Don’t Let Your HDB Flat Crush Your Dreams of Retirement1

Don’t Let Your HDB Flat Crush Your Dreams of Retirement

Irving Soh
Irving Soh

There’s a common belief among the older generation that you can’t go wrong buying property in land-scarce Singapore.

To be fair, their perspective is not without credit. The Merdeka generation – people born in the 1950s to 1960s – experienced tremendous property wealth growth by simply buying HDB flats.

The same thing can no longer be achieved today. The Singaporean economy has matured and the time for such explosive growth is past.

We will never be able to experience the same massive capital gains buying a HDB flat in current times. Treating your HDB flat as an investment is a horrible idea.

But is it reasonable to buy a HDB flat as a home?

Of course it is.

The trouble isn’t buying a home.

It’s how you buy it.

Pay for it the wrong way and you can end up in a nightmarish scenario where,

  • You’re Short Hundreds of thousands of dollars
  • You have no way to sell your flat and downsize for retirement
  • Your CPF monthly payouts when your retire is ridiculously low

This article is meant to help you dodge the nightmare and get out of it if you are in one.

#1 – Always Take A Bank Loan.

Bank loans are not the most common way of financing your flat.

Banks only offer 75% of your flat’s price, so owners actually have to pay more cash upfront.

This “painful” cash upfront amount convinces most new owners to go for the more attractive HDB loan.

But is it really that attractive?

A HDB loan is currently pegged at 2.6%, or at 0.1% above the CPF Ordinary Account rate.

A bank loan, by contrast typically averages 1.95% – 2.4%.

What most people fail to see is how much money 0.2% can be over a period of 25 years.

Let’s take a deeper look.

HDB Loan vs Bank Loan ($375,000 Loan)

A loan amount of $375,000 from the HDB would cost you $11,253 more over 25 years.

Note that I’m only comparing equal loan amounts. If I were comparing 90% loan valuations, the difference would be way larger.

In fact, for a full 90% loan to valuation over 25 years, the savings from a Bank Loan is approximately $113,407!!

We’re not even done yet. Remember that 10% down-payment you used from your CPF OA?

That’s due and payable the moment you sell your flat too.

So while taking a bank loan is more painful upfront, flat buyers should not let that blind you to the dangers of a higher interest rate.

Not to mention, bank loans can always be restructured to your benefit every couple of years.

You can always restructure your loan to take advantage of low-interest environments or hedge against high-interest rates.

Considering everything, a bank loan can represent a lot more than just $113,407 in savings.

That’s a significant sum of money over the years which can go towards investing in a portfolio to provide passive income, or towards gaining additional interest rates in your CPF account.

Key Takeaway: Don’t be shortsighted with your money. Look ahead. Look very far ahead. Look years and decades ahead. Shortsightedness with money tends to leave people poor. 

  • Bank loans are cheaper over time vs HDB loans.
  • Bank loans allow greater flexibility and provide more savings, allowing owners to hedge in times of risk and take advantage of low-interest rate environments in times of growth.

#2 – Don’t Pay Your Mortgage With Your CPF Ordinary Account

The second biggest mistake most HDB flat owners commit is utilizing their CPF OA account to pay for the monthly mortgage of their HDB flat.

That means they are sacrificing the 2.5% – 3.5% interest that they could have gained had they simply left the money inside.

On a fundamental level, they are sacrificing money that grows for a flat that doesn’t grow in value.

Let that sink in for a minute.

Just let that sink in really deep.

It’s a really bad, really yucky, disgusting feeling once you realise what it means to pay for your flat this way.

Paying for your flat this way is like saying you’re happy to lose money year on year.

Feeling disgusted yet?

Now take that disgusted sensation deep in your stomach and snowball it for 25 years.

$476, 212.80. That’s how much you would have had if you left your money in your CPF OA over 25 years if you’d been paying a $1000 per month mortgage.

It gets worse.

$476,212.80 is what you would have had if you left that $1000 per month in your OA.

That’s opportunity cost.

What about what you actually owe your CPF account?

