Are there any disadvantages or penalties for clearing HDB loan fast? (Eg 5yrs)? - Seedly
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Anonymous

Asked on 25 Oct 2020

Are there any disadvantages or penalties for clearing HDB loan fast? (Eg 5yrs)?

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There is no disadvantage and no penalties.

The only disadvantage is that the amount you use to clear your HDB loan, for some people, can be used to invest elsewhere and earn a higher return than your loan's interest rate.

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No penalties. The "disadvantage" is that you are locking your money into your flat very quickly when you could have drawn more value out of it via investments and/or top-ups to CPF SA.

The advantage will be a peace of mind.

Before you clear your loan quickly, please verify that you will not have any other more expensive loans in the near future (e.g. credit card loan, car loan, personal loan, etc).

Also, when your loan is still ongoing, always ensure you have at least x months (where x is usually 6) of monthly instalments ready in your bank account or CPF.

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Yang Teng

Yang Teng

Level 9. God of Wisdom

Answered on 25 Oct 2020

There is no early repayment penalty for HDB loan.

For the more financially savvy, you may also want to consider if there are other avenues where you can place the funds in for better returns. If your investments can reap a return of more than 2.6% over 5 years for example, with good certainty, then you can consider not doing an early repayment of your HDB loan.

For simplicity and peace of mind, you can do an early repayment.

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Question Poster

25 Oct 2020

Do you have any recommendation/suggestions of such investments? Thanks!
Yang Teng
Yang Teng

26 Oct 2020

For guaranteed products, there's easy save v (2.68%) https://www.tiq.com.sg/product/eeasy-save-v/ for first 6 years. But the difference of 0.08% probably wouldn't make significant difference. You can try equities/alternative investments. While returns can greatly exceed 2.6%, it is not guaranteed and there's potential for losses too.
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