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To pay down HDB housing loan faster or not?

Thursday, November 24, 2016

Not only do all of us have different financial circumstances, we also have different capacities to stomach stress.

What works for one might not work for another (i.e. what might give someone peace of mind might be quite stressful for another).

So, listen to what others have to say but, ultimately, make our own decision, one that will not rob us of our precious sleep
.




Chat with Reader #1

Reader:
 Hi there Ak. I have a question. I have a new bto flat that im staying in with abt 200k hdb loan spread over 25 years. It takes up abt half of my oa contribution every mth to pay it. Should i use the excess oa funds to channel it to sa or focus on paying off the house asap?
LikeReply1 hr



Assi AK
I would max out my SA first. Money should go to where it is treated best. Doing so, I would maintain a buffer in my OA sufficient for 24 months of loan repayment in case something goes wrong.
LikeReply233 mins

Chat with Reader #2


  • 12:31pm

    Reader:
    Hi AK, do you think i should pay off 10k of hdb housing loan whenever my OA accumulates to 20k so that it stays below 20k to enjoy the additional 1% interest? i.e. 3.5% instead of 2.5%


  • Assi AK
    12:51pm

    Assi AK
    Earning more interest is always appealing to me.



  • 1:11pm

    Reader:
    Cos I have a friend who says it's more impt to pay off housing loan as the 0.1% on a big loan is more than 1.5% on the 10k transferred. I.e. It only makes sense if the housing loan is less than 150k, correct?


  • Assi AK
    2:37pm

    Assi AK
    It depends on what you are after.



  • 2:38pm

    Reader:
    Maximized returns lor





  • Assi AK
    2:41pm

    Assi AK
    You have to remember to compare like for like



  • 2:41pm

    Reader
    Meaning?


  • Assi AK
    2:41pm

    Assi AK
    Compare $10K with $10K, $150K with $150K

    It is meaningless to compare 0.1% on a $200K loan and 1.5% on a $10K savings



  • 2:42pm

    Reader:
    Ah. So for 10k, where can it get maximum returns


  • Assi AK
    2:43pm

    Assi AK
    By paying $10K of your loan, what are you saving? By putting $10K in your SA, what are you gaining?

    You will have your answer then



  • 3:00pm

    Reader:
    Ok, I get it. Only that the SA monies cannot be used for other purposes in future.

    Thanks AK! ๐Ÿ‘๐Ÿป


  • Assi AK
    3:01pm

    Assi AK
    Yesh...

    If you are saving for retirement, go for it.



  • 3:02pm

    Reader:
    ๅงœ่ฟ˜ๆ˜ฏ่€็š„่พฃ

Whenever we do something, it is important to be clear what our motivation is. Then, we will know if we are doing the right thing.

Related posts:
1. Pay off home loan and hit MS.
2. Related to housing loan repayment.
3. Fixed rates, SIBOR, FHR18 or HDB loan?

2 comments:

jasper quek said...

Hi AK,
mine will be different approach because I have seen the benefit.
Keep extra $$$ in OA for worst senario - lost job.
The $$$ in OA will help to payoff HDB loan for years while we hunt for job.

Regards
JQ

AK71 said...

Hi JQ,

Oh, yes. Don't ever deplete our CPF-OA if we are using it to service the mortgage. Even if we are using cash to service the mortgage, don't deplete the CPF-OA. Depleting the CPF-OA would be like burning one of our bridges. -.-"

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