You’ve been drawing money from it after all.

It has to be paid back at some point if you ever sell your flat.

If you’d been withdrawing $1000 a month, for 25 years, at an interest rate of 2.5% imposed by HDB, you would have to pay back $415,422.86 to your CPF OA upon the sale of your flat.

For most people, that’s the selling price of their flat. Or at least 80% of it.  

What then?

What are you going to buy your retirement home with?

Thin air?

Are you going to buy a new home with another loan at 55 or 60?

Will the banks even loan you that money?

They won’t. Not unless you’re especially rich. And your CPF money doesn’t count here.

So what about not selling your flat?


You don’t have to pay your CPF account back. But your CPF retirement account is still short a ton of cash.

And that means a lot less money for you to withdraw when you officially retire, and its a lot less of a monthly payout.

In other words, if you paid for your HDB flat with your CPF-OA monies, you lose, no matter what.

You lose out on the opportunity cost. You can’t sell your flat because you won’t be able to buy a new one. And if you don’t sell your flat, your ordinary account is depleted anyway!

Key Takeaway: Don’t sacrifice invested cash for uninvested cash.

  • People with no means of growing your wealth should use cash.
  • Investors should use the pool of money that has the least growth or that doesn’t grow. That’s almost always cash. You only pay with your CPF OA monies if it has the least growth potential.  

Getting Back To Retiring Well

So you’re saying you took a HDB loan and you are paid for your flat’s mortgage with your CPF OA monies?

All is not lost.

Let’s take a look at how to retire well regardless

1) Paying off your HDB Loan

Let’s start with the obvious. If you took a HDB loan, try to pay it off as soon as possible.

The sooner you pay off the loan, the less interest you pay.

This will mean performing some amount of earlier repayments so that you save on the total cost of the loan.

This can be as simple as paying off a $100 extra a month on your monthly mortgage.

The next most obvious thing to do is to stop paying your monthly mortgage payments with your CPF Ordinary Account money.

Use cash.

Remember that if you can’t grow your cash at 10-15% a year or more, you shouldn’t be using your CPF OA account.

2) Rent Your House Out. Don’t sell it.

The current average rent for a 4 room hdb apartment varies between $2,000 to $4000 depending on area.

Collecting rent every month while you stay with your children can not only mean being able to “unlock value” from your flat. It can mean being an immense amount of freedom especially when you factor in your CPF monthly payments.

If you can’t stay with your children, a single bedroom for rent still fetches between $500 – $1000 a month depending on location. That still represents a significant chunk of cash that can help to sustain you.

Don’t overlook it.

3) Start Investing

Notice in #2’s takeaway that I mentioned investors should use the pool of cash that has the least growth potential.

That’s because investors naturally have an edge over the rest of the population.

They have more resources to spare.

And if their CPF OA account monies truly represents the money with the least growth potential, then it makes sense for them to use it for their HDB mortgage anyway.

Why not?

They can’t use it otherwise anyway.

Notice that in this case, a disadvantage for the average person becomes an advantage for the investor.

The investor now gets to use money that otherwise would be stuck.

The non-investor will have to suck it up and pay cash because he/she doesn’t have a choice!

His CPF is his “investment”!

Do you see?

Having the ability to invest and gain better returns on your money offers obscene advantage in our world.

But you’re the only one who can do it. You’re the only person in the world who can invest for you.

Not your insurance agent or financial planner. Not your government.

Not even your family or your loved ones.


  • You are not the government’s priority. Government policies will always be broad-based applications meant to soothe the wound, not treat it. Even if you are among the few, government aid will not account for a significant improvement.
  • You are not your Financial planners’ priority. Their sales targets are. That is a direct conflict of interest. You’re interested in building your wealth. The planner is interested in building their own. Not yours.
  • Your loved ones are not you. They don’t always know what you like or want. So they can’t plan for your needs and desires. In other words, they can’t invest for you the same way you can for yourself. This is not even accounting for the fact that they have to worry about their own money too.

You must depend on yourself because no one else can prioritise you better.

