Should I Use Oa Excess Cash To Make Prepayment For Hdb Loan?

[cacabi111 0]

Hi, will appreciate some advice, thanks.

Current situation:

I bought HDB two years ago, and took a 20 year HDB loan.

My CPF Ordinary Account has saved some excess cash over a period of time.

I am considering to use this excess cash to make prepayment on the HDB loan, aiming to cut down on total interest payments and reduce the number of years for loan. (I have already kept some savings as buffer

However, as Ordinary A/C savings gets 2.5% and HDB loan is 2.6%, it seems to me there is no real advantage to make a prepayment on the loan rite?

I save on interest payment at 2.6% to HDB, but also have to forgo the 2.5% interest that CPF pays me.....

Perhaps better not to prepay?

Hope to hear some advice, thank you.

[dreamhouse 0]

your analysis is correct

financial advisors would advise against repaying HDB debt with your CPF $

there is no real benefit except for the 0.1% saving

however, the benefit of keeping the $ in CPF are as follows

1) buffer against loss of income

2) if something happens to you, insurance pay the remaining of the loan

3) can invest your CPF $ (on shares or even endowment funds) for better returns

[kliee11 0]

your analysis is correct

financial advisors would advise against repaying HDB debt with your CPF $

there is no real benefit except for the 0.1% saving

however, the benefit of keeping the $ in CPF are as follows

1) buffer against loss of income

2) if something happens to you, insurance pay the remaining of the loan

3) can invest your CPF $ (on shares or even endowment funds) for better returns

Wouldn't really encourange repaying off HDB loan early though, it's an entitlement given to you by governtment, make full use of it. Advantage is, even if things turn very very bad, it's quite unlikely that HDB will recall the house back, hence, your roof over your head. Another thing is I always encourage fully leverage on the first property, and keep your cash and OA growing. When opportunity comes when market takes a dip, you can buy your second one as investment!

[yoongf 11]

The first 60K in CPF acct earns extra 1%.

This gives even lesser reason to repay down the HDB loan.

http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_13May2011.htm

[bepgof 20]

Bear one important in mind: "Accrued interest".

The first 60K in CPF acct earns extra 1%.

This gives even lesser reason to repay down the HDB loan.

http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_13May2011.htm