HDB Loan or Investment

[pantoo]

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.

Hi chialc,

Thank you for your reply. My SA has not gone over $60K yet ... and yes, I've looked at the POSB Loan and I'm contemplating between these two options. However, the POSB loan is only worthwhile if one is confident of re-paying within 8 years?

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.

Hi ghchua,

Thanks for your recommendation. Yes, I agree that low-beta stocks are not completely risk-free. Nonetheless, I've not bought any bond funds using CPF-IS before... how do I go about to purchase them? Are these bond funds easily liquidated?

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.

Hi Drizzt,

Well, I guess what is overvalued to one might not be so to the other?

[countonme]

Using rental income to cover the HDB loan, it's always positive cash flow for me. I try to repay the HDB loan as little as possible. Now I m building up cash and wait for the private market to soften further.

[pantoo]

I also realized that you could use CPF-IS for fixed deposits? Can't find much info on this online... except that POSB does not offer this since 2007. what about the other banks? anyone?

Sorry, am quite ignorant about CPF-IS until recently....

thanks

[chialc]

Now I m building up cash and wait for the private market to soften further.

Hi countonme,
Actually, many people had been waiting.
Some of them had been waiting for so long that they even missed out the 2007-2008 Crashed, aka they had been holding cash for past 6-7 years.

As what one of our Value buddies says, it's not about you're right. it's about what if you're wrong.

LC

[ghchua]

Hi ghchua,

Thanks for your recommendation. Yes, I agree that low-beta stocks are not completely risk-free. Nonetheless, I've not bought any bond funds using CPF-IS before... how do I go about to purchase them? Are these bond funds easily liquidated?

An example of a short term duration bond fund that can be used for CPF OA investment is NIKKO AM SHENTON SHORTTERM BOND(S$). The investment objective of the fund is as follows:
The fund seeks preservation of capital, liquidity and consistent with these objectives, to outperform the SIBOR by investing in a diversified portfolio of good quality, short-term bonds and money market instruments.

Bond funds are easily liquidated as they have daily pricing. If you open an online account with portals like Fundsupermart, POEMS etc, the sales charge for short term bond fund is normally 0%. There is no redemption charge as well. The charges you have to pay is the CPF agent bank charges for buying/selling. Management fee for the fund had been factored in the unit trust pricing.

[ghchua]

I also realized that you could use CPF-IS for fixed deposits? Can't find much info on this online... except that POSB does not offer this since 2007. what about the other banks? anyone?

Sorry, am quite ignorant about CPF-IS until recently....

thanks

I don't think there is currently any FD that can be used for CPF-IS, since they are expected to yield less than CPF OA interest rate.

[valuebuddies]

Even invest in bonds there is still risk. How much do you really save if you transfer out 30k for investment? Are we talking about 1.7% (3.5 - 1.8) a year which equivalent to S$500? Unless you are very good is money management, otherwise you might not ever transfer the 30k back to your OA because of greed on profit or hesitance to take loss.

[yeokiwi]

Even invest in bonds there is still risk. How much do you really save if you transfer out 30k for investment? Are we talking about 1.7% (3.5 - 1.8) a year which equivalent to S$500? Unless you are very good is money management, otherwise you might not ever transfer the 30k back to your OA because of greed on profit or hesitance to take loss.

There are quite a few reasons of not depleting the OA account totally.
1. The first 20k of OA will get 1% more interest.
2. In the case of job loss of either homeowners, the remaining amount in the OA will continue to pay the mortgage while you are looking for a job.
3. When there is a stock crash, you might want to make use of it.
4. It is not difficult to beat 2.6% HDB loan rate.

[specuvestor]

^^ Nice summary by Yeo on why the effort in doing this is worth it

[pantoo]

An example of a short term duration bond fund that can be used for CPF OA investment is NIKKO AM SHENTON SHORTTERM BOND(S$). The investment objective of the fund is as follows:
The fund seeks preservation of capital, liquidity and consistent with these objectives, to outperform the SIBOR by investing in a diversified portfolio of good quality, short-term bonds and money market instruments.

Bond funds are easily liquidated as they have daily pricing. If you open an online account with portals like Fundsupermart, POEMS etc, the sales charge for short term bond fund is normally 0%. There is no redemption charge as well. The charges you have to pay is the CPF agent bank charges for buying/selling. Management fee for the fund had been factored in the unit trust pricing.

Hi ghchua,

thank you for your reply. I will look out for these funds... and do you know if I am able to purchase these bond funds directly from the agent bank? (e.g. OCBC)