{"id":5652,"date":"2016-05-09T16:14:22","date_gmt":"2016-05-09T16:14:22","guid":{"rendered":"http:\/\/www.investollo.com\/?p=5652"},"modified":"2016-05-09T16:14:22","modified_gmt":"2016-05-09T16:14:22","slug":"things-must-know-cpf-housing-loan","status":"publish","type":"post","link":"https:\/\/www.areyouready.sg\/things-must-know-cpf-housing-loan\/","title":{"rendered":"Things you MUST know about using CPF for Housing Loan"},"content":{"rendered":"
Repayment of CPF Housing Loan\u2019s Accrued Interest<\/p>\n
How your Housing Loan work?<\/b><\/p>\n What this means is<\/b><\/p>\n CPF Interest<\/b><\/p>\n Money in your CPF account earns an interest every year.<\/p>\n The interest is compounded yearly.<\/p>\n This interest is important because it is additional money to your CPF savings or future retirement.<\/p>\n The prevailing interest rate for CPF Ordinary Account now is 2.5%*<\/p>\n *additional 1% for first $20,000 in Ordinary Account<\/em><\/p>\n CPF Housing Loan<\/b><\/p>\n Only your Ordinary Account (OA) is allowed to be utilised to help pay for your house.<\/p>\n It is called a \u2018Loan\u2019 because you are loaning the amount it from CPF.<\/p>\n The CPF Housing Loan interest is the sum of \u2018prevailing CPF Ordinary Account interest rate (2.5% currently)\u2019 PLUS<\/b><\/span> 0.1%.<\/p>\n The current housing loan interest rate now is 2.6%<\/p>\n Accrued Interest<\/b><\/p>\n It is the difference in interest between you leaving your money in your CPF accounts and you withdrawing out the money for paying your Housing Loan (or other approved purposes).<\/p>\n Returning of Accrued Interest<\/b><\/p>\n Because you withdrew it to pay for eg; your house, you denied your CPF money from earning the CPF interest.<\/p>\n This shortfall needs to be filled up to ensure you have sufficient CPF savings for your future.<\/p>\n Thus when you sell your house, the total amount you withdraw from your CPF PLUS<\/span> the accrued interest will be taken and returned to your CPF account – AUTOMATICALLY.<\/p>\n However, it is still your money inside your CPF account.<\/p>\n Double Interest Payment?<\/b><\/p>\n You may feel like you are paying 2 sets of interest<\/p>\n Another way to look at it is: Housing Loan + Forced Saving Account<\/p>\n You support your Housing Loan via your CPF account.<\/p>\n After you sold your house, CPF transfer part of your profit into your CPF account (saving account).<\/p>\n You can still use your profit to pay for your next housing.<\/p>\n Reducing Accrued Interest<\/b><\/p>\n CPF offers you the option to reduce the amount of accrued interest you accumulate with CPF.<\/p>\n If you have extra money with no place to invest them for returns, you can consider using them to pay down your CPF accrued interest.<\/p>\n This has 2 benefits<\/p>\n Profit less than Accrued Interest?<\/b><\/p>\n If the profits you made from selling your house is less than the accrued interest accumulated, you DO NOT have to top up the difference in cash.<\/p>\n Instead, you will just be left with no profits in your personal pocket.<\/p>\n Scenario 1: Accrued Interest ($40k) > Profits from Selling of House ($30k)<\/p>\n Scenario 2: Accrued Interest ($40k) = Profits from Selling House ($40k)<\/p>\n Scenario 3: Accrued Interest ($40k) < Profits from Selling House ($60k)<\/p>\n\n
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\n<\/sup>#<\/sup>2.5<\/span>% on all Ordinary Account money, extra 1% on first $20,000 in Ordinary Account.<\/span><\/li>\n<\/ul>\n\n
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