The Mortgage Conundrum

A 110 square metre 5-room flat in (so called ulu) Punggol is a place I call home.

Time really flies and in the blink of an eye, I realised that I have slept in this North-East corner of Singapore for the best part of the past 1,000 days. I still recall the days when I yearned for my own humble abode and yes, 3 years down the road, I am still immensely grateful of this opportunity.

The Mortgage

Even at the expense of going into debt for the best part of 30 years.

The BTO flat costs $340,000 and after wiping out our CPF OA accounts the moment we got our hands on the keys, we signed a contract agreeing to service a mortgage of around $255,000 for 30 years.

3 years on, the needle has hardly moved. The balance stands at $238,000.

We have probably paid around $36,000 but the outstanding debt has only gone down by $17,000. Basically, slightly more than half of our payments had gone into servicing the interest. This is one good example of how compounding, even at 2.5% could work against you.

Fulfilling My Part Of The Bargain

Another thing that I am wonderfully grateful for is my relationship with the Mrs.

We have a rather “equal or balanced” relationship, which from my observations lately, is quite rare.  A little bit of generalisation here, but men tend to either veer on the side of MCPs who dominate decisions or hen-pecked husbands who accept everything their unreasonable wives throw at them.

One thing the Mrs and I agreed on 3 years ago was to split the burden of the mortgage equally. $500/month for each person didn’t appear taxing at all since the monthly contributions to our CPF OA account then easily exceeded that amount.

However, things have slightly changed with my decision to quarter-retire and become self-employed. With no compulsory contributions to my CPF accounts, my balances are slowly being decimated by the mortgage payments.

Although it’s possible for the Mrs to take on the bulk of the burden (since she’s still making compulsory contributions to the OA account), that isn’t exactly very fair.

not fair

I am rather adamant that I should shoulder my fair share of responsibility.  

Use CPF Or Cash?

With no credits and only debits, my entire CPF balances is threatening to dip below $50,000 in the next few months. Which is not good, since my intention is to maintain the balances at $60,000 in the long run to ensure that I don’t lose out on the Extra Interest provided by the government.

To do that, I could periodically perform a voluntary contribution and the money would be allocated to the three different CPF accounts (specific allocation varies with age), similar to an employee. That way, I can continue to service my mortgage using my CPF OA account.

However, increasingly, I am more predisposed to the alternative of servicing my portion of the mortgage using cash.

Topping up using a voluntary contribution means that monies will flow to my Special Account. That pool of money isn’t liquid and wouldn’t provide cash flow to me for at least another 25 years, which isn’t ideal to my aspirations of early semi-retirement.

To maximise my Extra Interest, I could do a one-time Voluntary Contribution, and thereafter, service my mortgage in cash. The OA balances would serve as emergency cash, only to be utilised if I run out of freelance work and is in dire financial straits.

The latter seems to be a more efficient model. Readers who have a different opinion, please drop a comment!

Otherwise, it’s likely I will pop by one of the CPF branches in the next few days to formalise the above arrangement.

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    16 thoughts on “The Mortgage Conundrum

    1. Charles

      If you’re reporting your income to IRAS as a self-employed individual, CPF contributions would be deductible. You would also be required to contribute to your MediSave account if you’re self-employed.

      I would probably continue to make voluntary CPF contributions based on 37% of my income since CPF is a good minimum safety net for retirement and interest rates are competitive.

      1. My 15 HWW Post author

        Hi Charles,

        I agree with you that CPF is a good safety net. The only jibe I have with it is that there is no flexibility with regards to the withdrawal date, which makes it highly illiquid.

        The likelihood is that I will top it up to $60k to enjoy all the Extra Interest and let it compound from there onwards.

    2. Tim

      I would suggest you do a partial repayment of your housing loan, meaning the repayment will be credited into your OA only.

      1. My 15 HWW Post author

        Hi Tim,

        I am a little confused. If I do a partial repayment with cash, why would the repayment be credited back into my OA?

    3. Roy

      Regarding the share of CPF funds used for mortgage payments, it’s really a matter of perspective.