That’s the harsh, ugly truth.

If you want to be able to retire peacefully with zero worries, you have to find a way to grow your wealth beyond your job, your savings, and your CPF account.

There a dozen methods to make money from investing.

Go google it. Learn some.


I have a preference for academically reviewed, quantitatively supported, results-driven strategies.

In other words, its boring, it requires discipline, it requires the ability to delay gratification, and it requires a commitment to learning.

Long story short – it’s definitely not for everyone.

But, if you are interested, you can find out more here.

Closing Thoughts

On a more personal note, I would like your help in telling more people about this.


80% of Singaporean citizens and permanent residents live in HDB flats.

490,440 HDB flat owners were servicing mortgages as at end-2018.

320,526 flat owners took their loan from the Housing Board.

224,836 households paid their monthly instalment fully using CPF monies


I’d like to point out that if 224,836 households each had 2 people at a minimum, that’s still 449, 672 people who will have their retirements affected.

If I assume that’s its a family of three, assuming parents and one child, that’s 674,508 people who will be affected.

Just let that sink in for a minute, alright?

We’re talking close to half a million Singaporeans minimum.

You may not form part of these group of people.

But they could be anybody. They could be your friends, your family, or even your loved ones.

Tell them.

Share this with them.

Explain what I’ve covered today with them.

If they don’t read websites or blogs, sit them down and explain it to them.

No one deserves to have to sit down with their parents and tell them they can’t retire yet, or that they won’t have enough money month to month to even survive if they quit working and rely on their CPF monthly payout.

No one deserves to be blindsided by their own home. The home which they had been paying for nearly half their lives.

If you think this article can help just one person – share it.

Help us spread the word so we can ensure more people never step forward into their lives making a gigantic costly mistake again.  

If you have any thoughts or comments, no matter what they are, I’ll be happy to read them and discuss them with you. Simply leave your comments below.

Stay prosperous.

Irving Soh
Irving Soh
Behavioural Psychology fanatic. I like good food, movies, intelligent conversations and logical reasoning. I also dabble with options, factor-based investing, and data analytics.
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23 thoughts on “Don’t Let Your HDB Flat Crush Your Dreams of Retirement”

  1. Nice article on the importance of thinking about mortgage rates and paying off the house. I agree that anyone should always take the lower fixed mortgage interest rates whenever they can get it.

    However, I would like to raise a few points. While fixed interest rates are good, adjustable mortgage interest rates always represent a significant risk during boom times. Another way that we can understand CPF is that it is essentially a loan that you owe to yourself. If we adjust for inflation, the interest becomes zero (of course this is assuming that one is able to invest at a rate of real returns>0). If we look at it from that perspective, for the highly disciplined person who invests, freeing up this monthly cash cash flow can represent a humongous opportunity to build future passive cash flows. While value investing is awesome, even relatively simpler to understand instruments such as a diversified low cost STI index fund can yield some ~5% real return per annum over a 30 year timeframe. Such are the considerations one has to make. It’s not simply a matter of either or, but of crafting a risk-adjusted plan of financial defence and attack.

    • Agreed. The investor with the ability to invest will gain percentage points here. Which is why I’ve advised investors in the article to always sacrifice the cash with the lowest growth potential. thank you for the thoughts!

  2. I think the calculation may be a little off here.

    Servicing HDB loan through our CPF-OA account that provides 2.5% of interest makes sense to me because the HDB loan interest is 2.6% per annum. Therefore, if I do not hasten in settling my debt, the more I will lose (0.1%) from the difference between interest gained in deposit vs interest paid in loan.

    I am a firm believer in investing and making our money do some work to help us, but how do we get our CPF-OA to gain 10-12% of returns in interest without the accompanying risks that comes with it?

    In the face of retirement, I do think that downsizing may be a good option to allow for more cash, and there is also the CPF special account which can be drawn for retirement when we get there. Ideally, we can maintain a simple half day job to keep our mind active and draw on the special account during retirement years.

