Tuesday 22 March 2022

Use Cash Or CPF To Pay For Your Home?


Missing the forest for the trees...

That's how I feel whenever I read articles or blogs debating whether its better to pay for our homes using cash or CPF.

I know...  That's rich coming from me - a no study HDB street urchin - making fun of those who study too much until their thinking become "short, short, teh"...

Or focusing too much on "precision" at 2 decimal places when they should be focusing on multiples of $100K!

Let me explain.

First of all, the discussion is moot if you do not have enough cash to pay for your property purchase, 

Well, CPF it is then!


That was easy!

Now let's pretend you are a high income earner and can easily afford to service your home mortgage entirely with cash, 

Plus you are a fan boy/girl of voluntary contributions to CPF. 

Does it make sense for you to pay your housing loan with CPF and then make voluntary contributions in cash?

Isn't it easier and less of a hassle to use cash for your home purchase?

Now that we have got the 2 low hanging fruits out of the way, let's focus on what's important and forget about sweating the small stuffs...

I did share in the past one of my ex-colleague lamented he paid $100K more for his resale HDB 5 room flat than his neighbour one floor down.


I can never understand all this fascination with CPF "accrued interest" or negative/positive cash sales.

In simple england, it simply means:

1)  If you use CPF to pay for your home, and after selling, if you can't pay back to CPF what you have withdrawn and the accrued interests comfortably, its simply means you were either "unlucky" or you suck at the property game. 

Your property can't even beat the CPF 2,5%...  (Would you "invest" in a stock just to make a 2.5% return annually?) 

2)  If you use cash to service your property purchase, I'll be easy on you. Let's use zero % interest and assume your cash has no opportunity costs.

After selling, minus all the stamp duty, legal fees, agent commissions, and what not; if you're under water, that would mean you suck even harder... Time to visit Waterloo Street Kwan Im Ma for her blessings?  

Money stashed under your mattress would have outperformed your property purchase...

Think about that for a moment.

Now do you see what's important and more priority when it comes to property?


  1. Smol,

    All that's important only if you're targeting the property as investment.

    If it's for home, especially with kids, just focus on suitability, needs, and affordability ... with wants thrown in as bonus.

    At the end of the day, your long term income from your craft (job, career, skills etc) should be many MANY times the total cost of your home (incl. interests) ... since you shouldn't be paying more than 30% household income for own-stay property (ideally 20%). ;)

    As for cash vs CPF, if you're a saver, use cash. If you're a capital allocator, use CPF ... that 2.5% is an insult to you! :)

    1. Spur,


      If the property purchase is for a home, then cash or CPF should matter even less!!!

      Although having said that, I wouldn't want to be the one who bought near the top of a property bubble and have to wait 10 or 20 years just to breakeven...

      All this time knowing cash under the mattress has outperformed my purchase :(


      I like you summary at the end.

      Those who can't "earn more", its understandable they'll see 2.5% as big as a bullock cart...

      I'm just "lucky" in a way that when I first started with stocks, the brokerage commission was 1%.

      So round trip its more than 2%!

      Old fogeys who played contra during those glory days may share my experience - who would want to touch stocks if we can't even beat the 2% brokerage commissions???

      Now brokerage commission is near zero or even "free"!

      Did that make any SIGNIFICANT difference to our return on investment?

      The mantra during my time as a Buyer still applies,

      "A merchandise well bought; is a merchandise well sold!"


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