Wiping out CPF to prepay home loan for EC

I took out a bank loan on my EC, with the interest rates rising like crazy I'm expected to pay 4% on my loan. I have checked that I am able to:

Make prepayment on my home loan using my CPF OA
Make voluntary home loan refunds to CPF with my cash to minimise the principal and accrued interest

Is using all my CPF OA to prepay the home loan a good idea? Compared to paying 4% to the bank, wouldn't it be a better option to pay 2.5% in accrued interest to my own OA account in the future? It feels like a good idea to me but I'm not sure if I'm missing something out here.

Thanks in advance!

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Just_Saying

22 Dec 2022

Point 1, making prepayment using CPF OA allows u to reduce your loan principal and thus save on the 4% interest on the amount that you can prepay. However, you will also lose the 2.5% interest you gain if the money remains in your CPF OA. So the net difference is 1.5% (still good).

Point 2, this action has no impact, as reducing accrued interest is simply reducing the dollar on a paper (which is still ultimately your own money).

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Ace

22 Nov 2022

Do factor in a buffer - usually ppl keep some money in OA - so can still pay monthly instalment - e.g. if out of work and contributions dun stream in. Voluntary housing refund makes sense if your bank loan is fully repaid + have reached FRS (for SA) in my opinion.

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Tan Choong Hwee

19 Nov 2022

Investor/Trader at Home

Prepay home loan means cutting down outstanding loan amount and therefore reduce total interests you...

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