facebookWhat is your opinion on using only cash every month to pay for hdb loan repayment instead of using full OA CPF to pay hdb loan every month? - Seedly

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Anonymous

04 Dec 2019

Property

What is your opinion on using only cash every month to pay for hdb loan repayment instead of using full OA CPF to pay hdb loan every month?

So that can Transfer what is above 20k in OA to SA every month to reach the FRS in shorter time?

AMA 1M65

Discussion (7)

What are your thoughts?

Hi OP,

Using cash to pay for your HDB loan is a wise choice. In essence, you are leaving CPF monies to compound in your OA at a generous rate of 3.5% while your HDB loan is only at 2.6%. In this manner, you get to enjoy an "inversion", in which your CPF monies will be working harder than the cash in HDB loan.

Also, the money in your CPF OA can act as a a security net to cover about 1-2 years of HDB loan mortage payment if you or your spouse face financial difficulties due to retrenchment or illness of a loved one.

Lastly, if you are even more bold and care less about liquidity(CPF OA can be used to pay for education and housing), you can do an OA to SA transfer and let the amount compound at a staggering 5% risk free interest, which will bring out the power of compounding- the sum will grow to 4 times the principal in 30 years time! Do note that this transfer is irreversible though.

All the best in reaching FRS!

If you can, I would say pay cash instead of cpf like Cheng Chuan said.

But on your question, I wont transfer all of OA (above 20k) to SA. I would suggest you leave 6x (or maybe even up to 12x) monthly loan payment amounts in OA, so that in event you lose your job or main income, you can activate the OA to pay the loan and tide over the tough times while you look for the next job. This is my plan B.

My plan A is to redeem some of the SSBs that I buy to offset against the loan payments.

Something for you to think about. I always put keeping the house as a priority and to never default on the loan. Peace of mind.

You dont have to do this in one go, I started my plans with one-three mths reserve in oa / ssb, and then budget to increase by one mth each year to steady and fortify these buffers until well I get at least 6+6 mth buffer.

Jason Sing

Jason Sing

21 Jun 2019

Level 10·School Of Hard Knocks And Life at School Of Hard Knocks And Life

Yes, it is a good idea. The interest of your fixed deposit is lower than the interest of your CPF OA...

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