seeking advice - home loan refin

[stsilverbullet73]

have refin home loan of 240k to 3.85% for 2 yrs

have excess in both cpf can pay off 120k total to bring loan down to 120k and keep a nice buffer for rainy day as balance

i read older topics and many mention t-bill or put in fixed D to earn the different but seems like t-bills and fixed D are both coming down? or am i not looking hard enough

all ears to hear shifus' inputs.. TIA!

edit - realise there may be some confusion, i am asking if i should just put 120k in repayment via OA or max 240k loan quantum, and put cpf elsewhere with >3.85%

 

[iduncheckmail]

240k nia. Just pay full cash .

 

[rizhal]

have refin home loan of 240k to 3.85% for 2 yrs

have excess in cpf can pay off 120k to bring loan down to 120k and keep a nice buffer for rainy day as balance

i read older topics and many mention t-bill or put in fixed D to earn the different but seems like t-bills and fixed D are both coming down? or am i not looking hard enough

all ears to hear shifus' inputs.. TIA!

very envious of your situation.

can consider SSB, 10 years and decent interest. Any time can withdraw without penalty fee.

 

[stsilverbullet73]

very envious of your situation.

can consider SSB, 10 years and decent interest. Any time can withdraw without penalty fee.

thanks, to put in context its a low flr bto = low quantum..

edit = 120k cpf total is both of our cpf

 

[BBCWatcher]

You likely won’t be able to refinance the ~$100K remaining if you were to do this (pay down so much), or at least it would be impractical. And if mortgage interest rates are high 2 years from now you may have pretty terrible options. In my view it’s better to be in a position to retire the whole remaining mortgage balance if rates are genuinely high, and to do that rather easily (not reduce emergency reserves too much), rather than to accelerate repayment in current or similar conditions. Basically be ready to slay the beast rather than merely wound it. Wounded beasts sometimes bite back. Also bear in mind that you or your spouse are basically screwed if one of you dies soon after paying $120K and if you have the Home Protection Scheme or other MRTA policy.

First of all, is 3.85% fixed for 2 years the best you can do? DBS has 3.75% fixed in your choice of 2, 3, 4, and 5 year periods. That offer is listed on their Web site as I write this. Or is the refinancing at 3.85% a done deal? If the latter is there a penalty for accelerated repayment? What’s the prepayment penalty?

 

[abcde83]

240k need to think so hard?
just pay it off lor...
it's your one and only house, u will need it anyway

 

[DevilPlate]

I think most banks only entertain min loan sum of 200k.

 

[stsilverbullet73]

You likely won’t be able to refinance the ~$100K remaining if you were to do this (pay down so much), or at least it would be impractical. And if mortgage interest rates are high 2 years from now you may have pretty terrible options. In my view it’s better to be in a position to retire the whole remaining mortgage balance if rates are genuinely high, and to do that rather easily (not reduce emergency reserves too much), rather than to accelerate repayment in current or similar conditions. Basically be ready to slay the beast rather than merely wound it. Wounded beasts sometimes bite back. Also bear in mind that you or your spouse are basically screwed if one of you dies soon after paying $120K and if you have the Home Protection Scheme or other MRTA policy.

First of all, is 3.85% fixed for 2 years the best you can do? DBS has 3.75% fixed in your choice of 2, 3, 4, and 5 year periods. That offer is listed on their Web site as I write this. Or is the refinancing at 3.85% a done deal? If the latter is there a penalty for accelerated repayment? What’s the prepayment penalty?

factoring in legal and other associated fees i think 3.85 is decent . i could get it down to 3.8.

we got enough savings to pay off the remaining 100k if mortgage rates become high 2 yrs from now.

i will check on the prepayment penalty but i am on an accelerated repayment scheme .. looking to clear off the balance in 7 yrs with savings as backup for pt 2 above.

let's say i drag this out without any prepayment since it is impractical, do i let the $ sit in cpf? cpf OA only collects 2.5%

thanks for spending time to reply. appreciated

 

[stsilverbullet73]

240k need to think so hard?
just pay it off lor...
it's your one and only house, u will need it anyway

yes if there is no way to earn more than 3.8 ... want to see if there are other ways of earning >3.8 then i may not realise

 

[DevilPlate]

Actually just make partial repayment if u still have excess spare cash of about 100k?

Invest OA in Tbills is for those who took hdb loan at 2.6%

 

[V_for_Vanilla]

240k from the bank's perspective is not a big amount. Hence the refinancing terms is usually less attractive (i.e. higher rates) compared to larger loan quantum say 600k or above a million. At least that is my experience. So I would repay.