    For selling of the house and payment of HDB loan using cash, wouldn’t it make more sense to use the cash for other investments instead? While I understand that the proceed for the sale of HDB flat requires the money to go back to CPF, shouldn’t the sale of the flat ensure that the money gained from the sale, to at least break even to the amount that requires to be put back into CPF-OA? Based on trends, it seems logical to expect that should our economy turn for the worse and housing price falls beyond our initial purchase price, one should do their best to hold off the sale. And generally, the value of the HDB flats in Singapore, by value that 80% of residents in SG stays in apartments, should go up in price. This ensures that the sale should cover the original cost to cover the overall sum to be put into CPF-OA.

    Am I making sense here or are there things that I am missing out on?

    • Hi JJong, it rarely makes sense to service your CPF OA loan with cash that grows. CPF Loan is 2.6%. Your CPF OA grows at 2.5%. If you take a bank loan at 2.4% or lower, instead of being down 0.1%, you’re now up 0.1%. Further, the loan sum is smaller in most cases since Banks only loan up to 75% of the loan to valuation price, and that means less money lost overall. My personal recommendation is to only use your CPF OA if your cash at hand can grow faster and better than 2.5% compounded yearly. Christopher Ng, a popular blogger backtested a strategy using a Bloomberg terminal with REITs that had 1) High Yield 2) Low gearing, and it resulted in a 13.16% returns year on year. There was a 1 in 40 years chance of your portfolio falling by 16%, which meant that leveraging it @ 200% was an attractive option. Altogether, that means 23.32% – 3%(cost of leverage) = 20.32% dividend yield. Even if I account for a margin of safety and backwards testing methodoly and half my results, the yield of 10.16% still favors me using CPF OA versus using cash.

      Note that all this is only possible if I’m able to invest like he does at a higher level with a deeper understanding of what I’m investing in.

      With regards to the proceeds on the funds placed back into the CPF OA, we are assuming two true conditions.
      First, that the amount we owe the CPF OA that has been withdrawn to pay for the flat will often be at the same price point or even beyond given the impact of compounding interest, and two, the first condition paired with government policy means that flat prices will be kept affordable.

      Therefore, all sums that owners will have to repay to their CPF OA Accounts will often be quite substantial and fairly large in comparison to the selling price of their HDB flats.

      As always, there are exceptions. Your flat may have appreciated at well above the norm. Your buyer might be far more willing to pay cash over-valuation due to amenities and proximity to work and family. But I’ve purposley discounted these because they are outliers and not within the norm.

      I would also like to introduce my own point on this statement: “And generally, the value of the HDB flats in Singapore, by value that 80% of residents in SG stays in apartments, should go up in price. This ensures that the sale should cover the original cost to cover the overall sum to be put into CPF-OA.”

      By value that 80% of Singaporean Citizens and Permanent Residents staying in the flats, prices should theoretically go up. However, if you look at it from a macroeconomic perspective, 20% of the country will almost always hold 80% of the wealth. A vast majority of Singaporeans are not excessively rich. if flats appreciate beyond buyer powers on a large scale, unhappiness with cost of housing will mean the government loses power in the long run. Since our government has a vested interest in retaining power and accomodating the needs of the people (to provide affordable housing), its my view that in the long run, while home prices won’t be severely depressed for Singaporeans, they will be stagnant.

      Also, we must take into account that older flats are harder to purchase and often compete with upcoming BTO and new flat supplies. This means even less people interested in older estates and therefore, a bigger depression in your flat value.

      Taking into account the overall government policy as well the depreciating nature of a leashold property means that we must be conservative in our flat’s future valuation. In this case, my own beliefs is that most flats will be range between a small loss to modest gains at best. This means it is unreliable and that CPF OA cash should be preserved when possible.

  3. Easiest way not to let your home (which is basically just a consumption item) take over your future wealth is simply to get one that costs less than 3X your combined income, and pay off your mortgage within 5 years, whether using cpf or cash. For most couples that means 3-rm or 4-rm BTO. Trust me, 10 or 20 years down the road you will thank yourselves.

