Settlement of HDB loan

With rising costs and increased learning needs, financing our children's education is no longer a simple walk in the park. Discuss with other parents about how they are managing their finances to cope with their expenses.

Settlement of HDB loan

Postby little patrick » Sun Jun 22, 2014 12:36 pm

Hi

I still have outstanding HDB loan about 80K, my cousin has suggested to use up the $$ in CPF OA account to settle the loan ASAP to avoid the high interest incurred but some other friends advise to keep the $$ in OA and continuous instalment .

I would like to have your advise, will you settle all the outstanding loan if your CPF account got enough $$$ or just paid a lump some (may be 50%) to reduce the loan amount and continuous instalment?

Tks

little patrick
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Re: Settlement of HDB loan

Postby starlight1968sg » Sun Jun 22, 2014 12:47 pm

My personal take: settle the loan if you have sufficient cash or CPF.
Cash would be better because of the ultra low-interest rate but you may face tight budget.
CPF would be better since you wont be touching it but it is earning as much as 2.5%pa.

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Re: Settlement of HDB loan

Postby slmkhoo » Sun Jun 22, 2014 5:00 pm

Consider whether you can use the money to earn more than the interest on your mortgage. If you know how to do that, then it would make sense to keep the mortgage and invest the money instead. This is just theory - my husband manages our finances, not me.

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Re: Settlement of HDB loan

Postby little patrick » Sun Jun 22, 2014 10:49 pm

Thanks all for the advise . dh and I don't do any investment , we also don't have any extra cash, only can use our CPF. HDB loan interest @ 2.6% and CPF earn @ 2.5%. For 1st 20K in OA will earn extra 1% . Thinking just keep 20K in OA and the rest settle the loan .

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Re: Settlement of HDB loan

Postby bb_ mom » Sun Jun 22, 2014 11:24 pm

We kept a year's installment equivalent in OA and used the rest to do lump sum. That way, if we want to stop work for couple of months, no need to worry about installment.

bb_ mom
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Re: Settlement of HDB loan

Postby ngl2010 » Sun Jun 22, 2014 11:47 pm

I didn't know HDB loan interest rate is so high! :yikes:

If you want to buy 2nd property, it is better to keep the money in CPF so you can have a nice sum for downpayment.

ngl2010
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Re: Settlement of HDB loan

Postby bluesclue » Mon Jun 23, 2014 12:05 pm

If you dont mind doing a refinancing, POSB has a promotion of HDB loan with garantee of at least 0.1% lower than HDB Concessionary Loan rate for up to 8 years.

You get to keep 2.5% interest on the full amount of outstanding loan in the mean time.

Please do you own analysis to make sure this the best option for you.

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Re: Settlement of HDB loan

Postby ptb7476 » Mon Jun 23, 2014 2:50 pm

We settled our HDB loan asap ie when we have extra we will clear what ever outstanding loan there is ... the whole idea is
a) dun wan to incur more interest
b) if anyone lost job we dun have to worry about loan
c) if we have extra cash and wanted 2nd property , we wouldnt have problem getting max loan (outstanding loan in 1st property can result in restriction in getting max loan)

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Re: Settlement of HDB loan

Postby hquek » Mon Jun 23, 2014 3:33 pm

ngl2010 wrote:I didn't know HDB loan interest rate is so high! :yikes:

If you want to buy 2nd property, it is better to keep the money in CPF so you can have a nice sum for downpayment.


HDB rates v transparent already. it's always 0.1% higher than OA rates, and it's pretty stable. I took POSB HDB Loan when it was newly marketed about 10 years ago. Looks good that I only pay 1% (then). Guess what, couple years down the road, I kept receiving letters from the bank telling me there is rate increase. My last rate was about more than 4%. And the worse thing is that once loan is less than 100K, no bank will entertain any discussions about re-rating (loan figure too low).

Ended up we paid off as soon as we could.

For 2nd property, just take note that if there is an outstanding loan, the amount of loan one can take from bank on the 2nd property will be much reduced.

Also, unless one has got 50% of the Min Sum (I think it's sum of Special, Ordinary - not sure if medisave included), cannot use CPF on 2nd property. I used to think i had to keep 100% of min sum before I can use (that is incorrect).

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Re: Settlement of HDB loan

Postby ptb7476 » Mon Jun 23, 2014 4:11 pm

one of our MP suggest that we use less CPF so tht we have more for retirement :lol: because we live longer now

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