Cpf n new house question

[Ahboy069]

Hi all my friend has this situation
He currently holds a hdb that will last him till 93 only. In other words when he reach 55 he cannot use it to pledge for 50% of BRS or FRS.
so he has intention to sell his hdb for around 400k and buy another place at 650k. He is 40 this year and assuming BRS or FRS increase around 3% a year the FRS wld be about 290k at 55. With this move he can unlock 145k cash at 55. Should he sell his hdb n buy a new place?
what other advise will you give him?
Tia to all

 

[nautilus]

I was in a similar situation previously. Purchased an old HDB with around 60+ years of lease left. Issue comes when I tried to offload it with 59 years old lease left - it’s really tough.

So imagine if you’ve less than 50 years of lease left. It gets far worse unless you’re willing to sell it at a very depressed price.

Given the potential situation that he will face, My advise will be to offload his place now and purchase a place with a longer lease runway.

 

[BBCWatcher]

He currently holds a hdb that will last him till 93 only. In other words when he reach 55 he cannot use it to pledge for 50% of BRS or FRS.
so he has intention to sell his hdb for around 400k and buy another place at 650k. He is 40 this year and assuming BRS or FRS increase around 3% a year the FRS wld be about 290k at 55. With this move he can unlock 145k cash at 55. Should he sell his hdb n buy a new place?

No, that's not a good reason to sell his current home and buy a new one, not as you've phrased it. Withdrawing funds from his CPF Retirement Account is not "free money." It's his money, and it earns a very nice interest rate for all whole calendar months in CPF.

If he's concerned about liquidity at age 55+ then a very, very strange way to handle the potential problem is to reduce liquidity by $250K (a higher priced HDB flat) at age 40. He may have other reasons to buy a HDB flat, but this is a really terrible justification. It doesn't even pass the laugh test.

For the record, assuming his Retirement Account is funded to the Full Retirement Sum at age 55, even without a property pledge/charge, from age 55, he is able to withdraw every penny of his remaining Special and Ordinary Account savings and up to $5,000 from his Retirement Account. From age 65 he's able to withdraw 20% of his Retirement Account (inclusive of the up to $5,000 withdrawn from age 55+). In other words, there's likely to be quite a lot of CPF liquidity from age 55. (Not free, of course. Funds withdrawn from his Retirement Account reduce his future lifetime retirement income.) HDB leasehold equity, on the other hand, is impossible to tap unless he sells the whole flat either on the open market or back to the government (HDB Lease Buyback Scheme).

Like I said, there may be other reasons he might want to buy another flat, assuming it's affordable in the circumstances. But your question, as you've phrased it, is a bit like asking whether you should solve a mild headache you expect 15 years from now by bashing your head with a hammer today. Probably not!

 

[Ahboy069]

I think he want to buy a one
room condo fh n still be able to rent and also the value will be similar but not as depreciating as hdb in 15 years time

 

[BBCWatcher]

I think he want to buy a one
room condo fh n still be able to rent and also the value will be similar but not as depreciating as hdb in 15 years time

Maybe, but buying a condo either makes sense or it doesn't on its own terms. "I'll withdraw more from my CPF Retirement Account ~15 years from now" is not a compelling or particularly interesting argument in favor of making this particular purchase.

 

[nautilus]

I guess the bigger question is if the potential depreciation of his flat outweighs the gains from CPF. Getting a newer place with a longer lease at a similar value will help lock in the value of the asset.

 

[Opps-gal]

I was in a similar situation previously. Purchased an old HDB with around 60+ years of lease left. Issue comes when I tried to offload it with 59 years old lease left - it’s really tough.

So imagine if you’ve less than 50 years of lease left. It gets far worse unless you’re willing to sell it at a very depressed price.

Given the potential situation that he will face, My advise will be to offload his place now and purchase a place with a longer lease runway.

Use property agent sell to offload?

 

[nautilus]

Use property agent sell to offload?

Been there and done that. The sad fact is the demand remained low due to a small pool of interested buyers.

 

[dork32]

this thread reminds me of 1 guy that applied for debt relieve during the covid times. his monthly installment is 3k. he does not have to pay installment for 6 months last year. he was overjoyed. he claims his income increase by 3k for 6 months.