Asked on 26 May 2019
Should i transfer my OA to SA to quickly hit the minimum so that whatever overflows from SA and MA will go into OA for my second property? I have hit my MA recently and my OA + SA is around 100k. I plan to top up 7k yearly to hit FRS asap and have hit the 2200 monthly contribution. I can only buy my second property in 5 years time. Currently using cash to pay my mortgage.
If I am intending to use the money to purchase a house, I wouldn't aggressively transfer my funds over to my SA. If you are taking an approach that you would want to build your SA to hit the minimum sum fast, by all means do the transfer.
If you are still thinking to purchase a property, you might want to be careful on the top up. Funds transferred from OA to SA is permanent and irreversible. I won't wnat to be caught in the situation when I want to purchase a property and I have all my money in SA locked up for retirement.
If you have some spare in your OA, by all means do up some transfer to maximize yield. Just have to ensure you got sufficient spare in OA when you want to purchase your property.
1 more comments
28 May 2019
As long as you maintain a safe buffer (your savings can service the mortgage for six to 12 months), this is an approach you can consider. However, don’t do it if you’d be on a shoestring budget without savings.
One common issue of people who do this is that, when things go wrong, they start resorting to credit cards and personal loans; this would defeat the entire purpose.
You can read more abour prepping for your first home on the 99.co blog!
I did top up from OA to SA to max up the FRS earlier. Looking back from my experience, here are some things that I might do slightly differently.
1) Since you have 5 years to go, you do not need to quickly top up to the max FRS so early. Plus for doing so is that you can gain on the 4% interests and typically they will cover the yearly FRS limit increment subsequently. Down side is once you have max up your FRS, you cannot contribute any more top ups in the subsequent years, so you will need to plan how to invest the spare cash.
2) Spreading up your yearly cash top ups, eg up to 7000 SGD yearly limit can allow you for tax rebates. If you max up your FRS fast, you cannot top up further and get this tax rebates
3) Overflows from SA will NOT go into your OA. I miscalculated as well earlier. Overflows from MA will first go to SA, then to OA once FRS is reached. You will still contribute to SA even after your FRS is hit. So only your OA will have MA overflows to it.
4) I would use cash to pay for my mortgage like you did now as well. If you have cash, then why don't you use it to fully repay your existing mortgage unless you can get better returns from it vs the current interest rates or OA rate.