HDB Loan - Early redemption

[Booboon]

Of course nobody hopes for the 2nd part unless one kana terminal illness or whatever.

 

My friend's hubby ....34yrs old ... kana stroke ..... scary man ...

 

34 is so young. Must really take care of my health.

[Newbie2006]

If market crash or property crash, and you have yet to make full payment for your 1st house, dont expect HDB or bank to lend ya $$$ to buy 2nd properties.

 

During recession or market crashes, money flow tighten, hence no loans available to debtors.

 

Only available to those who can mortgage their fully paid 1st hse to finance the next hse.

 

I didn't say one should buy a private without considering the cost of the private apartment...I will not buy now myself.... the point here is whether one should pay off their HDB loan asap. If one is risk adversed, and will only want to clear all debts asap, it's perfectly fine. But for those who wants to make your money work harder for you, even if the money is in the CPF, you have the options. Many friends told me the rich gets richer because they have the money to help grow more money....by investing in properties, businesses etc etc...what about you?

 

If one is buying a HDB now, he or she can do the calculations based on 15yrs and 30yrs tenure. One should always take the 30yr loan even though he doesnt want to invest in a 2nd propery or other instruments.... many people's calculation is only = Monthly instalments X 12 X no of years and see that the amount is very BIG. This is not the correct way to calculate!!

 

If Person A takes 15yrs, he could have cleared in 15yrs time assuming he used up all his OA.

If Person A takes 30yrs, in 15yrs' time, he will still have quite a substantial loan amount outstanding BUT he will also have a substantial amount in his OA, because every month he has excess fund into OA and is also earning interest (can be more than the mortgage interest rate).

 

Now talking about market crash or property crash, if this Person A were to lose his job during the 5th, or 10th yr say, which situation will be better for him? The 2nd situation of course because his excess fund will continue to service the mortgage. In the 1st situation, Person A needs to fork out CASH to service his mortgage loan plus unemployment!!....a double whammy??

 

Final note... even without the 3.5% for the 1st 20K in OA, 2.5% is what you earn and you pay 2.6%. For every 10K loan outstanding, and 10K in CPF OA, one will only pay $10 PER YEAR.... isn't it very worth it for the cash flow one get to have?

 

My 5 cents worth....

 

 

 

 

 

 

 

[Notsogoodman]

whats the use when she is going to spent the rest of her life alone and unfilial kids are already aiming for her flat

 

that's a very rude statement

[Notsogoodman]

whats the use when she is going to spent the rest of her life alone and unfilial kids are already aiming for her flat

 

the use is that my poor aunt doesn't have to slog to pay off the flat, and her only child who is still studying still has enough money for her education.

what are you so bitter about?

[Jamesgetz]

OA account earns you 2.5%, so that is +2.5%

HDB loan charges interest of OA+0.15 = 2.6%, which mean it's -2.6%

 

The nett difference between leaving money in your OA vs taking HDB loan at 2.6% is 5.1% of Opportunity Cost

 

I think you are double-counting in the above example: You can leave $ in your CPF OR use the $ to redeem your HDB loan. The $ can't be in both places at the same time.

 

the difference is actually 0.1% as pointed out by some members.

1) u withdraw your CPF so u LOSE out on interest ie. -2.5%

2) but u SAVE on HDB on loan interest ie +2.6%

ignoring other factors for simplicity, the nett savings is only +0.1%

 

actually, most $ savvy and risk-taking individuals will just take 30yr HDB loan to enjoy the low interest and then use the CPF $ to invest elsewere (eg shares, condo) to get higher returns.

 

 

[Icecold]

See here http://mycpf.cpf.gov.sg/Members/HSG-Site/Hsg-ValnLimit2.htm

 

 

Thanks for your link. Read it and found the following:

 

There's a maximum limit to the amount of CPF savings that can be used for housing.

 

The limit applies to those who:

* buy a HDB flat from 1 January 2003, financed with a bank loan.

* refinance their HDB concessionary loan with a bank loan from 1 January 2003.

* take a bank loan to buy a private property from 1 September 2002.

* refinance an existing housing loan taken before 1 September 2002 for a private property from 1 September 2002.

 

So if one bought a re-sale HDB flat before 1 Jan 2003, financed with a HDB concessionary loan, he is not sujected to the CPF withdrawal limit for HDB, right?

 

 

[Jamstart]

That is called the CPF Withdrawal Limit for housing. Doen't matter how much CPF u have, there's a limit u can use for each property.

