HDB Loan - Early redemption

[Arjohn]

Fully agree with you. why let others earn the interest, if you can afford to pay back early. Unless you have other lobang which can earn give you higher return. Always calculate the final total amount to be paid, don't just look at the monthly small amount.

[Altivo]

Bro mortgage loans are based on reducing principles unlike car loan, so your calculation might not be correct i think? (pls correct me)

 

You paid up with cash + cpf or only CPF?

 

yup... home loans are on reducing balances... so the interest should not be 78k

[Aimnfire]

CPF only

 

reduction loan i dont think so as they calculate for me its fix at $300+ for the next 30 years

 

and out that $300+ if i'm not mistaken 78% of it is interest therefore u actually pay only 22%

 

check your yearly statement of your house and see how much monthly interest cost

 

u will be surprise

[Aimnfire]

i think its because

last time paperwork tedious

need to dig out files here and there

 

maybe i'm wrong

[Aimnfire]

yup... home loans are on reducing balances... so the interest should not be 78k

 

i just set it as example of 100k loan

 

imagine those buying houses with loan of more than 200k?

 

mah will be smiling all the way

 

as far as i know

if citizens tend to be smart and do all the calculation,

its a matter of time before they impose an early redemption penalty or

maybe must pay cash for certain amount if want to fully paid the house.

 

ok lah about $70k (rough estimate) of interest per $100k loan per 30 years using reducing balances..............

how many families in singapore we got? do your maths.

[Ixat]

CPF only

 

reduction loan i dont think so as they calculate for me its fix at $300+ for the next 30 years

 

and out that $300+ if i'm not mistaken 78% of it is interest therefore u actually pay only 22%

 

check your yearly statement of your house and see how much monthly interest cost

 

u will be surprise

 

Based on this calculator - http://mortgage-x.com/calculators/extra_pa..._calculator.asp

 

Term of the loan: 30 Years | Loan amount: $100,000.00 | Interest rate: 2.600%

Starting date of the loan: October, 2009

Monthly mortgage payments: $400.34

Calculation Results

Total interest paid over the life of the loan: $44,122.29

 

 

Anyway aims to clear off asap too. Hopefully if all things goes my way.

Edited August 25, 2009 by Ixat

[Altivo]

can put in this way?

 

The OA account earns 2.5% interest. HDB loan is 2.6%. Assuming all other things constant, the interest is 0.1%. The reason why people tend not to do early redemption is because they can use the OA for CPFIS (which i think is a flop) to make more than the 0.1% required. That's not a difficult return to look at and if successful, the interest rate of 2.6% is actually negligible

[Mingsect]

happened to have a copy of the annual statement with me.

 

seems like the cpf contribution is used to deduct the interest ..

 

then use for paying the loan ..

 

seems it make sense to pay off whatever you can can afford in order to pay lesser interest..

 

 

let me see if can scan a copy..

[Altivo]

this is how reducing amortization works..... in the early stage of your loan tenor, a huge proportion of your monthly installments goes to paying off the interest rather than the principal. As you approach the end of the tenor, the proportion slowly shifts towards more principal and less interest.

[Ixat]

can put in this way?

 

The OA account earns 2.5% interest. HDB loan is 2.6%. Assuming all other things constant, the interest is 0.1%. The reason why people tend not to do early redemption is because they can use the OA for CPFIS (which i think is a flop) to make more than the 0.1% required. That's not a difficult return to look at and if successful, the interest rate of 2.6% is actually negligible

 

I think if you were to use the CPF for investment instead of paying off the loan, you are trying to beat 2.6% just to break even and not 0.1% right?

 

Unless we are talking about monthly installment of $400 and CPF contribution at say $800 and you use the remaining $400 to earn that 0.1% to cover?

 

A little confuse here.

[Notsogoodman]

can put in this way?

 

The OA account earns 2.5% interest. HDB loan is 2.6%. Assuming all other things constant, the interest is 0.1%. The reason why people tend not to do early redemption is because they can use the OA for CPFIS (which i think is a flop) to make more than the 0.1% required. That's not a difficult return to look at and if successful, the interest rate of 2.6% is actually negligible

 

 

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

[Civic2000]

Speaking from my own experience. I paid off the outstanding balance in one lump-sum (about $120K), saved me lots of interests and also got a substantial amount of refunds from the insurance premium. ( All HDB flat owners taking loans are required to take out a Loan Mortgage Insurance).

[Alechi]

Ehh ... so what's your point?

 

Sorry .. but i really don't know what you are trying to drive at. Tx

[Altivo]

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

 

yes yes... you put it so well. Tks

 

[Vextan]

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

 

so if let's say someone has a outstanding hdb loan, and has more than enough in his ordinary account to pay off the loan with hdb, is it better to do so, or not to (and conitnue paying monthly instalment) ?

 

anyone understand the rationale, pls advise, thanks.

[Icecold]

I am confused by all the people who had done early repayment. Did you pay by cash or CPF? If CPF, any problem of exceeding the housing withdrawal limit or did you had already set aside half of the prevailing Minimum sum in your OA & SA. I checked CPF website, it mentioned about the valuation limit and limit for housing withdrawal.

 

http://mycpf.cpf.gov.sg/CPF/my-cpf/buy-hou...5.htm?popup=yes

Edited August 25, 2009 by Icecold

[Aimnfire]

I am confused by all the people who had done early repayment. Did you pay by cash or CPF? If CPF, any problem of exceeding the housing withdrawal limit or did you had already set aside half of the prevailing Minimum sum in your OA & SA. I checked CPF website, it mentioned about the valuation limit and limit for housing withdrawal.

 

http://mycpf.cpf.gov.sg/CPF/my-cpf/buy-hou...5.htm?popup=yes

 

oh yah forgot to mention

i clear it off before the stupid min 20k rule in cpf comes into effect.

[Kb27]

The best thing to do is to walk into the HDB branch and check your outstanding vs how much you can redeem using cpf.

 

They will tell you what's the actual figure.

 

Last time, I tried that, they advice me not to do it, bcoz there's a cpf withdrawal limit.

 

Which could mean you may end up paying cash somewhere down the line.