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Anonymous

10 Sep 2020

CPF

For those who invest, and about to buy your home where you would stay for whole of life, would you pay for your home using cpf oa or cash? How do my spouse and I make a decision?

As far as I know, we would only need to refund cpf-oa, with accrued interest, when we sell the house. Otherwise, there is no need to. If we were to repay the mortgage, I think it makes more sense to direct my money to the SA? And paying using cpf oa helps free up cash for more investment. Are we missing something?

Discussion (18)

What are your thoughts?

Hi there!
To ensure I understand you correctly, you are taking any ordinary bank/HDB loan to finance your home, and that both you and your spouse are employed with monthly CPF contributions. I see three parts to your question:

Before that, yes, you are right about the selling of your house part if you use CPF-OA funds to downpay and/or finance your loan instalments.

  1. Is it better to pay my mortgage (for a house that I am not intending to sell at all) with cash or CPF-OA funds?

  2. Does it make more sense to direct my money to CPF-SA?

  3. Does paying my loan using CPF-OA helps free up cash for more investment?

For part 1,
Yes it would be better, provided both of you have enough cash savings to ensure your family’s needs e.g. wedding, children etc. are taken care of.

However, if cash flow is an issue, then you might consider funding your house with CPF-OA monies first. You can always change your mode of instalment in future.

For part 2,
This depends on whether you see CPF-SA as an investment tool. There are people who treat it as a risk-free 4% instrument. Do take note that once you transfer money into CPF-SA, it will become illiquid until much later (at least until age 55).

For part 3,
Yes it does, but do ensure you really invest it or you’d be better off using cash for instalments. CPF-OA at least earns 2.5% vs very meagre interest on cash in bank.

I hope I have addressed your concerns! Feel free to clarify anything with me (:

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