HDB housing loan question

[kenapa siol]

Was having lunch and sort of chatted about housing loan where we are not too sure about it. Hope any expert can shed some light and advise.

Say, for eg, 30 yrs HDB loan, stayed for (finish MOP) 8 years, and $150k more to go.

If Husband and Wife co-pay 50-50 hdb loan and deducting via CPF monthly, for eg, 1k. One is working with CPF contribution, while the other is self employed(Real estate agent/Financial consultant, PHV/food delivery)without CPF.

If the self employed one finish up his/her cpf liao, whats the smart move here to carry on with the installment?

1) Top up to CPF one lump sum, and let it continue to deduct mthly with the co-pay 50-50?

2) Set ibanking to pay HDB mthly using their own savings account?

3) Mthly remember to use AXS to pay hdb loan like paying hp or electricity bills and maybe change the payment mode to say becomes 80-20 so not so xiong to cough out so much cash?

4) Ask the one with CPF contribution to absorb 100

5) Others

Any advise here is greatly appreciated

 

[BBCWatcher]

Was having lunch and sort of chatted about housing loan where we are not too sure about it. Hope any expert can shed some light and advise.

Say, for eg, 30 yrs HDB loan, stayed for (finish MOP) 8 years, and $150k more to go.

If Husband and Wife co-pay 50-50 hdb loan and deducting via CPF monthly, for eg, 1k. One is working with CPF contribution, while the other is self employed without CPF.

If the self employed one finish up his/her cpf liao, whats the smart move here to carry on with the installment?

1) Top up to CPF one lump sum, and let it continue to deduct mthly with the co-pay 50-50?

If you mean the self-employed spouse repays OA only to have the funds deducted again for the mortgage, probably not. If you mean the self-employed spouse contributes to all three of his/her CPF accounts with tax relief (as self-employed individuals are allowed to do), that'd be better.

2) Set ibanking to pay HDB mthly using their own savings account?

What would this cash be doing otherwise?

3) Mthly remember to use AXS to pay hdb loan like paying hp or electricity bills and maybe change the payment mode to say becomes 80-20 so not so xiong to cough out so much cash?

This is really just a variation on #2, but generally speaking you should make your life easier, not harder. Automatic payments are best. Why even risk a late payment penalty and damage to your credit report?

4) Ask the one with CPF contribution to absorb 100

That's certainly possible.

5) Others

Another possible option is to refinance the 2.6% HDB concessionary loan with a bank mortgage. As an example, DBS is currently offering a 1.4% rate fixed for 5 years.

This is a guaranteed sure winner for the next 5 years. The possible risk, of course, is that interest rates are much higher at the end of 5 years, well above 2.6%. In that event the couple may be able to accelerate repayment. They certainly would have that much more cash and OA available at that point in time with a 1.4% interest rate instead of 2.6%. Yes, true, there will be some expense for refinancing, but the math still works if you run the numbers.

Yet another possible option is to sell the flat to "rightsize." This flat has 91 years left to run, and let's suppose it's a 5 room flat. The couple could, for example, buy a 3 room with 81 years left to run in a location they even prefer, finance it for a fresh mortgage term at 1.4%, and invest the net sale proceeds. (Net sales proceeds will land back in OA, presumably, so OA to SA transfers, the CPF Investment Scheme, and servicing the new mortgage from OA are all possibilities.)

Lots of options! The "best" answer will vary depending on the situation, and some of these options aren't mutually exclusive.

 

[dork32]

Was having lunch and sort of chatted about housing loan where we are not too sure about it. Hope any expert can shed some light and advise.

Say, for eg, 30 yrs HDB loan, stayed for (finish MOP) 8 years, and $150k more to go.

If Husband and Wife co-pay 50-50 hdb loan and deducting via CPF monthly, for eg, 1k. One is working with CPF contribution, while the other is self employed without CPF.

If the self employed one finish up his/her cpf liao, whats the smart move here to carry on with the installment?

1) Top up to CPF one lump sum, and let it continue to deduct mthly with the co-pay 50-50?

2) Set ibanking to pay HDB mthly using their own savings account?

3) Mthly remember to use AXS to pay hdb loan like paying hp or electricity bills and maybe change the payment mode to say becomes 80-20 so not so xiong to cough out so much cash?

