PFF Panel 4
Seedly PFF 2019
Asked on 02 Mar 2019
There are two ways to look at it.
Is the 50K gonna be used for investment that generate more than 2.5% returns?
If yes then continue to use loan.
If the 50k is to be kept in the bank, then better to pay off HDB and save 2.5% cost instead.
In general, a housing loan is considered as good debt. You may consider leaving the HDB loan untouched (provided you have means of paying it off in the near future i.e. job stability, certainty of cash flow, etc. and investing in vehicles that can yield better returns.
One such vehicle would be the CPF SA that yields 4% p.a.; not to mention the tax relief (if you are a working adult) that you can enjoy (up to $7,000 a year).
However, an advantage of paying off your housing loan early is that you may be able to take up another housing loan for another property purchase.
It really depends on your investment objective, time frame, and goal :)
If you are confident that your investments will earn more that 2.5% returns, you should invest and delay paying off the HDB loan. However, if you think that you will not be able to earn a higher rate of return, you should pay off the loan.
Another thing to consider here is that return on investments are volatile and so there is the underlying risk that you may not earn a good return. If you are not comfortable with bearing the risk, you might want to consider repaying the loan first.
I work at Kristal.AI, and it's my passion to evaluate various upcoming investment opportunities.
With 50k you can buy many assets. Did you know in 2017, Singapore's medical inflation rate was 10%. It means your money is worth 10% less today compared to last year. 2.5%? Any good asset with cash flow could beat that even with no capital appreciation. Don't burn your money so easily.
Unless you have an investment that earns you more then 2.5%, do a CPF cash refund!
Basically you are putting the cash into your OA, which will earn 2.5%. So you if you somehow decided to just use the money to pay HDB loan, then just leave the money in OA and continue paying off the HDB loan.
But if you somehow want to spend on an investment, you can do an CPFIS. In the future CPFIS will be 0% fees!
If you are confident in getting more than 2.5% returns, by all mean do what you feel is the best for you. However, a lot times investments returns are not guaranteed but loan/debts interest are guaranteed.