When thinking about a HDB mortgage, we should consider the present value of future mortgage payments.
We also need to think about the different returns from cash vs CPF, which will lead to different discount rates when calculating the present value.

In general, a longer loan tenure helps to lower the net present cost for cash because the returns from
investments are far greater than the loan interest rate. We are better off using the cash to invest, and to
use the future investment earnings to offset future cash payments.

For CPF, with the similarity in the loan
interest rate to the CPF OA interest rate, the loan tenure has a negligible impact on net present costs.

Bank interest rate: The interest rates for bank loans are at a historical low as a result of the
2008 financial crisis. From the 1970s to 2008, the historical rate was usually above 3%. You may
want to use a higher estimate for the bank interest rate to account for potential future increases.

Annual returns from CPF: While there are some investments
available for CPF money, they have been performing at roughly the CPF OA interest rate (e.g. the
STI ETF has averaged 2.3% over the last 3 years). The CPF OA interest rate is a good estimate for a
discount rate for most cases.