I came across a post from Turtleinvestor which had piqued my interest: Picking the better loan – which on will you choose? 2.5% or 2.6%
In that article, he showed that the interest gained from $200,000 CPF OA is the same as the interest paid for a $200,000 loan with a fixed interest rate of 2.6%.
CPF OA is a retirement account that guarantees a 2.5% interest per annum. On top of that, the first $20,000 in the account earns an extra 1% interest, which is 3.5% per annum.
Because of that bonus interest, the math works out to be the same:
Interest paid to the loan: $200,000 x 2.6% = $5,200
Interest earned from CPF OA: $20,000 x 3.5% + $180,000 x 2.6% = $5,200
So, instead of paying off your loan as soon as possible, we could maintain the housing loan and let your CPF OA account compound.
