Asked by Anonymous

Is it advisable for a 25 year old to transfer some of their OA( OA above 20k) into SA to aid in reaching 1M65 when they are buying a bto flat 5 room (price 350k & no grants) in 4 to 5 years time?

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    • Loo Cheng Chuan
      Loo Cheng Chuan, Founder at 1M65 Movement
      63 Answers, 184 Upvotes
      Answered on 04 Nov 2018

      Good question. I often get a this question or a similar one on should one pay up their home loan with their OA or use it to transfer to SA to get 1M65.

      If I were in your situation, I would try to make sure that I have enough money in either cash or OA to pay for the deposit for the house. Then, the next question is reduce my loan with OA (or cash) or transfer OA to SA (thus incurring higher debt). I cannot tell you what you should do, but I will tell you what I have done. I transferred to SA more because the home loan interest rate is much lower than SA - one can arbitrage the difference. Usually between 4% minus 2.5% (or more). Not everyone likes to incur debt, but I think some debts are healthier than others. This is one of them.

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    • Kok Koon
      Kok Koon
      18 Answers, 64 Upvotes
      Answered on 07 Nov 2018

      I'm 34 and only maxed out my SA after the housing is settled.

      Speaking from personal experience (got our resale in July last year), we did ours in this sequence:

      • Check housing budget and overall cash buffer combined with le-spouse/fiance

      • Decide on choice of housing (BTO/Resale/EC/Condo - these were the options we were exploring then)

      • Signed the OTP for resale with keys scheduled to be collected in 5 months (mutual agreement)

      • Got the HDB housing grants via CPF

      • THEN got both of us to transfer all the OA to SA.

      • Service the downpayment and bank loan with cash.

      One can argue the "opportunity cost" lost in not transferring OA to SA from as young as 25 but I didn't know what was our final housing choice then. So although I'm a proponent of maxing SA as young as possible, I think common sense must reign. A bird in hand is better than 2 in the bush. If you are getting married soon, please make sure you are not financially stressed and do it in the right sequence.

      Liquidity is very important for a stress-free living. Good sleep is better than any returns.

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    Hariz Arthur Maloy
    Hariz Arthur Maloy, Independent Financial Advisor at Promiseland Independent

    Top Contributor (Jan)

    277 Answers, 468 Upvotes
    04 Nov 2018

    Only if you're willing to pay your mortgage in cash, pay a higher monthly per month, and cm get the loan of 350k from HDB or the bank.

    I would prefer cashflow over a slight bump in returns. So I personally wouldn't.

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