Cpf Cap

[karen77sg 0]

i didnt know this till about until 2yrs ago -

just so happen i was bored till got nothing better to do.

pick up the sg nitetime tabloid newspapers my parents bought.

there was a daily or weekly column for readers to post questions and have them answered by a qualified lawyer.

the story goes -

a couple backside itchy switched from hdb loan to bank loan for "better" interest. thinking they made a smart move until when they are left with about $57k more to clear, they receive the BOMB from cpf..bla bla bla - the same story above.

With immed effect they got to pay MONTHLY CASH of $1200+ to service their loan despite the fact that their total on going monthly cpf contribution is over $1400.

lawyer replied - there were BLACK n WHITE on this for years, just that you didnt go find out.

Switch from HDB loan to bank loan???? I tink tat is a very wrong move man!

[l_club23 0]

i dont mind.

infact just compare with hongkong is good enough....pple there can start doing biz with very little restrictions.

Government should really stop coddling those that can't plan...

Its the mindset that has to be changed, not just implement a system to "settle" retirement planning for everyone...

[raincole 0]

I didn't know abt it maybe both my parents, friends, etc took HDB loan only. And I'm still not sure what is it abt.

[MaCe 3]

I didn't know abt it maybe both my parents, friends, etc took HDB loan only. And I'm still not sure what is it abt.

it was quite some years ago - when all the banks starts to throw all kinds of carrots(low interest, rebates, free gifts, tv, vacuumcleaners) at the donkeys. then roughly 2 yrs back - cpf threw the big bomb.

[Chunky Monkey 2]

For most home owners, using CPF to pay installments in full is not an issue. CPF will give approval up to valuation of property OR purchase price, whichever is lower. In the current property market, especially in the HDB sector, buyers pay about $50,000 above valuation. CPF does not recognise this premium paid by buyers. It is only willing to approve up to valuation price. That's why buyers must not be too earnest and pay too much above valuation price OR be prepared to cough up the price difference in cash. It's as simple as that.

I am not familiar with HDB transactions, if there are stamp duties and legal fees. But in the private property sector, one would have to factor in about 3.5% of purchase price for these costs. CPF can be used for stamp duties and legal fees, but it would mean that the quantum loaned by CPF/bank can no longer be the maximum.

As for the couple who refinanced their loan from HDB to a private bank loan, I can't believe that they didn't get proper advice from a mortgage loan bank officer, before they commit themselves. Banks always give in principle approval, and customers will have the committment letter to read in detail what is paid by CPF and what is paid by cash, in the loan servicing.

Borrowers/Home owners must understand that CPF will account for the interest due to the CPF withdrawn if the money was left with CPF. That's why banks request for CPF Withdrawal Statments, which shows the interest accrued.

[applefreak 1]

yes for hdb transactions there are stamp duties and legal fees as well

however, legal fees are low compared to private property and stamp fees are the same for all properties.

however, the withdrawal limit usually hits during the last few years of the home loan

as it's at 120% of the valuation price / purchase price (whichever is lower)

but factoring in all the interest paid, the amt the buyer usually pay should be around 150% to 180% of the purchase price

when the 120% limit is hit, buyer have to fork out cash to pay the installments !!

[keltong 4]

Chance upon this topic and want to put in my 2 cents.

Someone mentioned that as long as you are on HDB loan, you will not hit Withdrawal Limit (WL). This is is wrong.

The only group of people who will not hit by the WL problem are those who purchase a flat DIRECT from HDB and use HDB concessionary loan.

If you purchase a resale flat from open market (whether or not you take the HDB Housing Grant), and if you were to take HDB concessionary loan, you will be hit by WL. WL is the HDB valuation of the flat. So as long as you take loan, you will hit WL because from day 1 you take you loan you are paying interest, that interest will eventually become the cash portion you need to pay.

