10 years Plan to clear my HDB Loan?

In my earlier post - Should I Transfer Savings from the OA to the SA?, I grappled with the fact of transferring some savings from my CPF OA to my CPF SA before using the rest of the saving to lower my mortgage loan. Being able to finance my hosing loan is a consideration for keeping my savings in the CPF OA.

Here are some information:

1. Purchased a BTO (Singapore's Public Housing) that will be ready in 2017.
2. Purchased the place for ~S$575,000.
3. Paid 5% down-payment + Stamp duty using my CPF OA.
4. Remaining Loan amount: ~S$550,000
5. Will be taking a loan from Housing & Development Board (HDB) at 2.6%. Or should I not? 
6. Both my partner and me are working currently with no kids.
7. My current income is ~S$5,000. My CPF OA has ~S$120,000.
8. My CPF OA contribution monthly is ~S$1,150. 
9. My wife's income is ~S$3,500 and she has ~S$30,000 in her CPF OA.
10. My wife's CPF OA contribution monthly is ~S$805.

I did an enquiry on our eligible loan cap on HDB website. Based on our current income, the estimated maximum loan is S$562,000 with a repayment period of 25 years. Estimated monthly instalment at S$2,550.


Here are the plans:

Plan A:

1. Wipe out all our CPF OA savings (total: ~S$150,000) and take a loan of S$400,000 from HDB.
2. Estimated monthly instalment is S$1,815.
3. Continue to use CPF OA to service our loan instalment (total: S$1,150 + S$805 = S$1,955, more than enough).
4. No additional cash needed to service the loan instalment.
5. Big Assumption: Both will continue to work and earn the same income. Still thinking what we will be doing if we are going to have kids. That is a discussion on its own.

Plan B:

1. Wipe out only S$50,000 from our CPF OA savings and take a loan of S$500,000 from HDB. The remaining S$100,000 will still be in my CPF OA account. In order to do that, I will have to transfer S$100,000 into some investment product before transferring it back to CPF OA. I have to do my research if it is feasible.
2. Estimated monthly instalment is S$2,269
3. Use full cash to service the monthly loan instalment. My wife will contribute S$500 and I will pay the remaining S$1,769.
4. CPF OA continue to grow with monthly contribution of S$1,150.
5. Big Assumption: Both will continue to work and earn the same income.

Fast forward ten years, let's envisage what it will be like on Plan A:



Using DBS Repayment Scheduler Calculator (as shown above):

1. Remaining Principal Amount: S$270,239.69.
2. Interest Paid (so far): S$88,001.05 (painful!).
3. Both our CPF OA account will have S$0 (ZERO). Assumption is that we do not have any pay increment or bonuses.
4. Assumption - Since I am not on Scenario B, I will be able to save the S$1,700 monthly. Without investing in anything, I would have accumulated S$204,000 in ten years. If I have invested in something that gives me a yield of 2.5%, I would have accumulated ~ S$228,550. As for my wife, knowing her, no money will be saved.

Now, let's envisage for it will be like if I had serviced the loan on Plan B:


Using DBS Repayment Scheduler Calculator:

1. Remaining Principal Amount: S$337,799.62.
2. Interest Paid (so far): S$110,001.31 (very painful!).
3. My CPF OA account will have ~S$285,293. My wife's CPF OA account will have ~S$109,847. See below. Assumption is that we do not have any pay increment or bonuses. 
4. I will be super poor. S$1,700 a month :(. That is a big chuck of my salary.
5. We are able to finish paying the mortgage at the end of the 10 year using our CPF OA savings.

While there are some assumptions made, a well executed Plan B will allow me to finish paying my HDB apartment in 10 years. I am currently still in a discussion with my wife. A hybrid model using a portion of Cash and CPF OA savings to finance might be another option. Probably, using my wife's CPF OA contribution + my Cash to finance the loan is a better option.

Maybe, I will not transfer my savings from the CPF OA to the SA.

So, Cash vis-a-vis CPF Savings to pay off my Mortgage. That's the important question.