This is an article that all existing and aspiring home-owners should never miss. And I do mean it. A few years ago, I wrote about a 54-year-old Singaporean lady who was left stranded after she was not allowed to use her CPF monies to finance her home. In her situation, she had to use cold hard cash to pay for her housing loan even though she still had savings in her CPF Ordinary Account (OA). Read on to find out how to avoid this devastating financial pit-fall created by CPF Housing Withdrawal Limit in your twilight years.
Before I proceed further, there are a few things you need to know about CPF Housing Withdrawal Limit. Specifically, they are Withdrawal Limit, Valuation Limit, HDB loan, type of property and lastly, bank loan. I will first discuss the merits and cons of HDB loan.
Through the years, Singapore government has been packaging HDB loan as a form of “privilege” exclusive only to Singaporeans. To qualify for this “privilege”, you need to meet many eligibility conditions. Hence, this give Singaporeans the impression that getting an HDB loan is the best option when financing property. In my point of view, such thinking may not hold water.
Just think about it. The HDB concessionary housing loan interest rate is pegged at 0.1% above the CPF OA interest rate. The CPF OA interest rate has been 2.5% for the longest time. So effectively, those who opted for HDB loans would be paying 2.6% of interest rate for their housing loans. This is a lot of money considering the fact that housing loans offered by banks had drastically dropped to below 2.6% since the Great Financial Crisis. Currently, there are many different types of home loan packages in the market but essentially, most of them are way below 2%.
Most Singaporeans are sold on the idea that HDB loan interest rate is very stable, thus this gives them a sense of security and peace of mind. Indeed, the interest rate has been very stable and is not subjected to market fluctuations. But the price that you have to pay [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
Read my articles on HDB and property investments:
- 99-to-1 Tenancy-in-Common
- Frightening HDB rules
- Managing your CPF proceeds from the sale of your HDB to build wealth
- HDB: The thin fine line between Joint Tenancy and Tenancy-in-Common
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