Pay off home with cash or CPF? 10 years or 25?

Here are the pros and cons of using cash or CPF to pay off home

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Transfer part or all in OA to SA to earn a higher interests of 4-5% https://dollarsandsense.sg/pros-cons-transferri...

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Let's do a simple calculation:

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Loan amount: $100,000

Loan term: 25 years

Interests rate: 2.6%

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Monthly payment: $453.67

Total payments: $136,100.65

Total interests: $36,100.65

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If you use the cash to pay and let the cpf grow at 4% by transferring from OA to SA,

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CPF balance:

OA: $0

SA: $100,000

MA: $30,000

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after 25 years

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OA: $90,000

SA: $266,583.63

MA: $54,500

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Total interests earned: $166,583.63

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BUT if you choose to use CPF to pay:

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Accured interests: $62,500

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This is the amount you have to refund back to your own CPF if you sell your flat. (If you did not meet the FRS)

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I hope I did not confuse you. In short, unless you do not intend to sell your flat at all then using cpf to pay your flat will be better. Those spare cash you have can go into investments to generate higher returns. But if you are unable to generate higher than 2.6% interests, then paying off your loan ASAP will be a better option. Because in 10 years' time you will be spending a lot of money on travelling and setting up business and you do not want to have any debts.

Hello fellow entrepreneur!

It is refreshing to see someone else with a different perspective as comapared to the vast majority who seek to climb the coporate ladder and win the rat race. That being said, I would like to ask you, what do you envision CPF to be? I can offer two perspective on it, based on what you have mentioned to be your game plan to pay off your mortage loan: 10 years with CPF, or 25 years as cash.

10 years with CPF

Enjoy the fruits of CPF now: By using CPF to pay off your housing loan while you guys throw all that you have into building your businesses, you do not need to worry about paying off your mortage loan as CPF will take care of it. However, this would come at an expense in the future in which you may face a situation in which your CPF may be insufficent for your future needs.

25 years as cash

Enjoy the fruits of CPF later: CPF can act as a great security net, in the worst case scenerio whereby you guys fail in business, there is still the light at the end of the tunnel for you in the form of CPF monies which has been steadily compounded whuich can be tapped when you are of the retirement age. Also, CPF OA funds can be utilised to pay off your child's tertiary education fees. In this manner, you wil enjoy the fruits of CPF later.

Ultimately, there is no right or wrong answer, but do keep in mind that CPF was envisioned first for retirement, then expanded to be included for housing. Many who have been caught up in the property market frenzy of the 1990s to 2010s have been burnt, leaving them "asset rich but cash poor". As such, it is pleasing to see that you guys are walking on the path less travelledWith regards to the freelancing/ setting up of business, I would advise you to take a good, hard long look at the market you are entering. It would be wise to exploit the weakness/gap you have been observing over a period of time, rather then jumping on the hype bandwagon(Bitcoin! Brown Sugar Bubble Tea!) based on FOMO. I end off with an anecdote:

One day, a man came accross a woodcutter that was trying to cut down a tree with and was swearing and cursing as he laboured in vain.

“What’s the problem?” The man asked.

“My axe’s blunt and won’t cut the tree properly.” The woodcutter responded.

“Why don’t you just sharpen it?”

“Because then I would have to stop cutting.” Said the woodcutter.

“But if you sharpened your axe, you could cut more efficiently and effectively than before.”

“But I don’t have time to stop!” The woodcutter retorted, getting more frustrated.

The man shook his head and kept on walking, leaving the woodcutter to his pointless frustration.