Would it be better to pay HDB repayment using CPF OA through a monthly recurring voluntary contributions (VC) to your three CPF accounts (non-tax deductible)?
The idea is to lock in the 2.5% OA interest rate and use it for HDB monthly repayment instead of using cash directly for the monthly repayment.
Also, understand that during the selling of the HDB, the amount taken from CPF OA has to be return with accrued interest. What if at the point of selling, the HDB is already fully paid (no more monthly repayment), still need to return the CPF OA and/or accrued interest?
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Tan Choong Hwee
04 Jun 2021
Solutions Specialist at Providend
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This idea is flawed for a few reasons:
CPF interests is calculated based on the lowest balance of the month. The amount you put into OA via VC3AC won't earn any interests this month.
VC amount is distributed to the 3 accounts (OA/SA/MA). You will need to higher VC amount in order to match up the amount for HDB monthly repayment.
There is an annual limit of $37740 for total mandatory (from employment) and voluntary contribution. This set a cap on the amount you can VC in a year.
Might as well use the cash intended for monthly VC to directly pay the HDB monthly repayment and let the money in your OA grow at 2.5%.
Regardless of whether the HDB is fully paid, you need to return the CPF OA amount withdrawn for housing and the accrued interest to your CPF OA account when you sell the HDB.