Is it a good idea to start stashing savings to pay down the cpf loan?

My monthly loan payment has reduced from peak of 3.4k to less than 2.9k. I have been thinking of stashing these savings (3.4k - current mth loan payment) to build a small reserve on hand (2 mths), and any balance going forward to pay down the cpf property loan (over the next 10-15 years) . I know my current reits portfolio gives better returns, but I guess these savings will be less than 20% of what I am putting towards investments and srs annually.

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Discussion (3)

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Duane Cheng

03 Sep 2020

Financial Consultant at Prudential Assurance Company Singapore

Hi there,

I believe you are referring to doing a voluntary home refund (VHR) for your current property. Depending on the intepretation, i am unsure whether your 2.9k is your current outstanding loan, or combined loan liability for yourself.

You can definitely start to pay off your CPF + AI should you have sufficient cash flow for yourself. This will definitely be useful, should you intend to sell your current property in the near future. That way, you will be able to receive more cash on hand, on the sale of your property.

However, if you are going to stay at your current property until your point of death, then doing VHR might be redundant, as any AI owed to CPF need not be payable on death. VHR is highly situational, and there are quite high opporunity costs with relation to paying off your current owed CPF + AI.