 

See this link http://mycpf.cpf.gov.sg/Members/HSG-Site/Hsg-ValnLimit2.htm

Thanks bro. So i am not smoked by them and it is true. They wanna just earn interest from you.

[Jamstart]

Thanks for your link. Read it and found the following:

 

There's a maximum limit to the amount of CPF savings that can be used for housing.

 

The limit applies to those who:

* buy a HDB flat from 1 January 2003, financed with a bank loan.

* refinance their HDB concessionary loan with a bank loan from 1 January 2003.

* take a bank loan to buy a private property from 1 September 2002.

* refinance an existing housing loan taken before 1 September 2002 for a private property from 1 September 2002.

 

So if one bought a re-sale HDB flat before 1 Jan 2003, financed with a HDB concessionary loan, he is not sujected to the CPF withdrawal limit for HDB, right?

I bought my flat in 1999, but it seems to apply to me. So I really dunno. Too many rules make me blur blur.

[Patwong]

Thanks bro. So i am not smoked by them and it is true. They wanna just earn interest from you.

Hi, i did a full settlement last year. Paid 15K in cash even thru got enough money in CPF.

[Icecold]

I bought my flat in 1999, but it seems to apply to me. So I really dunno. Too many rules make me blur blur.

 

Agree man. Guess the easiest way to clarify all this is to pay another visit to HDB. Any bros here can help and save me a trip?

[Patwong]

Agree man. Guess the easiest way to clarify all this is to pay another visit to HDB. Any bros here can help and save me a trip?

 

Hi,call your respective HDB branch office and ask for the procedure.

If i remember correctly, i make 2 trips to the branch office.

First trip, to clarify how much is the full settlement, how much allow to use CPF for payment..etc. They will not reveal info on the phone to you.

Second trip, got cheque ready and closed case.

[Kungfu]

My queries

 

What to do with my SA amt,now what type of investment worth????????????

 

I also intend to do lump sum payment every 10k,but this annoying HDB officer always discourage me, said HDB interest so low,but still is interest what?????

[Kungfu]

checked liao

 

CPF OA Int - 2.5

HDB Int - 2.6

 

we still lose. say I can offset lump sum 30k,but din do so.

 

thus is 0.1% x 30k = 3k lost

[Kusje]

checked liao

 

CPF OA Int - 2.5

HDB Int - 2.6

 

we still lose. say I can offset lump sum 30k,but din do so.

 

thus is 0.1% x 30k = 3k lost

 

Maths fail.

 

30 dollars only.

[D3badge]

5 years is my personal opinion only. I am a bit of kaisu when comes to cashflow and debts.

2 years is good, but 5 years makes you sleep better.

 

bro I think if jobless for 5 years, Great Singapore Sales need to go Lavender for shopping liao

[Throttle2]

for me my house cost abt $150 000

 

down payment is $50 000

 

Loan $100 000

 

Period 30 years

 

Monthly about $300+

 

BUT

 

within 5 years I clear my house loan by dumping my investment back to CPF. Together with wifey we manage to clear it as the 5 years they only deduct my cpf $300+ while wifey cpf left untouched.

 

thats mean if 30 years instead of $150 000 my house price is actually $100 000 x 2.6% x 30 yrs will be $178 000 + $50 000 = $228 000...................................$78 000 interest leh why give them that? the 5 years already they makan $13 000 of interest.

 

some of my friends said i goondo/stupid etc etc. should just let it be 30 years. i dont care what. now anything were to happen to me, my family have a roof over their head fully paid for. you can argue that we have home protection scheme (HPS). correct, that is if you die what if you become vegetable? i believe HPS only cover death.

 

for those who wants to drag 30 years go ahead but when 30 years reaching.....they will give you upgrading.....pay some more lah interest.

 

 

well done. you did the right thing

[2bfree]

for me my house cost abt $150 000

 

down payment is $50 000

 

Loan $100 000

 

Period 30 years

 

Monthly about $300+

 

BUT

 

within 5 years I clear my house loan by dumping my investment back to CPF. Together with wifey we manage to clear it as the 5 years they only deduct my cpf $300+ while wifey cpf left untouched.

 

thats mean if 30 years instead of $150 000 my house price is actually $100 000 x 2.6% x 30 yrs will be $178 000 + $50 000 = $228 000...................................$78 000 interest leh why give them that? the 5 years already they makan $13 000 of interest.

