What Am I Paying To Hdb Monthly?

[marshmallow 0]

hi eden,

will it be better to slowly pay the HDB and put the remaining into investment which might get returns more that the loan interest? What do you think?

u already say.. "Might"

Whether to pay slowily or faster. There are no confirm answer.

All up to indivual

Hi muffin,

the mortgage loan is generally a huge amount. We followed the 30 year maximum repayment period so we had first hand experience in dealing with a hefty loan...

If u could, better try to finish off paying ASAP. Unless u r expecting a huge lump sum cash coming from a lucrative investment that allows u to pay off ALL at one go in the near future.

But the longer u drag, the more funds go into paying off the accrued interests.

This scenario here doesn't apply to those seniors from the older generation like my parents & aunts, uncles. They bought their flats at maybe $15k - $100k during those days; can easily clear and still earn tonnes of money when they sell off their flats.

it really depends on your situation. for myself, i've parked my funds elsewhere and opted for max loan for 30 yrs. From my calculation, even if i release all the funds back to CPF OA and do nothing about it, i can still redeem my loan faster and pay less interest as compared to say, if i take 20 yrs loan.

[bepgof 20]

Wisely said.

The 3 variables($,%,yr)in Mortgage loan structure look simple but complex when mortgagee's terms come in.

As rule of thumb from experience, if one has accumulated >10% cash of outstanding loan amount, wise to do a partial payment(no penalty cost)& revise the tenure to cut down interest payment....

agreed. what is important is that the individual must have the knowledge of pros and cons of paying slowly and paying faster.

that way, it is an informed decision and not a "monkey see monkey do" decision.

Cheers!

Edited February 9, 2011 by bepgof

[random_username 0]

Wisely said.

The 3 variables($,%,yr)in Mortgage loan structure look simple but complex when mortgagee's terms come in.

As rule of thumb from experience, if one has accumulated >10% cash of outstanding loan amount, wise to do a partial payment(no penalty cost)& revise the tenure to cut down interest payment....

How did you arrive at 10% baseline?

Does it matter in your calculations if CPF was used for the property purchase or not? And what if the cash is being invested to get net more than the financing interest/charge?

tia!

[gimz63251073 0]

it really depends on your situation. for myself, i've parked my funds elsewhere and opted for max loan for 30 yrs. From my calculation, even if i release all the funds back to CPF OA and do nothing about it, i can still redeem my loan faster and pay less interest as compared to say, if i take 20 yrs loan.

Hi Marshmallow,

do you mean u invest the CPF OA monies at a guaranteed rate of higher than 2.6%? or could you give an example of your situation.

many thanks!

[bepgof 20]

By agar agaration

5% too troublesome to make the trip, time & energy are more precious.

15% take "very long" to save to reach this figure.

10% just nice

CPF also money. Best strategy is monthly instalment all pay by cpf OA. Simple logic that cpf money cannot be withdrawn as "cash", & one does not know whether he can survive till 55yr old (2013 withdrawal rule no more liao for 55yr old).

Put cash into property needs patience liao. Just make sure you have "spare cash" for contigent events lor.

Personally, I don't give cash to "fund managers" to play, I prefer "to play" on my own. But need to give face to wife, as she like to put cash into different "baskets"- letting wife happen is more important than making that little % differences.

How did you arrive at 10% baseline?

Does it matter in your calculations if CPF was used for the property purchase or not? And what if the cash is being invested to get net more than the financing interest/charge?

tia!

Edited February 10, 2011 by bepgof

[random_username 0]

By agar agaration

5% too troublesome to make the trip, time & energy are more precious.

15% take "very long" to save to reach this figure.

10% just nice

CPF also money. Best strategy is monthly instalment all pay by cpf OA. Simple logic that cpf money cannot be withdrawn as "cash", & one does not know whether he can survive till 55yr old (2013 withdrawal rule no more liao for 55yr old).

Put cash into property needs patience liao. Just make sure you have "spare cash" for contigent events lor.

