Asked by Andrew Kwek

If I feel that I can make 3-4% return on my investments through index funds (i.e STI ETF), should I pay my home loan using my cpf oa or using cash instead? ?

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  • Clarence Chua
    Clarence Chua, Financial Planning Specialist at Prudential Assurance Singapore
    Top Contributor

    Top Contributor (Apr)

    Level 6. Master
    Answered on 17 Apr 2019

    Personally, I will advise to pay a portion of it with cash, as CPF is a really good financial instrument for retirement. Giving 3.5% for your first 20k in OA and 2.5% subsequently.

    Taking money out of your CPF, means you will lose the 2.5 or 3.5% of interests and on top of that you are also paying your loan interests of 2.6% (assuming one took a load from HDB) so thats is like a -5%.

    But not everyone can afford to pay with cash and also some may earn more than enough for CPF hence its good for them to split as they have surplus from their CPF. (Everyone has a different number so its good to do your maths before deciding on the % split)

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    • Andrew Kwek
      Thanks Clarence, I think I'll pay my next 10% deposit in cash which is due in 2 years time when I get my flat. Previously I used 5% cash and 5% cpf for my initial 10%. I think I agree with you and I'm thinking of using my cpf as my bond portfolio and thus I transferred most of my oa to sa.
      20 Apr 2019
    • Clarence Chua
      It’s heartening to see more Singaporeans like yourself making good use of the Financial Instrument we have! I wish you the best of luck and pray your wealth grow steadily!
      22 Apr 2019
  • Teo See Hwa
    Teo See Hwa, MArketing Associate at Propnex
    Level 3. Wonderkid
    Answered on 17 Apr 2019

    Compare apple to apple.

    HDB loan is leverage and depends on the type you buy you get capital apprecation.​​​ investments through index funds (i.e STI ETF) is only using your money call cash or CPF.

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