Mid-year review: Goal met of $200k cash at 28. $400k+ net worth and Astrea bond V
Half a year gone.
I still have not gotten my keys to my new home and am still childless. Ok, TMI.
On financial front, I've been seeing a steady increase in my net worth. As at my last update in end 2018, my net worth was at $372k.
Half a year later, I've successfully crossed $200k cash savings (previously it dropped as I topped up my MA) and exceeded $400k in networth. I may be able to hit $450k by end year but will just need to carve out some money for renovation and home stuff.
Most gains came from employment. While I lament how sick I am of work, it is my main source of $. I've not added any stocks and can never not live off my portfolio for passive income. It is with salary crediting that I've received 1.85-2% interest on my DBS multiplier anyway.
I've been thinking if I'm making my money work hard enough. I occasionally browse the SGX hoping to see some stocks to purchase, but am not comfortable enough to make the move.
Since Jan till date, my transactions …
I still have not gotten my keys to my new home and am still childless. Ok, TMI.
On financial front, I've been seeing a steady increase in my net worth. As at my last update in end 2018, my net worth was at $372k.
Half a year later, I've successfully crossed $200k cash savings (previously it dropped as I topped up my MA) and exceeded $400k in networth. I may be able to hit $450k by end year but will just need to carve out some money for renovation and home stuff.
Most gains came from employment. While I lament how sick I am of work, it is my main source of $. I've not added any stocks and can never not live off my portfolio for passive income. It is with salary crediting that I've received 1.85-2% interest on my DBS multiplier anyway.
I've been thinking if I'm making my money work hard enough. I occasionally browse the SGX hoping to see some stocks to purchase, but am not comfortable enough to make the move.
Since Jan till date, my transactions …
Hi Cherry,
ReplyDeleteHave you applied for the HDB Loan Eligibility (HLE)? It will give a more accurate assessment on how much HDB loan you can get. It will also show you your monthly instalment based on different loan tenure.
I also took part in HDB May launch. Wishing the both of us luck.
Hi, I did. Awaiting their reply on my loan :) Good luck to you! Did you apply for BTO or SOBF?
DeleteI applied for SOBF in Dec but failed. Now trying for BTO.
DeleteIt depend which instalment amount you are more comfortable. It is ok to take the 25 years loan as you can pay off a lump sum later on to shorten your tenure. Check the HDB for more info or you can always email them.
ReplyDeleteDid your bf propose to u first? :D You will understand after reading my article on my BTO experience.
ReplyDeleteHonestly, there is no "right" answer between getting a HDB loan and paying off the property with cash, if you are in the fortunate position of being able to choose.
Heartland Girl and I have already decided on taking the maximum loan allowable, and thus transferred all our surplus $ in the OA to SA. We intend to pay off our monthly mortgage using $ credited into our CPF OA, assuming we are still gainfully employed then. In this scenario, the interest cost is 2.6% compared to 4% guaranteed interest rate in the SA.We have already transferred the $ right after we made the downpayment, so our $ in the SA is already working harder compared to being in the OA, furthermore with the extra 1% awarded to the first $60K of your combined balances in the CPF. Of course, the drawback is that $ in the SA will be "stuck" till age 55.
The other side of the coin is that some people are just uncomfortable with loans. So being able to sleep soundly at night is something that you cant put a price on. So at the end of the day, it boils down to the risk appetite of the couple.
Best of luck,
Heartlandboy
Hello! HAHAHA he proposed, but...it was kinda fail ANYWAY....thanks for your sharing and advice! :)
DeleteHi Cherry,
ReplyDeleteAll the best and hope you get all the luck you need!
If you are worried before you even start servicing the loan, you should really max it out first. If your incomes increase and you would like to speed things up, that's always possible. If you want to do the reverse, there would be many conditions you might have to fulfil.
For a SOBF, make sure you can get the loan that you need, since you could be receiving your keys within a year.
Hi!! yes, currently waiting for the HLE letter to come to see how much loan we're eligible for. A bit apprehensive about whether my partner and I can afford the flat, if we get it, as we'll have to start paying the monthly instalments using our CPF which we've only accumulated for less than 3 years...
DeleteHello Cherry,
ReplyDeleteHere is what I would do. I want flexibility.
1. I would take the maximum tenure possible. I can do a partial loan repayment every year, gives me flexibility in repayment.
2. Move 20k or so into say STI ETF or a safe investment for a while but you may not be able to implement this becuase of 60k downpayment. HDB loan will wipe out our CPF OA balance. The reasons for not using up our CPF are:
a) The first 20k earns an interest exceeding the loan interest.
b) I want to build an OA emergency fund in case I want to stop work for a while, the loan is still paid. I will not have mortgage pressure.
This builds in flexibility and gives me life options. For example, take a year off to take care of a child or study?
3. Time value of money concept. If we take a loan at 2.6% and our OA balance earns 2.5%, there is only a 0.1% cost to our loan. For example, I have mortgage of 200k now. My wife and I have 100k each. At the end of the loan, we would have only paid interest of 0.1%. Our 200k is earning 2.5% every year that "cancels" out a chuck of the 2.6% loan interest. CPF OA interest in computed monthly and given out annually. The mortgage loan is a monthly reducing balance loan.
I found Principles of Valuation: Time Value of Money course useful. (https://www.coursera.org/learn/time-value-money). After my wife did this course, she was able to build up scenarios in Excel and compare the various repayment options.
4. I know getting a house is a major milestone. It is worth exploring taking a smaller unit with less debt. When more financial strength, we can upgrade to another unit. Also if I have to use cash to pay a mortgage, that is an investment opportunity cost.
Hi, appreciate your sharing!
DeleteRegarding point 2, the $60k downpayment will wipe out both my partner and my CPF already. So, we will have to rebuild our OA from scratch, which again leaves us to nothing every mth because our mthly OA contribution is around $1.8-$1.9k and we will have to top up $500+ cash for monthly installments. A bit overwhelming thinking of these...will have to fret when I really get the flat
Hi Cherry,
ReplyDeleteI believe I'm in a similar boat as you! Just purchased a 4rm SOBF for almost 600K, which makes monthly payments rather daunting... and the flat is smaller!
If you take a loan from HDB, you should be able to loan up to 90% of the purchase price. If you take a bank loan, you can loan up to 80% of the purchase price. So you can keep your 60k cash for other purposes if you take up the HDB loan :)
I am fortunate to have purchased my flat just before the new HDB measures kicked in, so I managed to secure a loan tenure of 30 years instead of 25 years.
I would suggest maxing the loan tenure to allow yourself some flexibility - after all, if you have sufficient savings after every month, you can do partial repayments if you so wish. Moreover, the loan interest of 2.6% is really one of the lowest possible, and as you are just starting out, you might need the capital for other expenses that will come your way (wedding, renovations, children, they usually cost more than what we plan for).
Huh? There's an even smaller 4 room than 83-87sqm?! OMG..
DeleteThanks for your sharing! :)