Full settlement the HDB loan from the Bank or not?
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Hi, I have DBS home loan of about $200k for 30 yrs, I am paying it off very slowly because I want to keep my CPF. My loan interest is about 1.75 while my CPF interest earned is about 2.5%; due to compounding interest effect, the interest expensed definitely would be lower than interest earned and is not worthwhile to pay off the loan now.
In addition, if you need to buy a new house, currently government set a cap on borrowings, so if u spend all you have, subsequently if u want to buy house, maybe abit troublesome cos u need to time ur buying and selling nicely so that the funds can be contra off.
Lastly, CPF can also be used for education, as such, I also plan to keep it for my children tho I already bought educational insurance for her. -
if you can get bank fixed loan for say 3 yrs - then i think at present it will still make sense not to clear the loan. cpf provides a higher return than the bank loan interest and housing loans are the "easiest" form of loans to get with the "cheapest" cost. i would rather get a fixed rate loan, then take my cpf to do sound investments. even the most conservatives should give you a slightly better return than the bank interest rate.
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pqy:
Sorry pqy, I didn't monitor.thanks hquek and happy to be mum.
Hi hquek, i will paid full the bank loan partially with both cash and CPF. Subsequently, if i sold my current fully settled HDB. The big portion of the sale proceeds wil be credited back to our CPF account right? Then we can use the CPF money again to pay for downpayment and instalment for the new hse right?
If you sell your property, CPF will first claw back the CPF that was used, and the accrued interest (this is your interest income if you had left the money in your cpf). And yes, you definitely should be able to use cpf for the new house.
And if you pay up fully, meaning you start to accumulate cpf again; once you hit a magic figure (based I think on a percentage of the min sum that needs to be maintained - this is NOT the 123K or 126K min sum), you can actually use CPF for your next property purchase. I was happy to find that out becos I don't need to keep so much before I qualify to use cpf.
But note, there will be limits on how much you can pay for your next property out of your cpf - I think it's like 100% or less of the purchase price. You have to see what are the rules prevailing at that time. -
MrsTan:
I'm not very sure about this but do check. Loan interest is 1.75% on paper, but effective interest rate leh?Hi, I have DBS home loan of about $200k for 30 yrs, I am paying it off very slowly because I want to keep my CPF. My loan interest is about 1.75 while my CPF interest earned is about 2.5%; due to compounding interest effect, the interest expensed definitely would be lower than interest earned and is not worthwhile to pay off the loan now.
In addition, if you need to buy a new house, currently government set a cap on borrowings, so if u spend all you have, subsequently if u want to buy house, maybe abit troublesome cos u need to time ur buying and selling nicely so that the funds can be contra off.
Lastly, CPF can also be used for education, as such, I also plan to keep it for my children tho I already bought educational insurance for her.
My ex-hdb loan was from posb. They started at 1+% and then happily raised it to 4% and more over time. Needless to say, I started to pay off as soon as I am able. And the irritating thing about HDB loan is that when you make capital repayment, they will reduce the monthly payments so as to keep the original term of loan...they DON'T maintain the monthly payment and reduce the term. At the last stretch, I was faced with the silly prospect of owing them less than 3K for the next 5 years - nearly fainted when I hear that.
I think private property loans are different, if you make capital repayment, I think they will adjust the term of loan so it's shorter.
If you have an existing loan, I think there is a 60% cap on borrowings. But if you don't have a loan (ie fully paid), the cap on borrowings will be much higher. -
I do re-pricing when the rates up, so paid 500 admin cost.
I think is better to retain longer tenor, cos imagine if u suddenly short of cashflow, u want to lengthen the tenor, is v difficult, subject to approval, but shorten it v easy.
Even though my rates dropped, I tell them I want to retain the monthly payment amt, so that more payment towards the capital. -
Keep in mind that once your loan hits less than 100K, banks will not want to entertain you. It’s true about ensuring one has sufficient cash/cpf in hand.
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Since the Gov announced the latest ppty cooling measures, we decided to redeem our pte pty loan using cash and cpf.
This is done so that if we decide to buy another ppty, we do not need to worry abt servicing 2 loans and also we need to pay only 20% downpayment for the 2nd ppty. We were paying abt 2 % interest for the loan which was < 200K. No bank was interested when we wanted to convert our loan to get a lower interest rate. -
CPF give you 2.5% interest.
You pay fixed 2.6% interest to HDB via CPF (if you are paying via CPF and not bank).
For SGD60k you have in CPF, CPF give 1% extra. SGD20k must be in SA and $40k can be OA (if you have SGD40k) or SA.
Take 3% inflation rate (I know it’s higher).
You have HPS.
Your monthly repayment should be lower than market rental for same type of flat.
So, see no point for full repayment if CPF, unless you are buying second property and you cannot come out with 40% down payment.
Bank is different, interest rate not fixed and bank can take your house if you cannot pay. -
You should consider the point what Hquek has suggested. Along with that I will recommend you to consult a property expert to know more about it. You can visit Property Guru which is Singapore’s leading property portal and will guide you for the HDB loan settlement and other real estate related issues.
http://www.propertyguru.com.sg/mortgage -
musette:
I shared a similar thought.Since the Gov announced the latest ppty cooling measures, we decided to redeem our pte pty loan using cash and cpf.
This is done so that if we decide to buy another ppty, we do not need to worry abt servicing 2 loans and also we need to pay only 20% downpayment for the 2nd ppty. We were paying abt 2 % interest for the loan which was < 200K. No bank was interested when we wanted to convert our loan to get a lower interest rate.
If one has cash lying in the bank a/c earning that negligible interest and no big investment plans, maybe it is fine to repay the hdb loan so that the returned money in CPF a/c can continue earning a slightly higher interest rate than the banks'.
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