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Anonymous
Paying off interest on CPF monies used for property purchase Vs topping up Medisave or SRS?
Over the longer term, would it make more sense to channel major portion of spare cash into paying off the interest on the amount of CPF used for purchase of property rather than to top up Medisave or put in SRS account? Also assuming currently using cash and zero CPF to pay off mortgage. Would interest saved and/or generated from paying off the CPF monies be greater than interest earned from Medisave or SRS (assuming 5% returns p.a.) over the same time period?
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Sure, it will make sense to let your money work harder for u elsewhere. Why don't u top up your special account instead?
For the first $60k in your CPF combined balance (with only up to $20k max from OA), the monies will earn an extra 1%. You didn't mention your age, so not sure how close u are to the limit yet.
In additional u will receive tax relief for the topped up amount (same as SRS). Eg, your taxable income is $40k, for every dollar u earn above 40k is taxed at 7%. Therefore, if u topped up $1000 into your special account, u get $1000 tax relief, u saved 7% of $1000 = $70 tax money. Effectively have gotten 7% return on your money, in additional u will earn 4%-5% interest yearly guaranteed. Risk-free, regardless of market conditions. If your income is in the higher bracket, u will effectively earned more.
Tax relief earned this way has a cap of $7k a year. So after u have topup $7k, u can take a look at other ways (such as SRS). SRS u will have to take risk on your money, 5% return average might not be certain even for the long run.
Since u are not using CPF to pay your mortgage, u might want to consider transfer your OA to SA to earn a higher interest rate. Otherwise your OA earns 2.5%, but your loan is 2.6% (I assume is HDB loan?), so u are losing 0.1%. It will be more worth to use your OA to pay off your mortgage. Unless u are taking bank loan with is still below 2.5%.