Asked by Anonymous

My gf and I are both earning about $3.5k a month ($2.8k after CPF deductions). Should we use cash to finance our BTO loan or should we use CPF?

I am more financially savvy and my returns from investments are ~5% annually, whereas she prefers to keep her money inside DBS multiplier and have returns of ~2% annually.

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    • Teo See Hwa
      Teo See Hwa, MArketing Associate at Propnex
      42 Answers, 50 Upvotes
      Answered on 21 Oct 2018

      When one is young leverage, when old de-leverage.

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    • Kai Xin
      Kai Xin
      10 Answers, 15 Upvotes
      Answered 2w ago

      When you put cash into your BTO, it is still a form of savings as it will continue to appreciate in value,albeit a form of forced savings.

      I believe the BTO would not be the final place of residence and you may look to upgrade in future when your family grows in number. CPF put into financing the flat would incur accured interest that you can't see now at this point of time. You will feel the effects when you find that the cash proceeds from your future sale of flat is less than what you expected because part of it goes into paying the accured interest.

      I would recommend working out your budget carefully. Work out a cash amount that you and your future wife are comfortable with putting into the mortgage for BTO, and use CPF to pay the remaining amount. Since you are financially savvy,continue to set aside that money to invest, at some point of time, use the returns to lower your outstanding loan. Savings in the house and your own investments are separate baskets of investments. This is also considered diversification. Most importantly consider the expenses that you might incur as a young family before arriving at the amount of cash/CPF to use

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    Jeff Yeo
    Jeff Yeo, amateur Social contributor at School of social sharing
    268 Answers, 386 Upvotes
    04 Jan 2019

    cash flow might be tight if you do not use the CPF to fund the payment. I think a mix of both CPF and cash would be a good balance.

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