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CPF : As Home Mortgage or Retirement Plan

Mortgage repayment can be a burden to us, but using your CPF to pay your mortgage may seem an easy way out. Many Singaporeans still choose to touch their CPF account to pay the monthly home loan repayment instead of saving it as a retirement plan.

While it is assuring that we won’t be bothered much with the monthly repayment for our home loan, it is bad to rely on CPF to pay your home loan. CPF should be used as your retirement plan. 

Let’s say if you decide to pay the monthly mortgage using cash instead of using your CPF, you would have paid $240,000 over the 20 year period. However, during that same period, the money in your CPFOA would have accumulated $310,975, giving you an extra $70,975. But if you decided that you will be using CPF account to pay your mortgage loan, you can say goodbye to your extra earnings in the future.

Having a place to call home is an important part of life. Being able to retire when you are old is equally important. A gentle reminder, this is just our suggestion, but it is not the ultimate solution for all. There will always be pro’s and con’s on this, but at the end of the day, it’s up to you how you would like to pay your home loan.

Rather, what we should be doing instead is to allow our monthly mortgage obligations to be competing against another more frivolous spending in life, such as our holiday trips or the need to purchase a car. If servicing our monthly mortgage using cash appears too difficult, it would be these discretionary spending that needs to be sacrificed, and not the money in your CPF which is meant for your retirement.


Dollar and Sense

By: Timothy, January 2016


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