Personal Finance 101
Asked on 06 Dec 2018
Currently HDB housing loan left 20 years. Here are the options to refinance.
1) "Do a sweep" of remaining OA account once in a while to lower the HDB loan amount?
2) Increase the monthly contribution of HDB loan to match my salary but less savings in OA.
3) Just continue to pay the loan for 20 years and save the CPF for retirement.
4) Transfer the OA to SA for higher interest?
Any idea which is the best solution or any other advise?
Every SC are given 2 chance to get BTO. If this is your first BTO think of getting another BTO instead.
I have posted a similar question to many others before. It depends on your current CPF now. But I will try to break it down simply
1) has the total CPF figure (OA + SA + MA) reached $60,000? If not, please keep at least $20,000 in your CPF OA (which earns 3.5%) while continuing to build up your overall CPF. Then the rest of OA (if any) you can move to 2 or 3.
2) Once you hit $60,000, you may wish to keep about 1 year - 2 years worth of Housing loan payment. This is to buffer any job loss etc. The rest of the OA amount, you will have 2 options
A) partial pay off HDB loan. This option applies to you if you earn high income because you may wish to do Retirement Sum Topping Up (CPF-SA top up) to enjoy tax relief. This reduces your loan, while also allowing you to enjoy tax relief.
B) transfer to SA to enjoy the higher 4% interest. This option applies if your tax rate is low (annual income not hitting $80,000). There are other tax relief options like SRS for you to use if your income increased. You benefit by having compounding interest working for you, and slowly building your CPF OA after (since the interest earn will go to OA after FRS has reached).
3) this applies to you if CPF has both basic health care sum (BHS) and Full retirement Sum (FRS).
A) partial payoff everytime OA hits $5,000. This is to reduce loan amount.
B) if you have more risk appetite, to do investment using CPFIS to earn higher returns.
07 Dec 2018