CPF-OA Investment for CPF housing loan?

Hi there,

• Housing loan can be from HDB (not CPF la...) or banks. Banks w lower loan interest now (compared to HDB), but of course HDB (govt) more lenient if u lose job and can't pay for a while compare to banks (less merciful - I'm sure they will go right for the HDB once you can't pay for X mths).
• Spare cash - Yes, after factoring renovations, furniture/appliances other cash outlay (from getting the HDB) - surely balance good to invest (if can earn more than HDB loan interest), if not, shld just use to pay house, less loan, less loan interest (+accrued interest on CPF), quicker debt-free.
• Investing CPF-OA - if you can get 2.5%, I remember an article wrote about how a high %age of ppl investing their CPF-OA and did not earn as high at 2.5% (i.e they made the wrong move compared to those who did simply nothing.). Many who invest probably just didn't want the CPF-OA to go to HDB upon purchase and transfer back after the purchase (i.e. higher than 20K safety net). Some alternatives to consider: After factoring for your house, transfer balance OA (comfortable amt) to SA for 4% interest? Ppl usually choose to keep $20K (max allowable to keep) in CPF-OA after buying house (just in case - can still pay for several mths if out of job).
  If resale, you should start the research now - 2 years is a good time. If few mths left to purchase can go viewings.
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Hope this is of help.

Hi Anon,

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Good to hear of your plans and I'm excited for you too!

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Housing loan is taken from HDB (2.6% interest with 10% downpayment) or banks (from ~1.4% up with 25% downpayment). Both allows for usage of CPF for repayment and downpayment. For bank loan, you will need 5% cash downpayment, for HDB loan you can use full CPF.

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The question of whether or not to invest your CPF-OA funds is down to your planned usage for housing or education. Think of it as borrowing your retirement funds for these purposes now. Also bear in mind the risk-free interest rate of 2.5% (which is not hard to beat with low cost diversified investments) vs potentially higher returns.

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If you are intending to invest your CPF-OA in a hope to build up your funds for housing within the next 2 years, I would discourage you from doing so as your investment horizon is too short and there is a real risk of losing capital. Although markets have rallied in the past 2 years, it remains pretty volatile and uncertain with COVID and other geopolitical risks.

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Some people may choose to invest part of their CPF-OA when considering a HDB loan because the manner in which they "empty" all available funds before granting a loan. This will allow ypu to earmark an amount which will not be locked into housing and can be divested at a later date (anytime more than 5 years later) for other purposes.

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You can also choose to inform CPFB to set aside $20k in your CPF-OA when settling the downpayment. This $20k is shared if you have 2 buyers. (the first $20k in your OA gets 3.5% interest) This serves as a good emergency buffer for your mortgage liabilities in future.

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I'll suggest keeping your funds in CPF-OA and maybe consider cash top ups instead (Voluntary Contribution - 3 Accounts which will be split according to your working contribution rates). 2 years is too short to take the risk for any potentially higher returns.

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