Calculating Property Finances

With cash, loans and CPF, grants and limits, there’s lots to figure out when it comes to financing our properties.

This is the last topic in Unit 4 for Paper 2, which means I’m also finishing Paper 1. (thank goodness, because the exam is in two days.)

Buying Resale Property

No loan or HDB loan:

• 10% initial payment
• resale or valuation price, whichever
  • lower
• CPF or CPF Housing Grant
• cash if not enough.

Bank loan:

• loan ceiling 75%, 55%, 45% or lower (for subsequent home loan)
  • 5%, 10%, 25% cash
  • balance CPF, CPF Housing Grant, cash.

Housing Grants

CPF Housing Grant for first-time buyers of resale flats:

• first-time families, singles
  • 4-room and smaller: $50,000, $25,000
  • 5-room and bigger: $40,000, $20,000.

Enhanced CPF Housing Grant for lower-/middle-income first-timers:

• first-time families, singles
• up to $80,000, $40.000
• income limit $9,000, $4,500

grant amount depends on income and flat lease:

• new and resale flats
  • lease at least 20 years, and lasts until the youngest owner is at least 95 years old
• 2-room Flexi flats (which are new, so)
  • 99-year lease, non-mature estates
  • short-lease (mature estate?)
• resale flats for singles, joint singles
  • up to 5-room, all resale flats.

The Enhanced CPF Housing Grant is open to buyers so long as one is a first-timer, and when the flat is sold, $60,000 is credited to CPF Ordinary Account, balance to Special, Retirement, Medisave Accounts.

Proximity Housing Grant for resale flat with/near parents or married children,

• families with parents/children, singles with parents
  • $30,000, $15,000
• families near parents/children, singles near parents
  • $20,000, $10,000

Proximity of 4km.

(There’s a Top-Up Grant for singles who get married and for non-singaporeans who become singaporeans? and definitely a Step-Up CPF Housing Grant for families who are second-timer applicants for $15,000.)

HDB | Flat and Grant Eligibility

Resale Levy

to reduce the subsidy on the second flat,
paid by those who:

• bought a new flat from HDB,
• bought a DBSS or EC from a developer, or
• received a CPF Housing Grant.

The amount is fixed to the housing type (2-room to EC, $15,000 to $55,000), and singles (with the Singles Grant) pay half the resale levy.

Paid either from sales proceeds or/and in cash.

Enhanced Contra Facility

happens when selling an HDB flat and using the sale proceeds and CPF refund to buy (a resale) flat.

Pays mortgage and reduces cash outlay, does not pay stamp duty and conveyancing fees.

[Note for practising agents: only one party in the transaction is allowed to use the contra facility. So if a client is selling their home to buy, the buyer cannot be using contra to buy.]

HDB Loan Eligibility Letter

Valid for six months, this letter must be had before [a buyer can be issued an Option to Purchase] taking on a HDB housing loan.

Contains:

• eligible loan amount
• monthly instalments
• repayment period
• amount of case proceeds.

HDB Housing Loan

• at least one Singaporean
• available twice
  • have not taken one loan and the last owned property is not a private residential property
  • have not sold a private property in 30 months
• income ceiling
  • family, extended family, single
  • $14,000, $21,000, $7,000
• monthly instalments capped at 30% monthly income
• lease and Loan-to-Value
  • at least 20 years and covers youngest to 95
    • 85% 80%
  • less than 95 years old
    • prorated
• loan tenure
  • 25 years
  • 65 minus average age of buyers
  • remaining lease minus 20 years, whichever
  • shorter
• calculated at 3%, though the actual rate is 2.6%

Lease less than 60 years — HDB housing loan reduced or disallowed.

CPF Ordinary Account Usage

Public Housing Scheme allows the use of CPF to buy HDB flats.

Private Properties Scheme allows use of CPF to buy private residential property.
If buying land and constructing a house, own funds, TOP, CPF savings + reimbursement.

CPF usage limits (criteria similar to lease and Loan-to-Value above):

• lease more than 20 years, covers youngest to at least 95
  • valuation limit or
  • withdrawal limit, whichever
  • higher
• lease more than 20 years, but does not cover youngest to 95
  • prorated
• lease within 20 years
  • no use CPF.

Retain up to $20,000 and balance used for flat, before HDB Housing Loan is granted.

Can be used to pay:

• purchase price / loan instalments
• stamp duty
• registration and conveyancing (legal?) fees
• CPF Home Protection Insurance premiums.

To buy a second property with CPF, the owner needs to have the Full Retirement Sum set aside first. Excess Ordinary Account funds can then be used.

Second Concessionary HDB Loan

From the sale of the existing flat, the second HDB Housing Loan is reduced by the full CPF proceeds, and up to half the cash proceeds — we keep the greater of $25,000 or half the cash.

Right-sizing — the adjustment of loan amount (quantum) to the CPF and cash sales proceeds.

Concessionary — HDB’s interest rates versus commercial interest rates.

[Note for practising agents: there’s a third concessionary loan, open only on appeal.]

Insurance for HDB Housing Loan

• HDB Fire Insurance Policy
• Home Protection Scheme
  • mortgage-reducing insurance scheme by CPF, covering owner and family from losing home due to death, terminal illness, total permanent disability.
  • lasts until owner is 65 or loan paid up
  • exempted if
    • loan is within $3,000 and two years
    • alternate mortgage/life insurance covers loan.

Bank Loans for Residential Properties

• Loan-to-value and cash down payment
  • 15% – 75% of
    • purchase price or valuation, whichever
    • lower
  • either
    • property lease + age of youngest owner = 65 and above AND
    • HDB loan tenure up to 25 years /
    • private loan tenure up to 30 years
      • 1st home: 75%, 5% cash
      • 2nd home: 45%, 25% cash
      • 3rd+ home: 35%, 25% cash
  • or not
    • lease + age = less than 65 and/or
    • HDB loan tenure 26-30 years /
    • loan tenure 31-35 years
      • 1st home: 55%, 10% cash
      • 2nd home: 25%, 25% cash
      • 3rd+ home: 15%, 25% cash
  • entities
    • 15% loan-to-value
• income limit
  • 30% income — HDB
  • 60% income — private property
• loan tenure
  • 30 years — HDB
  • 35 years — private property
• property becomes security to bank
• interest rate
  • fixed rate
  • floating/variable rate.

Mortgage Servicing Ratio (HDB flats)

Loans for HDB flats are capped at 30% of monthly income.

The loan for the HDB flat can be HDB Housing Loan, bank or licenced finance company loan.

Total Debt Servicing Ratio (private p.)

All debt must be kept at 55% of income. Property, vehicle, credit…

Variable and rental income — so long as not a monthly fixed pay — is cut by 30% in calculation of income. (So 70% value.) Commission, rent, bonus, self-employment.

Interest rate for loans are calculated at:

• 3.5% 4% for residential properties
• 4.5% 5% for non-residential properties, or higher if prevailing rates are higher.

Income-weighted Average Age

Instead of using the average age or youngest applicant, the incomes and ages are set into a formula for an income-weighted average age.

• [(income x age) + (income x age) + (income x age)] / total income =

rounded down. monthly income.

❤️🌧️

Image of Singapore’s financial district by Jason Goh from Pixabay.