      In fact I will even opine that perhaps that if a couple truly sees themselves as one, it doesn’t matter what are the percentages of payment between them because what’s his is hers, what’s hers is his. The planning is simply just to optimised each other’s strength.

      Between me and my wife, I should almost all the expenses. She shoulders all the savings,

      When I need funds for investment, I directly access her account and transfer over to mine.

      I know it’s rare but working together has bought us further than we could travel by ourselves.

      1. My 15 HWW Post author

        Hi Roy,


        It’s quite rare to meet another couple who sees themselves as one unit instead of two separate financial entities. Kudos to you and your wife!

        I guess there’s a part of me that really doesn’t want to deplete my wife’s CPF savings and it does appear that paying by cash has its benefits. So we can strike a balance by doing it half-half.

    4. Jared - SMOL

      15 HWW,

      You math can’t be faulted.

      Bump up your CPF to $60K with one time lump sum contribution, and then service your HDB mortgage with cash.

      You are probably creating your own definition of “emergency fund” to mean a backup fund to pay your HDB mortgage in case you run out of cash.

      But if you meant emergency fund to meet all emergency situations in life, then its a case of “50 steps laughing at 100 steps” – especially after your comment on CPF Special account 😉

      1. My 15 HWW Post author

        Hi SMOL,

        Of course it’s just a backup fund for my HDB mortgage! I definitely don’t expect the government to “close one eye” and let me withdraw if my situation becomes dire.

        “50 steps laughing at 100 steps?”. Too chim, cannot understand! LOL

    5. Justin

      This post resonates with what I had gone through just recently. I became self-employed about a year back, but the sad thing was, HDB wiped out my CPF before I started paying cash.

      Though I had already submitted my giro application way earlier before my OA became empty. It seems that you have to specifically tell them that you do not want any further deduction from your CPF and only want to pay in cash. Don’t make the mistake that happened with me.

      HDB will continue to deduct from your CPF as long as there’s that bit of money left.

      As a result of what happened, my OA is left with a few bucks, and I’m paying in cash right now.

      1. My 15 HWW Post author

        Hi Justin,

        Yeah, I had initially thought that it’s about informing the banks. I also just found out that one has to contact CPF to stop the payments.

        You can top-up your CPF accounts if you want to bump up the amount in those accounts.

        1. Justin


          Yea, I ever thought of bumping it up, but didn’t really make sense considering that it will be split among the 3 accounts. I’m self employed, so I have to make quite an amount of contribution to MA.

          Just contact HDB, they will stop the amount deducted from the CPF account. Specifically tell them that you want to stop.

    6. KP

      Hey 15HWW,

      Like you and Roy, my mate and I have a common understanding that we should have equal contributions to all expenses including housing, car, kids etc. (So glad to have such an awesome and understanding wife 🙂

      I do however prefer to shoulder the load for our mortgage (via cpf) so that she can use her CPF for the kids educational expenses coming up – something you may wanna think about if there are plans to start a family.

      1. My 15 HWW Post author

        Hi KP,

        Hmm, CPF for the kids’ educational expenses? That’s probably easily more than 20 years away for me?!

        A bit too early to say but I would hope that they can pay for their tertiary expenses on their own, either from their savings or through a scholarship.

    7. calculativefather

      Hey 15HWW,

      Do consider paying with cash if your cashflow permits – the reason being the 2.5% accrued interest on your CPF OA used for downpayment and monthly servicing.

      Based on your downpayment of $90,000, over 30 years at 2.5%, you need to pay back about 98k to your OA for the accrued interest. That’s before the monthly servicing.

      1. My 15 HWW Post author

        Hi calculativefather,

        We would definitely be paying a certain portion of our mortgage in cash.

        The accrued interest is definitely a concern, but we also need to weigh it against our plans of achieving early FI/semi-retirement.

        Stay At Home Dads are rare and keep it up! Would love to hear more about your story.

        1. calculativefather

          Ya man, need to weigh against your FI/semi-retirement plans. Actually the accrued interest thing will not affect if you don’t plan to sell the house.

          Stay home dad not rare lah. You are on the trajectory to become one if you maintain your current status. It is not by choice, it is by profession.