4) Ask the one with CPF contribution to absorb 100

5) Others

Any advise here is greatly appreciated

if choosing 1, which mode would you choose,
top up via vc or
top up via housing refund.

if top up using housing refund, then not much difference accrued interest when you choose between 1 and 2

if top up using vc, then accrued interest may pile up.

accrued interest is not very good if you are young and want to take cash for your property sales

accrued interest is good if you are after 55 because it allows you to keep more in your cpf oa if you want to.

 

[Prof. Utonium]

2/3.

No point topping up if you are just going to pay back due to accrued interest. Might as well skip it and pay direct.

4. Depends if the partner is willing. I for one find it unfair if only 1 of the party bears all. Unless both parties already have an alternative retirement fund, and trying to utilize the CPF to the max.

If not, better to continue 50/50 so both retirement funds are not greatly affected.

 

[BBCWatcher]

No point topping up if you are just going to pay back due to accrued interest. Might as well skip it and pay direct.

There is a point, a very good one, for self-employed people who qualify for tax relief when they contribute to all three CPF accounts. This works particularly well when their MAs are "full" (at the Basic Healthcare Sum) and their SAs are getting up toward the Full Retirement Sum since the MA portion spills over into OA, where it's also available for housing. So you get the tax relief associated with "laundering" this money, a significant portion lands in OA, and the part that doesn't land in OA works harder and creates some future spillover opportunities. Not bad, really.

4. Depends if the partner is willing. I for one find it unfair if only 1 of the party bears all. Unless both parties already have an alternative retirement fund, and trying to utilize the CPF to the max.

Spouses can and should optimize their financial affairs in a coordinated way, and that's perfectly fine. There's absolutely no reason why one spouse must necessarily pay exactly 50% of the mortgage. If you want to make it "fair," then Spouse A could pay the mortgage and Spouse B could pay other household expenses.

Just to pick a random example, let's suppose you're a two income household. Spouse A earns $8,000 per month ($96,000/year) with zero variable pay. Spouse B is paid $7,000 per month with $30,000 per year of variable pay ($114,000/year). These spouses wish to make annual Voluntary Contributions into MediSave for tax relief, and they have Integrated Shield plans. In this scenario the smart move is for Spouse A, the lower earning spouse, to pay all Integrated Shield premiums for the household from his/her MediSave Account. That's because only Spouse A has room below the CPF Annual Limit and can make a Voluntary Contribution to his/her MediSave Account for tax relief after the annual premium deduction. If Spouse B wants to hand Spouse A the cash to make that Voluntary Contribution, that's fine, but it's much better if Spouse A handles this particular expense.

If not, better to continue 50/50 so both retirement funds are not greatly affected.

Not in this household. One spouse has compulsory contributions, and the other doesn't (self-employed). There's already asymmetry in compulsory CPF contributions. There'd be greater symmetry in CPF outcomes if the spouse with the compulsory CPF contributions handles the greater share of (or all of) the mortgage payments from his/her CPF OA. Indeed, the original post suggests such an asymmetry has already developed.

....But that's OK! Marriage shouldn't be about bean counting.

That said, there are other ways to keep CPF balances roughly in balance. For example, the first spouse to reach the Basic Retirement Sum is eligible to transfer OA dollars to his/her spouse's SA (or RA if the spouse is age 55+). As another example, the self-employed spouse could make "all three account" Voluntary Contributions for tax relief.

 

[Prof. Utonium]

Spoiler

There is a point, a very good one, for self-employed people who qualify for tax relief when they contribute to all three CPF accounts. This works particularly well when their MAs are "full" (at the Basic Healthcare Sum) and their SAs are getting up toward the Full Retirement Sum since the MA portion spills over into OA, where it's also available for housing. So you get the tax relief associated with "laundering" this money, a significant portion lands in OA, and the part that doesn't land in OA works harder and creates some future spillover opportunities. Not bad, really.


Spouses can and should optimize their financial affairs in a coordinated way, and that's perfectly fine. There's absolutely no reason why one spouse must necessarily pay exactly 50% of the mortgage. If you want to make it "fair," then Spouse A could pay the mortgage and Spouse B could pay other household expenses.

