HDB Loan - Early redemption

[Jrage]

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!

 

Correction, you will pay the 2.6% on the loan amt to HDB that are not paid up. And 2.5% on the amt that you take out from CPF. So estimate interest is <=2.6% .. and not 5.1%.

 

X : amt taken from CPF

Y : Loan amount

 

 

Incurred because you take money out of CPF : ( X) x 2.5%

Incurred because of the outstanding loan ( Y - X ) x 2.6%

 

Annual interest if you pay using CPF only : ( X) x 2.5% + ( Y - X ) x 2.6%

i.e <= Y x 2.6%

 

So when you sell your flat , you roughly need to pay back CPF = Y x 2.6% x no. of yrs you stay there. :)

Edited August 28, 2009 by Jrage

[Damonfong]

Thank you very much.

 

I had redeem the HDB loan already.

 

For me, it's not how much gain / loss.

More of working towards a debt free life.

 

No loan = No worry.

 

Best of luck.

Thanks again.

 

[Jamstart]

You are right, dude. End of the day, why pay interest if you can afford to settle all? Dun let the MIW earn lah.

[Kungfu]

me and wife gg to deduct lump sum 26k from OA towards hse,can do it via HDB homepage? or must go to branch office

[Yaloryalor]

I did that, manage to dump the balance in CPF to hdb. if there is any balance loan, they will askif you wish either

 

1) maintain the loan period with lower monthly repayment.

2) maintain the monthly repayment amount and shorten the loan period.

 

I did that too with option 2!

[Aimnfire]

bought 4 room in punggol back in 2003 under walk in selection (that time was a major WIS as HDB open up unsold flats for the whole of Singapore. manage to get queue no 24)

 

actual price was 146 800 btw.

[relacker]

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

 

 

the 0.1% diff is relevant only if u have the principle sum of say 300k to start with in ur cpf , then u decide if u pay back or use it to invest. but how many ppl have 300k to start off with , esp young couples(ok there are many rich guys here).

 

e.g. so if take 300k loan for 350k flat for 30 years at 2.6%, the interest owed is quite a lot. my advise is pay back in lump sum to reduce the principle when u can, but provide allowance for monthly deduction for uncertain time like job loss period of say 9-12months as u never know what's gona happen in this volatile period

[Octopus]

Hi all, don't want to start a new thread as my question is similiar as TS...

 

On partial capital replayment for HDB loan, there are basically 2 option.

A) Retain the existing loan expiry date and pay a lower monthly loan instalment

B) Continue to pay the same amount monthly instalment but shorten the balance repayment period.

 

Which option is better?

Personally I feel I would choose option A), cos by reducing the monthly instalment I can accumulate more money in CPF OA account for future use. But Option B) meaning my OA account will only increase very slowly.... Please advice, thanks.

[Nerdyfrog]

Hi all, don't want to start a new thread as my question is similiar as TS...

 

On partial capital replayment for HDB loan, there are basically 2 option.

A) Retain the existing loan expiry date and pay a lower monthly loan instalment

B) Continue to pay the same amount monthly instalment but shorten the balance repayment period.

 

Which option is better?

Personally I feel I would choose option A), cos by reducing the monthly instalment I can accumulate more money in CPF OA account for future use. But Option B) meaning my OA account will only increase very slowly.... Please advice, thanks.

 

Redemption by cash or CPF?

 

If it is not full redemption or very substantial(more than 50k), i feel it will help you more to just keep the money for rainy days..

 

Ironically, you are depleting the amount that you want to accumulate for other purposes.

[Octopus]

By CPF.

 

I'm curious which of the two option is better. Both type of redemption do contribute towards reducing the amount of interest payable, but any difference between the two?

[Letsmoveon]

once you shorten the loan period, i think you will not be able to extend it back to the original... think thats the main diff

[Jrage]

actually its more than that. HDB loan is also provide a cheap form of term insurance. In the event, if 1 parties is not ard, his portion of loan will be fully paid. Thus, you have hdb outstanding + cpf upon death.. Which is better.

Either way, you are paying interest, either to CPF or HDB so why not take advantage of the cheap term insurance.

[Neoscan]

Hi all, don't want to start a new thread as my question is similiar as TS...