Once your WL is hit, there is the Additional Housing Withdrawal Limit (AHWL). But it's quite tricky on how you can use this. If you are BELOW 55, you need to set aside the min. sum first (currently at $99,600 but will slowly go up to $120K [actual amt will be revised after adjusting inflation]) before you can use the amount above it to continue to repay the housing loan. Min. sum will be from your OA + SA (including invested amt).

You can pledge up to 50% of your property as the min. sum (thus reducing the cash amt require in your OA+SA acct) but it's quite complicated for me to explain here.

What if I cannot reach my min. sum? IMHO you got a few choices.

1. Pay with cash

2. Sell the house and buy another one, this will reset the WL (but remember it's very costly too as you need to reno, but stuff, etc...)

3. Sell the house and buy a flat direct from HDB to do away with WL (buy you need to qualify to buy a direct flat and subject to resale levy payable in CASH)

The only good news is you are not subject to a percentage for the AHWL as compared to Bank Loan (will explain later) so as long as you meet the min. sum, you can continue to service the loan with CPF.

For Bank Loan, it is much the same with buy a flat in open market and getting HDB Concessionary Loan, except your total withdrawal limit (including your AHWL) is cap at 120% of Valuation Limit (VL is the valuation of your house).

So in the case of bank loan, even if you have min. sum, you can withdraw more than 120% of your VL from your CPF. The way to get over it is more or less the same as above but once you get bank loan, you will not be able to get HDB loan. Also, if you are using bank loan, you need to pay 5% of the purchase price in CASH, which is not a case for flats bought DIRECT from HDB.

All these problem will only happen in the later part of your loan repayment, which many do not realise as they change house before they even hit the problem. If you are those who try to pay lump sum to shorten the loan period, you will face these problem earlier. So you are caught in a bad situation, redeem early and hit the CASH portion early but pay less interest, or repay slowly while accumulating your CPF to hit min. sum and face the problem later (or not at all if you have min. sum) but pay huge interest.

If you got a direct flat from HDB with HDB concessionary loan, you can sit back and relax. But if you are not, you need to start to do your sums now.

Why is this happening? Why can't I use my CPF to pay my housing loan? My only explanation is, CPF was intended for your retirement, using it to pay your housing loan is a privilege. So the 1st priority is saving for retirement before you can continue to pay your housing loan.

But they wipe out my CPF when I first take up a my loan (apply only to HDB concessionary loan). Because usually these are younger couples with enough time to accumulate CPF monies again, if you are 55 years old they may not even grant you a loan!

[applefreak 1]

actually if you can shorten the loan term, you might escape paying cash totally

coz the withdrawal limit is pegged at 120% of the valuation, which means as long as you don't pay more than a total of 20% interest, you won't have to fork out cash

[MaCe 3]

Chance upon this topic and want to put in my 2 cents.

Someone mentioned that as long as you are on HDB loan, you will not hit Withdrawal Limit (WL). This is is wrong.

The only group of people who will not hit by the WL problem are those who purchase a flat DIRECT from HDB and use HDB concessionary loan.

If you purchase a resale flat from open market (whether or not you take the HDB Housing Grant), and if you were to take HDB concessionary loan, you will be hit by WL. WL is the HDB valuation of the flat. So as long as you take loan, you will hit WL because from day 1 you take you loan you are paying interest, that interest will eventually become the cash portion you need to pay.

hmm, didnt know that.

[Jaren 0]

actually if you can shorten the loan term, you might escape paying cash totally

coz the withdrawal limit is pegged at 120% of the valuation, which means as long as you don't pay more than a total of 20% interest, you won't have to fork out cash

so jia lat ar... mine 29yrs loan leh... somemore buy form resale...

anyway, its veri difficult to retire peacefully in first world country like SG... how much can u save if u r mid income earner...

some calculation done by mi:

retire at 65yrs

live till 80yrs

estimated $ needs per yr after retirement = $24,000

estimated $ needs after retirement till 80yrs = $360,000

current age 24

no. of yrs to save: 65-24 = 41

$ need to save per yr: $360,000/41 = $8800

$ need to save per mth: $8800/12 = $730

base on the calculation above, i need to set aside at least $730 every mth for retirement. all this haven include inflation rates, $ needed for major illness happen, holidays after retirement.