  4. What if I’m an investor but not sure if I could achieve 10-15 percent annual returns? Do I take bank loan or use cpf to pay mortgage? How about not getting a hdb at all and just renting for life? Is it worth it/financially savvy in Singapore? Alot of foreign countries do that but not sure whether it’s good to do in sg as well.

    • Hey Dan,

      The way I look at it is this. For the answer of renting versus buying, would you get a significant discount on a house of equivalent size and comfort? A 300k 4 room non mature estate BTO, assuming a 2.6% interest with a 25 year loan tenure, works out to 2k a month. Whereas a rental for a equivalent flat is also 2k. Would you rather pay that 2k to someone else, or yourself? I think the answer is quite obvious. Even better still, buying allows you to lock in 99 years of your “rent” for 25 years of payment whereas in a rental situation you are always subject to inflation. Therefore you wouldn’t get to free up any cash flow by your decision, and might instead be backed slowly into a corner by rental inflation.

      Why it makes sense overseas is because the real estate market is vastly different, with high rental yields of ~10% of down-payment capital. In a market that is as real-estate conscious as Singapore where rental yields are 3%, this wouldn’t work.

      Hope this helps.

    • Hi Dan, owning a piece of property in Singapore far outweighs the risk of renting. With rent, your rates and your home is always controlled by the landlord. And not you. If he decides to raise rates, you will suffer. If he sells and the new owner decides he’s not renting out anymore, you will also suffer. Not to mention, if you rent for 25 years and still don’t own a home, why not pay the same 25 years to own the home to begin with?

      bank loans typically offer better rates vs hdb loans but are slightly more painful to take on since they require greater cash outlay. long term wise, a bank loan will pay off in savings. if cash is a problem (as it often is for a home in SG), i would suggest a HDB loan and then to pay off the loan as quickly as possible.

      At the risk of sounding like a salesperson, I strongly recommend factor-based investing. it was the strategy that buffet used to grow his own wealth when he was young and remains a viable option to grow your wealth at an accelerate rate. You can read the full guide here:

      I hope that the guide helps, and if you have any further questions, just write it on here. I’ll do my best to reply in a timely fashion.

  5. By far, this is the best article I have read on using CPF for HDB mortgage. Yes, that sinking feeling of paying for 25 years with CPF OA is painful. OUCH !!! So, if I have some cash in the bank, is it better to pay off my mortgage with that to reduce the principal sum than to utilise my CPF OA ? Thanks and keep those interesting, provoking and much needed articles along. Great stuff !!!

    • Thank you, Desmond! I’m glad it has provided some value for you. As for whether it’s better or not to use extra cash to pay off your loan earlier, you will have to ask yourself if your cash can grow at 10-15% in order to make up for the loss from CPF OA, loss from opportunity cost, and inflation, with your own monetary growth accounted for. If you can’t grow your available cash at 10-15%. it’s best to repay the outstanding loan on your flat with cash to reduce overall debt and protect your cash balance in your CPF OA.

  6. Hi Irving, good article..but what’s your view on the decaying value of the HDB that are less than 60 yrs lease? This will have a bearing on your statement on “Rent Your House Out. Don’t sell it.”
    Is it wise not to sell the HDB when the decay sets in?

    • Hi Chin Chye, imo, a flat is a necessary expense, not an investment. I would treat it as money that I have to part with. And I would only sell if it I had another home to move to and if the cash after all deductions are substantial.

      In most cases, I would rather your flat be an income generator for you so that you both have a home and cash to spend in the later years.

  7. Some comments:

    1. why do you talk about returning downpayment to CPF OA only for a HDB loan? Surely for a bank loan you need to do the same as well? (“Remember that 10% down-payment you used from your CPF OA? That’s due and payable the moment you sell your flat too.”)

    2. what is with the 10-15% figure? (“Remember that if you can’t grow your cash at 10-15% a year or more, you shouldn’t be using your CPF OA account.”) Surely if we can grow our cash at better than CPF OA, that’s good enough already?

