facebookI want to buy a HDB that is about 600K and I have 500k on hand. Should I pay all in cash & loan the rest? Or will my CPF be automatically wiped out first before I can pay in cash? is it worth to pay cash? - Seedly
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Anonymous

Posted on 26 Jun 2020

I want to buy a HDB that is about 600K and I have 500k on hand. Should I pay all in cash & loan the rest? Or will my CPF be automatically wiped out first before I can pay in cash? is it worth to pay cash?

Am wondering should I invest the 500k instead and loan the rest for 25yrs?

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Discussion (1)

Tay WenHao

Tay WenHao

Level 11. Master

Posted on 27 Jun 2020

My personal opinion:

  1. Take bank loan max amount, down payment pay in cash.

  2. Monthly instalments pay via CPF OA. Leverage on the difference between bank loan and OA interest.

  3. If you are able to confidently invest the amount and get more than 2.5% p.a. safely with minimum risk, go ahead. Else, consider bonds, high interest savings accounts, fixed deposit or even short term endowment plans (<3 years). Returns on investment should be higher than your bank loan for HDB. If not it defeats the purpose of getting bank loan.

3.1. If you are unable to get a safe investment that generates higher returns than 2.5% p.a, topup your spare cash into CPF VC3A. Subjected to the annual limit of 37k including your mandatory contributions. Since you using CPF OA to pay for your monthly instalments, by topping up your CPF, you are paying for your housing loan indirectly and earning the difference in the interest rate. (Leveraging on HDB Loan)

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4 more comments

Tay WenHao

Tay WenHao

05 Jan 2021

From a start state, yes you need to VC3A so you will have lesser amount flowing to OA. Anyways, CPF Voluntary contribution have a cap of 37k per year (including mandatory work contributions). After a year or so, you can 'topup' directly to OA via the 'Refund OA for Housing" option. This amount is excluded from the 37k contribution

Wilu

24 Jan 2021

Hi Wenhao, what do you mean by at the start you need to VC3A? Why can’t one straight away do a topup directly to OA?

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