With the excess cash flow one is holding, is it advisable to use this cash to pay off HDB loan ASAP or to invest? - Seedly





Resale HDB

Asked by Anonymous

Asked on 26 Nov 2019

With the excess cash flow one is holding, is it advisable to use this cash to pay off HDB loan ASAP or to invest?

What should i prioritise and why?


Answers (3)

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Mark Chan
Mark Chan
Level 5. Genius
Answered on 26 Nov 2019

In general, a housing loan is considered as good debt. You may consider leaving the HDB loan untouched (provided you have means of paying it off in the near future i.e. job stability, certainty of cash flow, etc. and investing in vehicles that can yield better returns.

One such vehicle would be the CPF SA that yields 4% p.a.; not to mention the tax relief (if you are a working adult) that you can enjoy (up to $7,000 a year).

However, an advantage of paying off your housing loan early is that you may be able to take up another housing loan for another property purchase.

It really depends on your investment objective, time frame, and goal :)


Paridhi Jhunjhunwala
Paridhi Jhunjhunwala, Associate at Kristal.AI
Level 7. Grand Master
Answered on 26 Nov 2019


There are few things you should consider before making this choice. Firstly, you should see the interest rate that you are paying on the loan. Then, you can check if the returns on your investment will be higher than the interest cost. If yes, you should delay the repayment of loan and earn some extra return from you investments. If not, there is no point of delaying the repayment and you should pay off the loan before making any investments.

However, the returns on your investments are not fixed, and you may end up earning a lower rate of return than what you expected. On the other hand, the interest cost on the loan will be fixed. So, making use of leverage can be a risky proposition and I would suggest you to take an informed call.

I work at Kristal.AI, and it's my passion to evaluate various upcoming investment opportunities.



First of all, have a clear and detailed calculation on your current mortgage loan, loan tenure, instalment amount, as well as on the interest rate.

With this done, we will be able to determine the exact opportunity cost on whether to pay off your housing loan or to invest.

By the way, do note that the investment return is always non-guaranteed while the housing loan interest rate is always guaranteed. Therefore, have a detailed calculation before making your choice.

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