Taking a mortgage

First of all, I'll like to thank you for some of the sound advice that you have posted on your blog. I'm an avid reader of your blog and also someone who had bought and like your financial planning book. I am currently staying in a 3 room HDB flat and planning to upgrade to a 5 room HDB this year. I have some questions that I would love to hear from your advice

1. Mortgage - floating vs fixed. What is your take on this given the current situation?

Reply: I think that the mortgages in Singapore are all on floating rates. I am not aware of any bank that offers fixed rate morgage. If you have found one ,give me the terms for analysis

2. Mortgage - lock period, is a short or long period better?\

Reply: same comment as for 1.


3. We are not sure if we should repay our loan as fast as possible (i.e. using our entire monthly cpf contribution for repayment) or if we should stretch our loan tenure for a longer period for reasons such as to use our CPF for any investments (e.g. NTUC growth, etc) with the hope of getting returns higher than our mortgage rate or to build a buffer in ordinary account for repayment in case anyone or both of us goes jobless, so that we do not need to fork out cash.

Reply: You should keep 6 months of repayment as a buffer in the CPF. If you have cash flow problem, you can pay from this buffer.


4. Is it better for us to deduct everything we have in our CPF for housing purchase or should we transfer some if not all of our CPF for investments such as NTUC growth, etc with the hope of getting returns higher than our mortgage rate?

Reply: Do not invest in a new Growth policy, as it is rigid and does not offer an attractive yield.


5. Me and my wife's used a sum of our CPF to purchase NTUC growth prior to buying our 3 room HDB. Now that we are planning to buy a 5 room HDB, should we terminate our NTUC growth plans and use that amount to pay for the HDB? We have sufficient CPF to pay for the 15% downpayment, but I'm thinking of paying more and borrowing less from the bank. Would you know for early termination, would I at least have my sum invested back? Is what I'm thinking of doing advisable?

Reply: You can a poor deal with you terminate the Growth policy. It is usually better to keep it to maturity, rather than terminate it early. You should ask them to quote you the cash value now, and the projected cash value on maturity to make a proper decision.