30 Nov 2021
Hello Seedly friends,
I am currently at the stage of planning to look into BTO / resale in the next 2 years.
I'm thinking to take the housing loan from CPF instead of bank because i think the cash can be used for other purpose (investment or repay other loans). If there is really spare cash, then use cash to top up CPF and repay the loan to cut short the duration.
With the rising housing prices, I'm thinking of investing my CPF-OA. I'm not really confident in my research and stock pick skills, so wondering if Endowus is a better choice than having the money in CPF and earn the annual interest?
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Hope this is of help.
Edited 01 Dec 2021
Solutions & Financial Literacy at MoneyOwl
Good to hear of your plans and I'm excited for you too!
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.
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.
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.
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.
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.
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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