.

Assuming we sell our house in 2028.
The first 5%($18403) we did this year in 2018 would have the accured interest which amounts to $4.6k
CPF balance($173,778) we wipe out in July 2021 would have accured interest which amounts to $34755
So total CPF used is $231537

5) If we sell our house at 400k, we will have a cash back of $168463 right?
However, this will reduce our own cash savings from 2021-2028 to be approx 70k?
We will still have our CPF 90k combined.


However, if we use our CPF to pay the monthly instalment of $758
Our own cash savings from 2021-2028 would be approx 144k.
Our CPF would be 33k combined.
So, if we sell our house at 400k in 2028, total CPF used is $231537 (1st and 2nd wipe out), $72845 which was also our amount used for monthly instalment and the interest of $14569.
6) We will get back cash $81049?


If all my calculations are correct. It's better to pay HDB instalment by cash right? Cause this is base on selling the house in 2018, however if the house is sold in later years like 2035 (which the HLE loan is fully paid, the accured interest would be 51k alone.) and I would have to topup money back to CPF
Base on 2018
a. cash saving approx 70k,selling of house 168k cash, cpf 90k
b. cash saving approx 144k, selling of house 81k cash, cpf 33k.

 

[tangent314]

As long as your flat is sold at or above valuation price, you do not need to top up cash into CPF if there is shortfall when refunding principle + accrued interest into CPF.

http://www.housesinsingapore.com/top-up-of-cpf-if-hdb-is-sold-below-valuation/

Whether you use cash or CPF to pay, couple of things to take note of:

1. It is suboptimal to have balances in your OA except for paying for your housing (or perhaps education), otherwise it's just better to move into SA to get better interest rates.

2. If you decide to pay with cash and move OA into SA, you can achieve the same thing by just paying with OA and then use cash to top up into SA. The big difference is can get tax deductible up to $7k....