By: Derek Lim you have to fork out excess cash or your loan interest is high. The reason is simple, to have an excess buffer in the event of unforeseen circumstances e.g. retrenchment. How much to keep as a buffer varies. As a general rule, the higher your loan amount is and/or the longer your repayment period is, the less buffer you should keep. HDB has a monthly installment calculator that allows you to check how much to pay per month base on your loan amount and repayment period. Consider this scenario: a $150K loan for 20 years and a $140K loan for 20 years using the HDB interest rate of 2.6%. Using HDB's monthly installment calculator, the monthly payment will be $803 and $749 respectively. This is a difference of $54/mth or $12,960 for 20yrs. If we make use of this 10K to continue our investment at say 3.5% (base on CPF interest) compounded, we will have $19225.01 at the end of 20 years. Calculating backwards, your $10K investment will need an annual return of about 1.4% to break even. Surely, 1.4% per annum for 20yrs is not too hard to achieve.