HDB Loan or Investment

[chialc88]

ai yo...
typo mistake? emergency fund based on expense or household income?

Love Compassion

[Belg]

Emergency sum should be determined by the expense, rather by income, otherwise it might be overly allocated. It is a cost, and should be kept as low as appropriate and comfortable to each individual.

Ok Noted. Expenses could be a routine sum and not emergency? Since emergency is out of the blue and it can incur up to big sums. I guess different people has varied mindset on this.

Correct me if I am wrong.

Well, I always start a discussion with definition What is the definition of the Emergency Fund, not a generic one, but the one used by most financial planner?

It should not be an emergency fund for medical expenses. In fact, no fund of reasonable amount, is sufficient for medical expenses. Wealthier families like Brunei Royal medical bill costed ten of million dollars. So insurance should be the one to cover it.

It is also should not be an emergency fund for ad hoc big ticket items.

The emergency fund should be for lose of income, due to whatever reasons. It should cover the essential expenses during the budgeted emergency period.

Much appreciated for your comments.

[Temperament]

Emergency sum should be determined by the expense, rather by income, otherwise it might be overly allocated. It is a cost, and should be kept as low as appropriate and comfortable to each individual.

Ok Noted. Expenses could be a routine sum and not emergency? Since emergency is out of the blue and it can incur up to big sums. I guess different people has varied mindset on this.

Correct me if I am wrong.

Well, I always start a discussion with definition What is the definition of the Emergency Fund, not a generic one, but the one used by most financial planner?

It should not be an emergency fund for medical expenses. In fact, no fund of reasonable amount, is sufficient for medical expenses. Wealthier families like Brunei Royal medical bill costed ten of million dollars. So insurance should be the one to cover it.

It is also should not be an emergency fund for ad hoc big ticket items.

The emergency fund should be for lose of income, due to whatever reasons. It should cover the essential expenses during the budgeted emergency period.

Much appreciated for your comments.

Each person has different perception of Ideal "Emergency fund". For my case it should be at least 3 to 5 years of "Reserve" as you know how i look at investments at my de-accumulation phase. It is definitely harder to invest for people like me.

[Layman A]

If you decide to take a HDB loan, HDB will clear everything in the cpf oa account before granting you a loan. Therefore you need to transfer the money out of the oa through investment prior to the "sweep". Bear in mind that your savings will be subjected to market and securities risk when you invest.

If you decide to temporarily park your money in investment and transfer back to CPF, have to keep exposure period minimal and go for low beta securities.

Good advice.
Yes, HDB will wipe out your entire CPF OA account before giving you any loan.

What I did previously was to transfer the maximum amount of my CPF OA out through buying share ( REITs ) , then sell the shares 6 months down the road.
The maximum amt is subject to 1/3 of total CPF OA amount ( check the CPF website before you act ) .

The valuation of REITs was quite cheap during the time frame when I bought them, so I get to collect 2 rounds of dividend plus some capital gain. And I get to retain a comfortable amount of buffer in my CPF OA.

Caveat Emptor.

[pantoo]

thank you TS for this thread as I'm the same situation and would like to hear from you guys.

Currently, I have about $50K in OA, $20K in CPF-IS and I will be collecting the keys to my BTO flat soon, with a loan of about $300K.

In view of the existing overvalued stock market, Im thinking of quickly diverting another $30K for investment before HDB depletes my CPF and putting it back to my OA immediately after. The rationale for this is that I would have at least 3.5%(additional 1% for first 60k) interest on my $30k.

As my $30K will be exposed to the equity market for at most one week, I find this approach relatively safe if i trade low-beta stocks. In return, I get a 3.5% interest on my $30K rather than have HDB take away this $30K.

Is this a good idea?

[chialc]

Is this a good idea?

Hi pantoo,
do a quick check on your cpf, how much SA do you have?

if you have > $60k in CPF-SA, then you'll definitely get the maximum amount of S$600 (aka extra 1% of 60K).

Just curious, did you actually get a HDB loan or a bank loan?
if you get a HDB loan, then my question is had you already looked at POSB HDB Loan?
This might be a more meaningful exercise for you.

[ghchua]

Hi pantoo,

If your aim is just to divert $30K for investment using CPF OA, why take any risk? Just invest your $30K into a short term CPF included bond fund and then liquidate it when you need to transfer back to CPF OA to earn extra interest.

Low-beta stocks though low risk is not completely risk free.

[Drizzt]

thank you TS for this thread as I'm the same situation and would like to hear from you guys.

Currently, I have about $50K in OA, $20K in CPF-IS and I will be collecting the keys to my BTO flat soon, with a loan of about $300K.

In view of the existing overvalued stock market, Im thinking of quickly diverting another $30K for investment before HDB depletes my CPF and putting it back to my OA immediately after. The rationale for this is that I would have at least 3.5%(additional 1% for first 60k) interest on my $30k.

As my $30K will be exposed to the equity market for at most one week, I find this approach relatively safe if i trade low-beta stocks. In return, I get a 3.5% interest on my $30K rather than have HDB take away this $30K.

Is this a good idea?

its interesting that you say the market is overvalued thus it has an impact on your decision, but the index is so far below the highs, 7 years later. i doubt you would call this overvalued.

[ValueMaster]

The STI is only trading at 14 times earnings
Historical average is 15 times earnings

I would say index is neither high nor low

[pianist]

any quick tip on how to transfer cash from a bank saving account to cpfoa?