 

some of my friends said i goondo/stupid etc etc. should just let it be 30 years. i dont care what. now anything were to happen to me, my family have a roof over their head fully paid for. you can argue that we have home protection scheme (HPS). correct, that is if you die what if you become vegetable? i believe HPS only cover death.

 

for those who wants to drag 30 years go ahead but when 30 years reaching.....they will give you upgrading.....pay some more lah interest.

 

 

May I knw where is tis property at? Cos its rather a good buy, $150,000/- & maybe can u oso info me when u bought it? Dunno stil gt tis pricing or not?

I m interested. Tnx in advance.

[Kiario04]

Hope this help. Edited, forgotten to deduct the payment.

 

If you have $100K and keep in CPF, you earn interest of $30.9K after 25 years.

You will pay $36.1K interest for your loan of $100K.

Which means you will pay $5.2K more.

 

If you do not take loan pay in full, or redeem your loan, $0 gain.

 

Calculation as follows:

Loan Years Loan Int CPF Int

100000 25 2.6% 2.5%

 

Year Interest Principal Total Interest

2001 Total ($2,565.86) ($2,878.17) ($5,444.03) $2,363.90

2002 Total ($2,490.13) ($2,953.90) ($5,444.03) $2,286.90

2003 Total ($2,412.41) ($3,031.63) ($5,444.03) $2,207.97

2004 Total ($2,332.64) ($3,111.39) ($5,444.03) $2,127.07

2005 Total ($2,250.77) ($3,193.26) ($5,444.03) $2,044.14

2006 Total ($2,166.75) ($3,277.28) ($5,444.03) $1,959.14

2007 Total ($2,080.52) ($3,363.51) ($5,444.03) $1,872.02

2008 Total ($1,992.02) ($3,452.02) ($5,444.03) $1,782.72

2009 Total ($1,901.19) ($3,542.85) ($5,444.03) $1,691.19

2010 Total ($1,807.97) ($3,636.06) ($5,444.03) $1,597.37

2011 Total ($1,712.30) ($3,731.74) ($5,444.03) $1,501.20

2012 Total ($1,614.11) ($3,829.93) ($5,444.03) $1,402.63

2013 Total ($1,513.33) ($3,930.70) ($5,444.03) $1,301.60

2014 Total ($1,409.91) ($4,034.13) ($5,444.03) $1,198.03

2015 Total ($1,303.76) ($4,140.27) ($5,444.03) $1,091.88

2016 Total ($1,194.82) ($4,249.21) ($5,444.03) $983.08

2017 Total ($1,083.02) ($4,361.02) ($5,444.03) $871.56

2018 Total ($968.27) ($4,475.76) ($5,444.03) $757.24

2019 Total ($850.50) ($4,593.53) ($5,444.03) $640.07

2020 Total ($729.64) ($4,714.40) ($5,444.03) $519.98

2021 Total ($605.59) ($4,838.44) ($5,444.03) $396.87

2022 Total ($478.28) ($4,965.75) ($5,444.03) $270.70

2023 Total ($347.62) ($5,096.41) ($5,444.03) $141.36

2024 Total ($213.53) ($5,230.51) ($5,444.03) $8.80

2025 Total ($75.90) ($5,368.13) ($5,444.03) $(127.09)

Grand Total ($36,100.85) ($100,000.00) ($136,100.85) $30,890.33

 

Difference ($5,210.52)

 

bro, u made a big mistake.

 

dont forget that in addition of paying the loan using 2.6% interest, you need to pay HDB BACK with 2.5% for the interest LOST due to LOAN!

 

You wont know this till you have fully paid back all your loans and then you'll be surprised when HDB starts to charge you 2.5% interest for LOANS used!

 

so total damage is 2.6+2.5 = 5.1% (just for layman easy calculation)! In reality, the damage is much higher than just 2.6% interest but below the 5.1% easy calculation!

 

Therefore, save ya self, pay fully and hence you only kena charged 2.5% ....

 

You may argue that the 2.5% is actually paying to your OWN account, but in reality, if your OA has ZERO $$$, on event of HDB sale, you need to PAY BACK the 2.5% interest by CASH!!!

 

FYI also, OA can NOT withdraw out till u old men/women, may even ever see daylight with ever changing CPF re-regulation... Hence, better off to pay off everything and let ur OA grow & pay the interest for ya...