facebookIs it wise to repay HDB housing loan earlier than loan duration (paying in full/partial)? To save on loan interests / use less of CPF OA? - Seedly

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Sharon Lim

Level 6

Edited 02 Oct 2021

Property

Is it wise to repay HDB housing loan earlier than loan duration (paying in full/partial)? To save on loan interests / use less of CPF OA?

On HDB loan, 2.6% interest. Planning to repay the loan earlier (w any accumulated spare cash savings in next few years - after taking into consideration of savings, liquidity, other investments, insurances, needs etc.), wanting to be debt free as early as possible + save on loan interest / allow some OA to accumulate (instead of heavily used on property). Comparing this option to refunding to OA, this does seems more sensible.

Any thoughts to share? Anyone tried this? Sharing of experiences - actual early repayment and tips/insights will be appreciated, thanks in advance!

Found interesting articles on this topic too: https://blog.moneysmart.sg/property/retirement-...

https://www.propertyguru.com.sg/property-guides...

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Discussion (11)

What are your thoughts?

Property loan to me is a good debt, example car/credit card are bad debt. I will want to clear my bad debt liabilities faster but not to good debt.

ETFs investment can easily outrun your hdb loan interest, repaying early also will lower your purchase power.

So to me, I will not repay early, but invest the rest, till the period end.

For OA, earning is not high enough (may be because I’m still young), I will rather let it use my OA so I have more cash to invest on simple thing like S&P500 etf.

Not advising but just sharing my thoughts

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Nigel Tan

Nigel Tan

16 Sep 2021

Level 7·Executive Senior Financial Planner at Great Eastern Life

If you don't plan to do anything with your money in the bank, paying off your home would be a good idea. Its nice to live debt free, less stressful + you get to let your OA funds grow. Not only do you save on paying 2.6% yearly, you get 2.5% credited.

Otherwise, investing it outside would be the alternative. Interest rates are all time low right now which also means your opportunity cost is quite low. You could also consider refinancing with a bank, interest rates outside are now about 1 over %, much lower than HDB at 2.6%. You'll easily save a few hundreds a year.

There's no right or wrong, both are viable options. Do what you're most comfortable with.

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I have never taken hdb loan, but I don't like that it is 2.6% when you can get a lower rate from ban...

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