 

On partial capital replayment for HDB loan, there are basically 2 option.

A) Retain the existing loan expiry date and pay a lower monthly loan instalment

B) Continue to pay the same amount monthly instalment but shorten the balance repayment period.

 

Which option is better?

Personally I feel I would choose option A), cos by reducing the monthly instalment I can accumulate more money in CPF OA account for future use. But Option B) meaning my OA account will only increase very slowly.... Please advice, thanks.

 

There is limit to how much you can accumlate money in your OA....

 

Even if you earn $29k a month, the amount of contribution is same as earning $5k a month.... so accumlation of $$ in OA is capped at only $5k...

 

Take note that even after full redemption of your HDB loan, you will still need to accumalate $65k(OA + SA) before you can use CPF to pay for your 2nd,3rd property...

 

I would advise you to go for option B) , so you are closer to clearing your first housing loan...

[Titanhook]

once you shorten the loan period, i think you will not be able to extend it back to the original... think thats the main diff

 

u r right. Unless u appeal, through your MP of course.

[Dafansu]

u r right. Unless u appeal, through your MP of course.

Write in to MP sure approved. Nevertheless if really need to resort to this meaning the couple should be in financial difficulty. HDB should be able to help

[Bullterrier]

May I share my case in case there are bros here also in similar situation?

 

We have an outstanding HDB loan of $194K after some years of payment all from CPF.

 

We wanted to buy a 2nd property and under the new guidelines, we can only take up to 60% on the 2nd property if we are servicing any existing loan. Otherwise we can loan up to 80% for the second property if the bank is agreeable.

 

I went to HDB area office one morning. Found out I was servicing a loan with 4.1% interest all this while - I took the loan some eight years back or so. And CPF is paying me 2.5% so I am losing 1.6%. Well I have $192K in my CPF OA and the wife has another $400K+ in hers. I figured I will pay off the HDB loan completely with my OA then. The HDB officer checked our ICs and all that and then told me that there the value of my flat is only $90K. I cant remember the exact term for this value she used - its not the market valuation cos my flat is a 13 years old 5i in Pasir Ris. So she said I can only redeemed up to $90K even though my CPF OA has more. After redemption, the balance 100K must be serviced in cash cos there is no more loan.

 

WTF, I cant believe the crap she was telling me. Is she saying that HDB is placing the REAL value of my flat at only $9OK when people are selling it above $450K at the moment? And then why cant I use my CPF to pay off my loan for my flat? She couldnt give me a straight answer except to say this is a CPF and not HDB regulation. I told her to please call CPF and have them explain to me what is going on. She rang up CPF and gave the officer our particulars and loan details. I was thinking I will need to speak to this officer but it turns out that she allowed us to take $190K from my OA and $4K from my wife's to settle our loan in full.

So that was it settled. The HDB officer then feebly tried to justify that maybe CPF wants to ensure that I have the minimum sum required after paying off the loan blah blah blah.

 

So I would suggest that you look at your loan numbers carefully. Dont be like me too lazy to check and assume all is in order and ended up paying HDB more than I should when I do have the funds to settle the loan in full. 2ndly even if the HDB were to tell you anything that you feel is not regular, do ask for verification and do not hesitate to speak to other departments like CPF, lawyers and so on if need to.

 

In the end we got our HDB title deed back. We got our 80% loan for the second property so everything ended well. Hope everyone here will have a smooth uneventful encounter with HDB and CPF.

[Ronleo]

Would like to point out to those with a lump sum of $$$ sitting

Inside OA n thinking of clearing off your loan.

 

How hdb loan derives at 2.6% is cos of the OA interest tat

We are getting is 2.5%.

 

Hdb loan interest rate of 2.6% is not GUARANTEED!

BUT it's always pegged at 0.1% higher than OA rates.

 

So u guys might wanna do some forms of investment using

Yr OA $$ instead of worrying abt the extra interest tat

U will incur.

 

Juz my 2c worth of contribution!

[Deckbuild]

Hi all,

 

Would like to check, if I loan an amount of $100,000 for 10 years and let say I wan to make a lump sum payment to reduce 1 year, the amount I need to repay is $10,000?