February 1, 2023
Should You Use Your CPF Savings to Pay Off Your Housing Loan? The Surprising Benefits of Going Against Tradition!
When it comes to paying off a housing loan in Singapore, many people have traditionally chosen to use cash rather than their CPF savings.
But in today's high interest rate environment, it may be worth considering using your CPF savings to pay off your home loan.
There are a few different ways to pay the instalments on your home loan, including using cash, using your CPF Ordinary Account (OA) savings, or a combination of the two.
By using your CPF OA savings, you'll be forgoing the risk-free OA interest rate of 2.5% p.a., as well as any additional interest earned by those under 55 or over 55.
On the other hand, if you pay in cash, you may be forgoing returns you might have received if you invested that money.
Under the CPF Board's Housing Scheme, you can use your CPF funds to pay for HDB flats or private residential housing, as well as for various transactions including repayment of housing loans and payment of stamp duty, legal fees, and upgrading costs.
However, you can't use your CPF savings for certain expenses such as option fees, booking fees, deposit to HDB/HDB sellers, HDB resale levy, and non-housing loans.
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When taking an HDB loan to finance an HDB flat, a 20% downpayment is required and can be paid with monies from the CPF OA account.
Withdrawal limits apply to the use of CPF funds based on the youngest owner's coverage under the HDB lease until the age of 95.
Additionally, CPF funds can be used to repay bank loans for both HDB and private property.
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In conclusion, the decision of using cash or CPF savings to pay off housing loan is highly dependent on individual financial situation and goals, it is always recommended to consult with a financial advisor before making a decision.
Also, it is important to consider your retirement funds and future plans before using CPF savings to pay housing loans.
Conclusion:
It is important to weigh the pros and cons of using cash or CPF savings to pay off a housing loan in Singapore.
While traditionally, many have chosen to use cash, in a high interest rate environment, using CPF savings may make more sense.
There are various options available, such as using cash, CPF Ordinary Account (OA) savings, or a combination of the two.
By using your CPF OA savings, you will be forgoing the risk-free OA interest rate of 2.5% p.a. and any additional interest earned by those under 55 or over 55.
But if you pay in cash, you may be forgoing returns you might have received if you invested that money.
It is crucial to consider your individual financial situation, goals and future plans before making a decision. It is always advisable to consult with a financial advisor before making a decision.
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Source: PropertyGuru
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