Personally, I don't give cash to "fund managers" to play, I prefer "to play" on my own. But need to give face to wife, as she like to put cash into different "baskets"- letting wife happen is more important than making that little % differences.

oh, hahaha, ok, i was expecting some formula that you'd come up with. though, each time you pay down 10%,the base gets smaller and smaller so the 10% is reached faster ...

say, purely hypothetical, no CPF was used previously for a property purchase, do you reckon it would now be a good idea (or too late) to apply to use it to pay down/off the loan and to use it to service instalments? What other considerations would there be apart from comparative returns/yields?

i'm not closed to the idea of buying products, but none of the returns (projected or otherwise) of those i've seen so far appeal to me (maybe i've not seen enough). we manage our own money too - so far so good.

Edited February 10, 2011 by random_username

[bepgof 20]

Much to do with "personal style". Personally I prefer to clear the loan immediately if CPF OA got enough money, would think "twice" to activate cash for instalment payment. Simply cash can do many other things.

OA=2.5%, SA=4%. Definitely I would use cpf to pay up as much as possible, I would dump all the SA if regulation allows, simply:

1. Remain $ in cpf account, just to earn interest that 2.5%? No. no, just leave some (~ 24 instalments, my standard) for just in case.

2. Say, compare 300K in OA with 2.5% interest and 300K outstanding loan(2.6%) for 1 year. Actually this is "capital budgeting" technique.

2-1. OA earns $7500 of intest. Need to pay $4242 loan interest if use cash. CONCLUSION: use cash to pay

2-2. 2 years. OA (300K+7500) earns $7687, loan interest(2 yr) =8,192 .CONCLUSION: use OA to redeem loan

2-3. 3yr, 4 yr....the longer the year the more loan interest than interest earn in OA!

2-4. One must know that the way of interest calculation is different from OA and loan! For OA is simple, like Fix deposit, the interest just add on to the principal. Loan's interest calculation is not like that, need spreadsheet. That was why I die die obtained one from UOB in 2005.

3. One may be called home by the Lord tmr without advance notice, then what happen to $ in cpf? If can "consume" while one is still alive, do it fast.

4. The $ in cpf is just like $ in fund mangers' hand.(temasek holding). How I wish the $ is in my hand!

oh, hahaha, ok, i was expecting some formula that you'd come up with. though, each time you pay down 10%,the base gets smaller and smaller so the 10% is reached faster ...

say, purely hypothetical, no CPF was used previously for a property purchase, do you reckon it would now be a good idea (or too late) to apply to use it to pay down/off the loan and to use it to service instalments? What other considerations would there be apart from comparative returns/yields?

i'm not closed to the idea of buying products, but none of the returns (projected or otherwise) of those i've seen so far appeal to me (maybe i've not seen enough). we manage our own money too - so far so good.

[random_username 0]

interesting. thanks for the analyses. i had not thought to think of it that way - i merely did a direct comparison of interest on CPF and what roi would probably yield based on past investing track record if investing the cash amount.

i suppose, then, if the interest rate is <2.6% then the comparative interest "saved" would be viable for >1 year.

Much to do with "personal style". Personally I prefer to clear the loan immediately if CPF OA got enough money, would think "twice" to activate cash for instalment payment. Simply cash can do many other things.

OA=2.5%, SA=4%. Definitely I would use cpf to pay up as much as possible, I would dump all the SA if regulation allows, simply:

1. Remain $ in cpf account, just to earn interest that 2.5%? No. no, just leave some (~ 24 instalments, my standard) for just in case.

2. Say, compare 300K in OA with 2.5% interest and 300K outstanding loan(2.6%) for 1 year. Actually this is "capital budgeting" technique.

2-1. OA earns $7500 of intest. Need to pay $4242 loan interest if use cash. CONCLUSION: use cash to pay

2-2. 2 years. OA (300K+7500) earns $7687, loan interest(2 yr) =8,192 .CONCLUSION: use OA to redeem loan

2-3. 3yr, 4 yr....the longer the year the more loan interest than interest earn in OA!

2-4. One must know that the way of interest calculation is different from OA and loan! For OA is simple, like Fix deposit, the interest just add on to the principal. Loan's interest calculation is not like that, need spreadsheet. That was why I die die obtained one from UOB in 2005.

3. One may be called home by the Lord tmr without advance notice, then what happen to $ in cpf? If can "consume" while one is still alive, do it fast.

