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Free money from the government is good.

Thursday, May 11, 2017


Reader:
I don't know if this is the correct avenue to ask you a question. I'm hoping that you can give your insights if you're faced with this situation.

I bought a HDB flat and took a bank loan plus used a bit of my OA to pay for it. I have about $240k of bank loan left and now I 'owe' my OA $85k.

Since the market is kinda 'overvalued' now, so nothing to invest in. What would you do if you have some spare cash. Would you pay off the Bank loan or CPF loan?

Actually, I have enough money in my OA to fully pay off the Bank loan, but I decided that 'free money' from the government is good. Besides, the interest of 2.5% in OA is higher than 2% Bank loan.

Or I can use the money to invest if Mr Market gets very depressed.

What would you do?

Best regards,



AK:
I am not allowed to give advice. I am only talking to myself in my blog.

From your email, I get the impression that you have been reading my blog. So, you know about the accrued interest we owe when we use our OA money to pay for our home.

I am not saying anything new when I say that we should avoid using OA money to pay for our home unless we don't have a choice. CPF money is primarily for retirement funding purpose and not to fund consumption.

Since you already decided that 'free money' from the government is good, act on that belief. ;)

I say frequently enough that I treat my CPF savings as the investment grade bond component of my portfolio, generating relatively good returns. That is good enough for me.

We can never have our cake and eat it too.

Related post:
How to stop accrued interest from growing?


1 comments:

Kevin said...

intend to live in your HDB flat throughout your golden years as a senior citizen? Paying it off using OA right now and opt for BRS thereafter is one of the ways to also accumulate free money from the government.

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