Should you wipe out your OA to pay for your HDB?


Many younger Singaporeans think that paying for their HDB flats with their CPF Ordinary Account (OA) is very normal.

But to be honest, this is a decision not to be taken lightly.  That’s because CPF is also supposed to help you with your (basic) retirement needs. It’s not just for housing. 

The moment you decide to pay for your house using CPF, you are channelling funds away from your retirement. (Because the money from your OA eventually goes into your Retirement Account (RA) at age 55)

Now, before you get alarmed, I want to reassure you that you’re not necessarily in trouble. 

You see, there are two schools of thought when it comes to using CPF for your housing needs. 

“I pay with cash and not CPF”


The good: 

The logic here is that by paying in cash, your CPF savings can continue to earn interest for you. How much interest? Have a look. 


The first $20,000 in your OA 3.5% p.a^
Everything above that $20,000 in your OA 2.5% p.a
If you transfer OA savings to your Special Account (SA)# (irreversible move, don’t do this without thinking through)  5% p.a^
^Includes extra interest on the first $60,000 of a member’s combined balances (capped at $20,000 for OA). Read more about CPF interest rates here
#Those aged 55 and above can transfer SA or OA savings to RA. Read more here.  


The attractive thing here is very stable interest rates – CPF is generally a safer way to grow your savings compared to say, the stock market, bitcoin or even property. There are no price fluctuations, and you basically accumulate wealth effectively with compound interest. 

Also, in the event that you lose your job, you don’t have to worry about not being able to pay your housing loan as your “untouched” CPF savings can cover your monthly instalments.

The downside: The big downside here is cash flow – duh. It’s not pleasant to see a chunk of money go to your mortgage every month.

Also, you give up potential higher returns of investing in exchange for safety.  

You see, the base interest of OA (2.5% p.a ) and SA (4% p.a) are spectacular returns for a super safe product, but compared to what the stocks or property (might) give you, they’re not so spectacular (sorry CPF, we just gotta say it).

TL;DR: If you don’t use CPF for your home, you’ll earn more interest from CPF, and have more retirement funds in CPF. That said, it won’t necessarily make you wealthier as compared to other investment tools.

It’s a risk/return trade-off thing. 

Who this works for: Unsurprisingly, most of the people I know personally who subscribe to this are big on saving and not so much into investing. They don’t like putting most of their net worth into investments, and prefer the stability that CPF provides. 

“I pay entirely with CPF”CPF_UsingOAPayHDB_003

The good: Most Singaporeans do this, because it gives them more cash flow during a time in their life when they’re not that cash rich (particularly when you are broke in your twenties). For the most part, people are happy with this option – you often hear people say “I didn’t have to come up with a single cent in cash!!” 

The bad: The main problem with “paying with CPF”, though, is that statistically, most Singaporeans don’t prepare for their retirement.  We tend to deplete our retirement funds for the sake for cash flow. Classic instant gratification. 

CPF_UsingOAPayHDB_004OCBC Survey, link here.

But perhaps less obvious is that the fact that with all the cash flow, we could have invested more instead of spending it on god-knows-what. 

So yes, let’s say paying home loan instalments entirely with CPF frees up $1,000 in cash every month.

But you gotta ask yourself where does this $1,000 go? 

Does it go towards saving for your future needs or goals like starting a family and retiring comfortably? Or do you spend it on bubble tea and hypebeast sneakers? 

And if you wipe out all the money in your OA for a home like most Singaporeans do, keep in mind this can be quite a significant amount which will not be going towards your retirement.

My point here is this: You know that unpleasant feeling that happens when you have to take cash out TODAY to prepare for future goals?

If you want a cushy retirement, that has to happen no matter what.

You either save more with CPF, or you use other investment options to take on higher risk (for higher returns) outside of CPF to grow your retirement savings. 

You pick your poison. 

It all boils down to this

Are you paying for your HDB with cash?

Okay, you set aside money in CPF to grow your wealth. 

Are you paying with your CPF?

Then it’s time to set aside some CASH to prepare for retirement (you might still want to leave some savings in your OA, as that can be used for your mortgage payments in times of need, and if left unused, will continue to grow decently with compound interest for your retirement) 

There is really no wrong or right way to do things, and it’s up to personal preference and your risk appetite. 

We can’t decide what’s right for you. We all come from different backgrounds, have different wants, have different goals in life. 

What we do know is that while you are responsible for your money, your financial decisions will affect your loved ones – your aging parents, your hypothetical children – who depend on you in some way. 

The least we can do is to make informed decisions. 

Stay woke, salaryman. 

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17 replies to “Should you wipe out your OA to pay for your HDB?

  1. U forget to mention that cpf is controlled by government but your cash is not. What if one day retirement age is 90? Then u really die poor. U forget that control, is the most important factor to consider.

    1. @Jonathan But let’s not forget that the value of cash can be controlled by the govt too. Money printer go Brrr

    2. It’s true that there’s also a degree of volatility in CPF and Singapore. But versus other forms of investments out there, we can reason that CPF is a pretty safe vehicle nonetheless. Up to you to determine if the specific quirks and terms are suitable for your situation.

    3. That doesn’t make sense in at least two ways. One, you make it sound as though the government has no way of touching your cash. The government has control in so many ways, it really makes no difference unless you migrate. Two, you seem to believe that if you hold onto your cash, you can exert control over your retirement. Again so many things you could do wrong with your cash, so I can only hope you make the right choices. Good luck man.

    1. Hi bro, think cpf would allow use of RA but on OA funds to pay for mortgage payments. RA is strictly for retirement purposes. You may visit the CPF website for such FAQs and details.

    1. Yes, the underlying point here is that paying one’s home loan with CPF is actually a decision to **switch investments**, from CPF (safe but low returns) to property (riskier but potentially higher returns).

      However, low income families simply may not have the spare cash lying around to pay their home loans, and may thus have to pay with CPF. So, in effect, lower income families are being forced to switch from a safer (CPF) investment to a riskier one (housing). And these are families who shouldn’t be taking on added risk.

      @Thewokesalaryman, perhaps a future article could frame this issue for lower income families, with your views on how they can manage their risks here. The answer is probably along the lines of, “try to have some CPF left over if possible — even if this means staying in a smaller flat than you’d like”. But would be great to hear your views.

      1. For lower income families paying with CPF is the only option.
        It’s a balance between liquidity and solvency.

  2. Well we need to also consider that 2.6% interest of hdb is higher than cpf OA and it made sense if u don consider selling your house till u die. So technically u do not need to pay accrued interest back to cpf.

  3. many school of thoughts. But if one can generate more than 2.5% return then better use cash which has less restriction compared to the options offer by CPFB.

  4. Good article on HDB. just my thoughts here, you mentioned about using CPF to pay for HDB and hence affect the retirement funds in future. I agree with you and discussed this too with my friends. We thought that this group of people would also sell off their flat when they r older and downgrade to a studio maybe and free up cash for their retirement funds. Any thoughts on this?

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