Asked on 12 Sep 2019
About $100k in various investments, $40k cash savings, protection plans sorted. With a combined income of ~$12k (before less CPF), took a DBS home loan.
Thinking whether to pay monthly HDB mortgage of ~$1.8k by cash rather than CPF since
(1) collect CPF 2.5% interest,
(2) I can afford it now and can switch to paying by CPF if I need the cash flow subsequently rather taking eating straight into my savings (e.g retrenchment or wife stop working to take care of kids).
Does this make sense?
There are people who do that
1) lack of choice.. coz CPF not enough
such as me. I have very little CPF since I operate my own business and has very little CPF in my OA account.
2) Choose to do so willingly, as they know they have to pay back the CPF with accrued interest (at 2.5% per year) when they sell off their properties.
If it's me, I will maximise as much CPF as possible. Sure, I have to pay back 2.5% pa accrued later (accumulated it's going to be a big sum) but it's still to myself...
and let's be honest with all of us, cash is king.
You can see your cash, but it's very difficult to see your CPF outside the.. building.
1) If you can hit FRS, which means you are able to withdraw the extra monies (Including accured interest) when you hit 55.
2) You have plans to use your cash to invest/ start a business or put into income generating assets that can give you significantly more interest than 2.6%.
If the above 2 points resonates with you, then go ahead and use CPF to pay as having cash on hand is always better since there are more flexibility.
It really depends on your personal cashflow and okding power. You may service your mortgage loan either by cssh or your CPF OA. CPF OA earns you a very attractive interest thus it may also be a good idea to maintain your CPF OA contributions.