So r u all able to set aside tis amount every mth if u r mid-income earner & u have other committment like hse, car, childs expenses & education needs, parents...etc

do yr own calculation & force yrself to set aside the $ needed & u will have no worrys when u retire... lol

Happy Retirement Everyone!

Edited February 25, 2008 by Jaren

[keltong 4]

actually if you can shorten the loan term, you might escape paying cash totally

coz the withdrawal limit is pegged at 120% of the valuation, which means as long as you don't pay more than a total of 20% interest, you won't have to fork out cash

From my understanding, this statement is not true.

New flat direct from HDB with HDB concessionary loan

- no limit on CPF withdrawal

Resale flat with HDB concessionary loan

- withdrawal limit is 100% of valuation

- AHWL has no limit as long as you can set aside minimum sum

Resale flat with bank loan (based on if you purchase in 2008)

- withdrawal limit is 100% of valuation

- AHWL + withdrawal limit is cap at 120% of valuation BUT you can use the additional 20% only if you have set aside minimum sum

For minimum sum, as mentioned, it will eventually reach 120K (in 2003 money so must add inflation) but you can pledge up to 50% with your property but actual percentage varies.

So, unless you have already set aside minimum sum, than you have no worries. But if you are using almost all your monthly CPF contribution to pay your monthly installment, which means you may not accumulate enough to meet minimum sum, you will definitely need to pay the last few years in cash if you take a loan. Even if you take 5 years loan you will have to pay a portion in cash.

For those who have a large savings in the CPF and getting house soon, you may consider parking some of them in investment, if you do not want to take risk, then park in somewhere safe with guarantee returns (but will be low). This will prevent HDB from wiping out your CPF when you collect your keys. You can always reverse them back after they deduct your CPF or continue to put them in the investment.

The reason is 2 folds, you can reach your minimum sum faster so don't have to worry about paying in cash (but still subject to certain T&Cs) and you can have a lump sum in your CPF for rainy day.

*The above comments are my personal opinions and findings but please do not hold my word for it. Check it out at HDB and CPF website for better understanding. I was in this situation before so I did quite a bit of research*

hmm, didnt know that.

You can read here for more info.

http://mycpf.cpf.gov.sg/CPF/Templates/SubP...HEHINT=Guest#Q1

[applefreak 1]

oops looks like i've got to read up more on the scheme

in this case, then it's really better to buy new flats from hdb if one is eligible right?

looks like a very subtle push towards those expensive flats

[keltong 4]

oops looks like i've got to read up more on the scheme

in this case, then it's really better to buy new flats from hdb if one is eligible right?

looks like a very subtle push towards those expensive flats

Actually I was wondering why the double standard for new flats bought direct from HDB and flats bought from open market but with housing grant. This is something I cannot understand. If they are saying that flats bought direct from HDB are below market value so they are not worried you will 'overspent' your CPF to repay the housing loan, than those bought from open market with housing grant is also considered 'below market value' since they give you the money in CPF to offset the buying price, so you are not using as much of your CPF. Worst still, the grant is part of the withdrawal limit so you hit your withdrawal limit even faster. Sigh...but it will take a long time for any rules change.

[kellyla 1]

If the couple hit >8k ceiling, the only way to get HDB loan is one to quit first?

[keltong 4]

If the couple hit >8k ceiling, the only way to get HDB loan is one to quit first?

Wow, this is tough. But from what I understand (it may or may not be true), 2 times income is check. When applying HLE, and during 1st appt. I remember during 2nd appt they never check. So the timing is probably an important factor. Once you get key, even if you earn a million bucks you can still stay in HDB.

If the couple is slightly above 8K, can try to appeal, but it depends on them whether they approve.

They ask for last 3months income, so if you are comm base, not sure if anything can be done. Have to be careful with my words so as not to run foul of the law. Hahaha...

Be creative and sometimes you can get what you want.