4. The $ in cpf is just like $ in fund mangers' hand.(temasek holding). How I wish the $ is in my hand!

Edited February 10, 2011 by random_username

[marshmallow 0]

Hi Marshmallow,

do you mean u invest the CPF OA monies at a guaranteed rate of higher than 2.6%? or could you give an example of your situation.

many thanks!

no, i mean just put the fund in CPF OA and take their 2.5% interest. sorry i can't explain clearly... it's something like take a longer loan but accumulate money in OA, once OA got enough funds, redeem the loan.... it may sound strange that you can redeem faster this way, but once you punch all the numbers to calculate in Excel, you can see for yourself

of course it also depends on how much funds you park in your OA~ did a calculation for my fren before, think in her case, not worth the effort

[gimz63251073 0]

no, i mean just put the fund in CPF OA and take their 2.5% interest. sorry i can't explain clearly... it's something like take a longer loan but accumulate money in OA, once OA got enough funds, redeem the loan.... it may sound strange that you can redeem faster this way, but once you punch all the numbers to calculate in Excel, you can see for yourself

of course it also depends on how much funds you park in your OA~ did a calculation for my fren before, think in her case, not worth the effort

hmm i had not thought that this is possible given that loan rate is 0.1% higher than savings rate... (ignoring the 3.5% on whatever amount...)

shall try it when i got enough for repayment....heee... thanks!

[marshmallow 0]

hmm i had not thought that this is possible given that loan rate is 0.1% higher than savings rate... (ignoring the 3.5% on whatever amount...)

shall try it when i got enough for repayment....heee... thanks!

i also never thought so until i sat down and calculated. some of my frens had tried this before.

the fren that i mentioned not worth the effort to try is one that has very little balance in CPF OA. that's why.

[bepgof 20]

no, i mean just put the fund in CPF OA and take their 2.5% interest. sorry i can't explain clearly... it's something like take a longer loan but accumulate money in OA, once OA got enough funds, redeem the loan.... it may sound strange that you can redeem faster this way, but once you punch all the numbers to calculate in Excel, you can see for yourself

of course it also depends on how much funds you park in your OA~ did a calculation for my fren before, think in her case, not worth the effort

Give me some time to work out some tables, will prove you wrong.

Edited February 12, 2011 by bepgof

[opehsom 0]

2. Say, compare 300K in OA with 2.5% interest and 300K outstanding loan(2.6%) for 1 year. Actually this is "capital budgeting" technique.

2-1. OA earns $7500 of intest. Need to pay $4242 loan interest if use cash. CONCLUSION: use cash to pay

2-2. 2 years. OA (300K+7500) earns $7687, loan interest(2 yr) =8,192 .CONCLUSION: use OA to redeem loan

2-3. 3yr, 4 yr....the longer the year the more loan interest than interest earn in OA!

2-4. One must know that the way of interest calculation is different from OA and loan! For OA is simple, like Fix deposit, the interest just add on to the principal. Loan's interest calculation is not like that, need spreadsheet. That was why I die die obtained one from UOB in 2005.

thumbs up

[snowpear 0]

no, i mean just put the fund in CPF OA and take their 2.5% interest. sorry i can't explain clearly... it's something like take a longer loan but accumulate money in OA, once OA got enough funds, redeem the loan.... it may sound strange that you can redeem faster this way, but once you punch all the numbers to calculate in Excel, you can see for yourself

of course it also depends on how much funds you park in your OA~ did a calculation for my fren before, think in her case, not worth the effort

Are you referring to keeping a lumpsum in your OA and pay your monthly instalments purely using your monthly CPF contributions? Ya you are right it can actually be more beneficial in this manner if you have a sufficient figure in your OA that earns interest that can offset the loan interest. This is because mortgage loan is based on reducing interest whereas OA is compounding interest

[marshmallow 0]

Give me some time to work out some tables, will prove you wrong.

i don't mean that this will result in paying less interest, it just results in saving the $ to redeem the house faster. and one very important factor is how much lump sum you have in OA to start with. it has to be significant enough for this to work.

Are you referring to keeping a lumpsum in your OA and pay your monthly instalments purely using your monthly CPF contributions? Ya you are right it can actually be more beneficial in this manner if you have a sufficient figure in your OA that earns interest that can offset the loan interest. This is because mortgage loan is based on reducing interest whereas OA is compounding interest

yes. and the installment needs be less than the monthly CPF contribution so the funds in OA can grow. btw, now first $20k still earning 3.5% pa interest?