 

[BBCWatcher]

But what's the remaining savings if, the day after repayment, the primary income earner becomes disabled (for example)? Because if the remaining savings after repayment is $10,000 (let's suppose) then the HDB flat will have to be sold rather quickly to raise cash to survive.

The prior 6 month T-bill had a cut-off yield of 3.85%. The effective yield is slightly lower with CPF Ordinary Account dollars. And that's the #1 safest available vehicle for Singapore dollar savings. I wouldn't be in a rush to pay off a 3.85% mortgage when 3.85% COY T-bills exist.

 

[stsilverbullet73]

But what's the remaining savings if, the day after repayment, the primary income earner becomes disabled (for example)? Because if the remaining savings after repayment is $10,000 (let's suppose) then the HDB flat will have to be sold rather quickly to raise cash to survive.

The prior 6 month T-bill had a cut-off yield of 3.85%. The effective yield is slightly lower with CPF Ordinary Account dollars. And that's the #1 safest available vehicle for Singapore dollar savings. I wouldn't be in a rush to pay off a 3.85% mortgage when 3.85% COY T-bills exist.

off topic but i do have careshield and DI .. and also high term life for all these

otherwise, would ur take be to leave the quantum as it is and just slowly service the 3.85% mortgage?

 

[stsilverbullet73]

Actually just make partial repayment if u still have excess spare cash of about 100k?

Invest OA in Tbills is for those who took hdb loan at 2.6%

my spare cash is making abt 4% risk free so i won't be paying cash repayment. it would be cpf

 

[stsilverbullet73]

240k from the bank's perspective is not a big amount. Hence the refinancing terms is usually less attractive (i.e. higher rates) compared to larger loan quantum say 600k or above a million. At least that is my experience. So I would repay.

this is exactly my thinking, looking to hear other opinions to weight off

 

[BBCWatcher]

off topic but i do have careshield and DI .. and also high term life for all these

OK, that's likely good. However, these forms of insurance don't cover all family emergencies. I'm simply pointing out that HDB leasehold equity is not liquid. You have to sell the whole flat if you want any of that leasehold equity back. Liquidity should be a consideration when deciding whether to pay off a loan faster than required.

otherwise, would ur take be to leave the quantum as it is and just slowly service the 3.85% mortgage?

I'll repeat what I wrote: I would not be in a rush to pay off a 3.85% mortgage when ~3.85% T-bills exist. That's approximately an even trade versus the safest available savings vehicle, so I would not be reducing liquidity "just because" (which is really what you're proposing).

Whether you actually buy T-bills is a separate question, but their existence puts the mortgage interest rate in perspective. (Personally I would not. I'd be taking the long view and would invest in long-term assets.)

 

[BBCWatcher]

Bear in mind also that if mortgage interest rates fall back down to 1.4% or 1.5% a year or two from now then this bet (paying off ~$240K faster than required) won't look like such a great bet when 2.5% OA will still exist. So that's part of the risk calculation too.

I don't see the financial appeal here. It's just not compelling enough to me.

 

[stsilverbullet73]

thank you, i appreciate your inputs

i wil let it roll and might put some monies into tbills, fixed Ds.

you reminded me of a good pt... i do foresee i/r to fall a fair bit 2, 3 yrs from now.

 

[DevilPlate]

Personally im guessing mortgage rates will averagely around 2.5% for the coming decade.

 

[dork32]

OK, that's likely good. However, these forms of insurance don't cover all family emergencies. I'm simply pointing out that HDB leasehold equity is not liquid. You have to sell the whole flat if you want any of that leasehold equity back. Liquidity should be a consideration when deciding whether to pay off a loan faster than required.

I'll repeat what I wrote: I would not be in a rush to pay off a 3.85% mortgage when ~3.85% T-bills exist. That's approximately an even trade versus the safest available savings vehicle, so I would not be reducing liquidity "just because" (which is really what you're proposing).

Whether you actually buy T-bills is a separate question, but their existence puts the mortgage interest rate in perspective. (Personally I would not. I'd be taking the long view and would invest in long-term assets.)

i would be clearing my loan 500k. i feel 3.8% not easy to beat risk free for me. i do not like to take too much risk on borrowed money. i know that my other investment are bring in more than 4%, but there are risk.

in future if the rate drop back to 1.5%, then i do a cash out.