Options for the CPF-OA with a new flat on the way.

(Please make sure you have enough cash, CPF savings and housing loan to pay the balance, duty and fees.)





This was taken from a letter B wrote to me recently:

My wife and I recently got married and will be receiving the keys to our new home (BTO) soon. 

We have indicated to take up HDB loan and I know that on the point when we receive our place, both our CPF will be wiped out completely for the house.

We have worked for about 2-3 years and CPF balance is about 30-50k currently.

I have received advice from different people on this. I am actually quite confused with so many choices.

My reply:

Hi B,

Do you know why there are so many suggestions? 

Because people with different circumstances, beliefs and risk appetites will do different things. ;)

So, it is important to know yourself. 

What is comfortable for you? 




Have a discussion with your wife and weigh the costs and benefits of all the suggestions and decide on one which you are most comfortable with.

Of course, I have never faced such a question before but if I had to decide, then, having a roof over our heads is of primary importance for my family. 

Any decision I would then make would have this consideration in mind. 




1. Transferring money from OA to SA would not be an option in such an instance with only $30K to $50K in the OA. 

I would rule this out since funds in the SA cannot be used to pay down housing loans. 

The SA is to help secure finances for our retirement.

2. If I were to place what is allowed in the CPF-OA in investments approved under CPFIS, I would have to make sure that these investments are virtually risk free like the CPF-OA and would generate a return similar to or higher than what the CPF-OA generates. 

In the end, it is really difficult, if at all possible, to tick all the boxes. 





Some risk taking is probably necessary as risk free options are limited to T-bills and Singapore Government Securities (bonds) which have much lower returns compared to the CPF-OA for those maturing within the next 2 years. 

We are looking at a coupon of 0.4% or so per annum now. Acceptable?

3. Let HDB wipe out all the money in my CPF-OA? 

That is certainly a simple option but I would lose that 3.5% interest on the first $20K. 




HDB's home loan only attracts 2.6% in interest cost. 

I would lose 0.9% per annum in interest income on that first $20K. 

Hmmmm... How much is that? 

$180 a year (and of course, it would be compounded over the years). 

Is that significant enough for me to take some short term risk?

Just sharing my thoughts. :)




Related post:
1. A new flat on the way and $200K in spare cash.
2. CPF or Singapore Government Securities.
3. CPF, SRS and HDB housing loans.

Buy a resale flat now or later? It depends.

K is unable to buy a BTO flat because his combined income with his wife is above $10,000. Currently staying with his dad, they are thinking of buying a resale flat with their first child on the way. They want to be close to his dad and have more space of their own. He wonders if he should wait for prices to bottom before buying a resale flat near his dad's.

My reply to his message:

I have to say that I don't know when the HDB resale prices would bottom. I don't think anyone does.

However, if I were to hazard a guess, I am going to say that prices will continue to fall. More BTO flats will be completed. More ECs and condos will be completed. Will happen in the next 2 to 3 years. It is just starting now.

So, the question is really how urgently you need a place of your own. If it is not an urgent need, then, waiting for a while more seems like a good idea.

In the meantime, do some window shopping first. There could be people desperate enough to sell cheap for various reasons.

Finally, when location is more important than price, then, your choices are more limited. This is certainly the case for you since you want a flat close to your dad's. If a choice unit should come along, would you want to buy or continue waiting?

Have anything you might want to share with K? Please feel free to leave comments below. Thanks.

Related posts:
1. 45 years old, get a bigger flat or invest?
2. Buying a property: Affordability and value for money.