    • 1) Bank Loans afford some amount of CPF loans but it’s not often as sizable as the HDB loan amounts, thus my exclusion.

      2) Your opportunity cost of using your CPF OA is 2.5% interest that the government would have paid you. Instead, now you’re force to pay yourself at another 2.5%. That’s a 5% loss combined. In order to keep up with inflation at an average rate of 2%, your investible cash needs to work double time and earn 7.5% growth minimum. And even then you’re only running on a treadmill. You’re not losing money, but that’s about it.

      To have true growth above running a threadmill, another 7.5% needs to be made. Thus the deriviation of the 10-15% figure.

      I understand that some people will not be happy that I’ve used opportunity cost and what you have to pay yourself in such a way, but I’m viewing it from the lens of money in and out. CPF money not earned from the govt is money out. You paying your CPF account is also $$ out (though you get it back sometime later, still, since its out of your control, assumed out). Inflation is money out. Thus, that’s how I’ve constructed my argument.

  8. Hi, I am new to this property area so please help me out here. May I know if it is possible to opt in for the Home Protection Scheme (HPS) if you’re paying back the loan using cash instead of CPF OA?

    And will it even be advisable to opt into the HPS or is it better to go for a separate mortgage reducing insurance plan?

    OR, I saw on another forum that a person stated it may be more worth it to not even get a mortgage reducing insurance as its value decreases over time. Instead, he suggested increasing the coverage for life/term insurance instead. Anybody has thoughts/experience on this? Thanks!

    • Hi James,
      A home mortgage reducing insurance or HPS is expensive. An alternative would be buying a personal accident insurance or having a term insurance with sufficient coverage that is enough to cover your mortgage liabilities in case any unforeseen circumstances happen to you. That’s just my cheatcode. But if you are well-to-do, just go for the HPS if you can afford it.

  9. If there are 490,440 households servicing their mortgages at the end of 2018, means that there are more than half million HDB flats fully paid up as there are more than a million HDB flats currently. Whatever the debate on value decay, Singaporeans certainly are rich, at least asset-rich. How does that affect their retirements? At least they have choices from downgrade, rent out a room or two, rent out whole unit and stay with adult children, leaseback to HDB, and so on. Which is better; being poor with nothing or asset-rich but cash poor?
    Singaporeans are lucky people, they have two bites at BTO HDB, if a couple plans wisely and exploit twice, they could easily pocket half million in cash from the two transactions.

  10. Hi Irving, you got a fantastic article here. You should post this article on Facebook and sponsor the post! Or give a reward to those who share your post! I’m doing exactly the tips on what you posted and I also long to tell this to all my fellow friends. Thanks for getting this article out!
    I think one more thing you can add on, to soothe the worries of some people who might face difficulties paying cash on some months in case they change job etc. It is that you can also pay with a combination of CPF or cash for months that you are cash-tight.

  11. You recommended taking bank loan instead of CPF/HDB loan. But do bank loan interest rate stay the same every single year?

  12. “If you’d been withdrawing $1000 a month, for 25 years, at an interest rate of 2.5% imposed by HDB, you would have to pay back $415,422.86 to your CPF OA upon the sale of your flat.”

    >> So when you sell, you actually earn back the proceeds of $415,422.86 into your own CPF OA, which can be part of your retirement funds, isn’t it? This $415,422.86 will still be used by you somehow.

    “What are you going to buy your retirement home with? Thin air?”

    >> Assuming you continue working and contributing to CPF, you would have easily met the minimum sum for the retirement account. This $415,422.86 will be an additional sum of money available for use to buy the next flat, perhaps a downsized one. How can it be thin air?

  13. Singaporean that seek to retire should sell their hdb and move to other cheaper countries.
    Hdb becomes zero value when the lease expires.

  14. It still goes back into your CPF account – probably meeting your minimum sum, and there would be some allowance to purchase your next property does it not? It cannot be “thin air”. From your phrasing, it would seem you have not a single cent to purchase your next property with.

    Also, by then people who are retirees would also be 65 or older.


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