Should we utilize all our CPF to buy the first HDB?

[DavidisFinanciallyFree]

Hi Dennis

Can I seek your kind opinion if it's a good idea to utilize all our CPF for the first HDB instead of just keeping the 10% required to meet the minimum down payment for HDB loan and use the rest for investment?

I'm looking at this from both sides of the coin. If we were to use all my CPF (eg 100K) for the down payment, we will pay less to service our monthly instalment. It's about $400 lower. We could invest the $400 cash we saved every month ($4800/yr) into other investments.

So on the contrary, if we do not utilized all our CPF, we will have to pay $400 more every month to service the loan but we get to keep our monies in the CPF and grow by investing it (where we will never get to withdraw out the profits).

Many people would advise not to let HDB clear all our CPF but I rather listen to someone who really knows.

[Dennis Ng]

Hi Dennis

Can I seek your kind opinion if it's a good idea to utilize all our CPF for the first HDB instead of just keeping the 10% required to meet the minimum down payment for HDB loan and use the rest for investment?

I'm looking at this from both sides of the coin. If we were to use all my CPF (eg 100K) for the down payment, we will pay less to service our monthly instalment. It's about $400 lower. We could invest the $400 cash we saved every month ($4800/yr) into other investments.

So on the contrary, if we do not utilized all our CPF, we will have to pay $400 more every month to service the loan but we get to keep our monies in the CPF and grow by investing it (where we will never get to withdraw out the profits).

Many people would advise not to let HDB clear all our CPF but I rather listen to someone who really knows.

what is the cost of the loan? 2.6% per year.

I rather have S$100k on hand, remember in investing, the more money you have, the faster you can multiply to reach S$1 million. Just work out the numbers yourself.

[DavidisFinanciallyFree]

Hi Dennis

Can I seek your kind opinion if it's a good idea to utilize all our CPF for the first HDB instead of just keeping the 10% required to meet the minimum down payment for HDB loan and use the rest for investment?

I'm looking at this from both sides of the coin. If we were to use all my CPF (eg 100K) for the down payment, we will pay less to service our monthly instalment. It's about $400 lower. We could invest the $400 cash we saved every month ($4800/yr) into other investments.

So on the contrary, if we do not utilized all our CPF, we will have to pay $400 more every month to service the loan but we get to keep our monies in the CPF and grow by investing it (where we will never get to withdraw out the profits).

Many people would advise not to let HDB clear all our CPF but I rather listen to someone who really knows.

what is the cost of the loan? 2.6% per year.

I rather have S$100k on hand, remember in investing, the more money you have, the faster you can multiply to reach S$1 million. Just work out the numbers yourself.

Yes I'm calculating based on HDB loan of 2.6%. Thanks Dennis, understood The only drawback is we wont be able to take out the profits from the CPF..

[jazzmama]

Hi DavidisFinanciallyFree

Another reason why you shouldn't use up all your CPF money to pay down your loan is that your CPF acts as a buffer in case you lose your job. This is actually quite a common scenario since hardly anybody works with the same employer for life nowadays. Just imagine the double whammy if that happens, you not only lose your income but you still have to pay your monthly mortgage with cash since you have no CPF savings. Just consider the housing loan interest you pay as unemployment insurance.

Cheers

[woonty]

Hi DavidisFinanciallyFree

Another reason why you shouldn't use up all your CPF money to pay down your loan is that your CPF acts as a buffer in case you lose your job. This is actually quite a common scenario since hardly anybody works with the same employer for life nowadays. Just imagine the double whammy if that happens, you not only lose your income but you still have to pay your monthly mortgage with cash since you have no CPF savings. Just consider the housing loan interest you pay as unemployment insurance.

Cheers

Ya, for me another reason is that to drag for as long as I can earn better return elsewhere.

If fully paid-up it would use up some of my investment capital (opportunity cost).

Unless I need to clear in order to qualify for 70%-80% loan (just for example) instead of 60% due to policy restriction

Another reason is, other than I'll have the cash at my disposal for investment (by not clearing my mortgage) is if "I'm gone" the property will be fully paid-up by the mortgage insurance for my wife, haha

Use insurance to leverage on my life to the MAX (but NOT suitable for everyone) please do NOT learn from me but refer to Dennis instead

[candy_chia]

A friend used his CPF to purchase shares & unit trust prior to buying a HDB flat so that HDB can't deplete his CPF saving.

CPF "safe-keep temporary" in other financial instruments can be used as contingency fund in case he is retrenched and can't afford to pay for the monthly installment.