In a previous post I mentioned I will revisit the effect of repaying HDB Housing Loan earlier (link here).

I believe thoughts of repaying the HDB Loan must have crossed the minds of some homeowners out there to finish paying off the mortgage earlier with the goal of becoming debt-free. This post will explore the example of doing early repayment for a $300,000 HDB Housing Loan. Let’s call this homeowner with this loan Mr A.

If we recall the formula of compounding:

Paying off a $300,000 HDB Housing Loan (prevailing interest rate of 0.1% above CPF-OA Interest, which is 2.6% as of this post) means you will pay a total of ~$413,500. This means you will be paying ~38% worth of interest over the course of 25 years. Because you are regularly paying off the mortgage periodically, the effect of compounding is reduced and has the effect of compounding for 12.5 years instead …