Using HDB loan instead of bank loan to afford a lower downpayment upfront, have already paid 5% downpayment and fees, need some opinions on future payment options?

1) proj. cashflows to be used on reno and wedding, intending to use the loan (incur 2.6%) to cover the remaining 95% + fees of house (higher than the 90% MSR of our income) instead of using CPF OA since it will earn 3.5% (our CPF is currently below 20K each). is this a logical option?

2) if we have exceeded 20K in our OA, should we use the excess above 20K OA to pay off the 5% downpayment + fees since we will technically incur a "loss" of 2.5% interest which is lower than a 2.6% loan interest?

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Jiayee

13 Oct 2020

Salaryman at some company

1) Yes. Renovation loans and other personal loans have a higher interest rate than mortgage loan interests. Yes, please have $20,000 in your OA at all times where possible. In case of emergency, you will still have $40,000 to pay for your mortgage loans.

2) Fair point, if you have no intention of transferring your OA to your SA. I am in the same situation as you but I am likely to plan to transfer from OA to SA instead of locking my CPF monies into my home. Only when my other non-OA accounts are maxed then I will consider the lump sum payment. Personally, I am not keen to invest my CPF OA so these are the only things I can do with my CPF OA ^_^ I do not plan to use my CPF to fund my future children's education as I do not want to leave them with CPF debt.

Hope my answer helps.

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