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.

What is CPF OA?

CPF, which stands for Central Provident Fund, is an investment scheme by the Singapore government designed to help Singaporeans and permanent residents set aside funds for retirement.