Financial advice needed. TY.

[magnus0304]

Hi, I would appreciate some advice please.

1. Background Info

Currently, we own a 5-room flat valued at $525k.
It’s my first flat purchase. It was purchased at $186k, financed by HDB loan with 30-year tenure.
I have paid the monthly instalments for 7 years, left with 23 years.
At moment, I have $87k balance left to pay. Monthly instalment for the flat is $650/mth, all paid using CPF, zero cash payment.

A bit info about my family.
Me and my wife are in our early thirties.
Both husband and wife are working, family gross monthly income is 6k.
We have 3 kids (Oldest 11, youngest 8 months).
We have a car that we pay 400/mth, include fuel expenses 650/mth.
Risk appetite : I do have a family to provide for, but I’m open to calculated risks, and willing to make informed decisions to take a certain amount of risk.

2. My wife and I are currently exploring our options to invest and grow our wealth progressively. Would greatly appreciate it if someone could analyse the situation above and answer the questions below.

i) Recently, we went to view a commercial shop space (under construction), priced at 700k, and considered tapping into the liquidity of our home to fund the purchase for a 2nd property (commercial property). Could someone explain to me how does this works and how can we go about doing it?

ii) Frankly, I’m not very financially savvy. What are our other options (other financial instruments and strategies) besides real estate, above (i), if we are considering tapping into the liquidity of our home?

Sincere thank you.

Regards,
Ah Lee

 

[DevilCurseYou]

i) Recently, we went to view a commercial shop space (under construction), priced at 700k, and considered tapping into the liquidity of our home to fund the purchase for a 2nd property (commercial property). Could someone explain to me how does this works and how can we go about doing it?

you are not supposed to tap into your HDB for 're-loan'. What you are looking for is home equity loan, to take a loan on your HDB since there is such a big difference between market price and outstanding debt. By law, home equity loan, fortunately(or unfortunately), is not allowed for HDB, and is only allowed for private properties. Private properties will include condo.

HDB used to be eligible for equity loan in the past, for a short while. The government allowed it so that Singaporean could free up some money for investment and business, but unfortunately, Singaporean abused it, using the sudden found cash to splurge rather than invest, spending on things like holidays, threatening their future saving and singapore home ownership scheme.

 

[FreDeRicK]

I would pay down the remaining outstanding loan using my CPF OA balance if it is sufficient - to save on interest.

Not sure if this is possible for HDB loan, I have been doing it for my bank loan though. Plonk down additional $20+ k over the past 3 years to reduce the outstanding amount and hence, interest charged.

Paying down the principle reduces my loan tenure but monthly charge will remain as same amount unless I write in to change.

I own a 3-room HDB flat purchased at 88k 6 years ago with a 15 year bank loan. Current value around 300-315k. Current outstanding about 20+k, I am the sole owner.

 

[FreDeRicK]

Oh the reason why I plonk my CPF OA to repay the principle loan amount is because the bank loan interest is quite high @ 4.25% per annum.

 

[FreDeRicK]

Oh TS, fyi, I just found out that you can pay down your principle amount.

HDB InfoWEB: What To Note : Financing your flat

Partial Capital Repayment and Redemption of Loan

The buyers/transferees can from time to time submit an application to HDB to make partial capital repayment of the Principal Sum (over and above the monthly instalments to be paid) provided such payment is made within one (1) month from the date of receipt of the said application. Notwithstanding the foregoing HDB reserves the right not to accept any such payment or to accept such payments only if it is of a sum of not less than a minimum sum as may be determined from time to time by the HDB in its discretion.

Buyers can also fully redeem the loan by giving one month’s prior written notice to HDB . For redemption after complete disbursement of loan, the buyer should pay the whole of the Principal sum then outstanding and all other monies due including interest up to the date of payment.

 

[Michyeosseo]

Housing loan are the cheapest to leverage

 

[FreDeRicK]

Housing loan are the cheapest to leverage

In some circumstances yes, but do it with due care and diligence. =)

 

[highsulphur]

Here's my advise. Set aside the money for the mortgage of your home first before buying another property. Yes you may miss the boat but on the other hand you have 4 dependants who will suffer with you if your property investment goes south. If you want to get better returns, can try invest in lower risk instruments like stock indices ETFs or certain reits. At least they are more liquid and can easier get out.