Should I use cash or CPT to service my housing loan if I'm confident of achieving >2.6% returns? (Assuming I take a HDB loan)? - Seedly
 

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Asked by Kevin Ong

Asked on 02 Mar 2019

Should I use cash or CPT to service my housing loan if I'm confident of achieving >2.6% returns? (Assuming I take a HDB loan)?

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Jim Tay
Jim Tay, Director at Jimtay.com
Level 3. Wonderkid
Answered on 05 Mar 2019

Putting it in the simplest terms, the cost of using your CPF funds is 2.5% per annum. (compounded, and ignoring the additional 1% on the first $20k)

So, if you can make more than 2.5% compounded returns on your cash, then use your CPF for mortgage.

Otherwise, use your cash.

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Zuhdy Farhan
Zuhdy Farhan, Consultant at Jna Real Estate Pte Ltd
Level 3. Wonderkid
Answered on 03 Mar 2019

Understand that using CPF for your home means incurring accrued interest from the sale of your home, which strongly depletes your cash proceeds from the sale of your flat.

Essentially,

Cash Proceeds = Sale Price - Outstanding Loan - CPF used - CPF accrued interest

Which means, the more CPF you use, the more interest accrued, the less cash you have.

This means the profits you earn from your property all go back to your CPF, locked in, until you retire.

If you're confident of your returns, as much as possible, reduce the use of CPF.

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