Just to pick a random example, let's suppose you're a two income household. Spouse A earns $8,000 per month ($96,000/year) with zero variable pay. Spouse B is paid $7,000 per month with $30,000 per year of variable pay ($114,000/year). These spouses wish to make annual Voluntary Contributions into MediSave for tax relief, and they have Integrated Shield plans. In this scenario the smart move is for Spouse A, the lower earning spouse, to pay all Integrated Shield premiums for the household from his/her MediSave Account. That's because only Spouse A has room below the CPF Annual Limit and can make a Voluntary Contribution to his/her MediSave Account for tax relief after the annual premium deduction. If Spouse B wants to hand Spouse A the cash to make that Voluntary Contribution, that's fine, but it's much better if Spouse A handles this particular expense.


Not in this household. One spouse has compulsory contributions, and the other doesn't (self-employed). There's already asymmetry in compulsory CPF contributions. There'd be greater symmetry in CPF outcomes if the spouse with the compulsory CPF contributions handles the greater share of (or all of) the mortgage payments from his/her CPF OA. Indeed, the original post suggests such an asymmetry has already developed.

....But that's OK! Marriage shouldn't be about bean counting.

That said, there are other ways to keep CPF balances roughly in balance. For example, the first spouse to reach the Basic Retirement Sum is eligible to transfer OA dollars to his/her spouse's SA (or RA if the spouse is age 55+). As another example, the self-employed spouse could make "all three account" Voluntary Contributions for tax relief.

Ah yes! I missed out OP mentioning "self employed" in 1st post.

I for one encourage to take whatever tax rebates you can and at the same time earn interests from it through CPF. Albeit, many self employed would rather have cash at hand and put the minimal they possibly can inside CPF.

I do agree on the last statement recommending transferring of excess OA (>BRS) to the other partner.

Reason being why I would want the "50/50" is to ensure both parties retirement fund (SA) are sound to ensure a safety net are met for both.

Sure, it is still possible if both work into funding a one common pool for retirement [non CPF]. However, RA is untouchable except by ownself and in my view safer when we are older and of lesser sharp mind. Though of course, I am being cautious and conservative to ensure my spouse retirement would still be taken care of. This risk can be mitigated if the one who is earning more VC or transfer to the less earning spouse.

 

[kenapa siol]

Thanks for all input and advisory. Inserted the self employed working class based on the scenario on my lunch chat.

Appreciate and glad to learned so much in depth suggestion and advises. But after reading, please correct me if im wrong, seems like options 3 and 4 is the most ideal ones.

3 being changing the payment mode to 80:20, the one with CPF to contribute 80 while the one without to pay 20 directly to HDB. Please pardon me, is this considered "refinancing" or just a change of payment mode? And how does one make this changes? Via online or drop by HDB to make necessary changes?

As for option 4, in the long run, by absorbing the full payment, meaning both parties should or if not already have another "retirement" funds set aside liao? Else this payment mode will greatly affect the one paying his/her CPF retirement's fee?

 

[streetfighter]

4)
Just login to online CPF website using Singpass to vary your CPF housing loan payment for both parties.

Was having lunch and sort of chatted about housing loan where we are not too sure about it. Hope any expert can shed some light and advise.

Say, for eg, 30 yrs HDB loan, stayed for (finish MOP) 8 years, and $150k more to go.

If Husband and Wife co-pay 50-50 hdb loan and deducting via CPF monthly, for eg, 1k. One is working with CPF contribution, while the other is self employed(Real estate agent/Financial consultant, PHV/food delivery)without CPF.

If the self employed one finish up his/her cpf liao, whats the smart move here to carry on with the installment?

1) Top up to CPF one lump sum, and let it continue to deduct mthly with the co-pay 50-50?

2) Set ibanking to pay HDB mthly using their own savings account?

3) Mthly remember to use AXS to pay hdb loan like paying hp or electricity bills and maybe change the payment mode to say becomes 80-20 so not so xiong to cough out so much cash?

4) Ask the one with CPF contribution to absorb 100

5) Others

Any advise here is greatly appreciated

 

[BBCWatcher]

But after reading, please correct me if im wrong, seems like options 3 and 4 is the most ideal ones.

Option 3 is not ideal. It requires monthly treks to an AXS kiosk, and that's just not necessary. It's better to set up automatic payments so that you avoid late payment risks.

For example, HDB provides an online form to set up an automatic GIRO arrangement to pay (all or a portion of) your HDB concessionary loan. You can modify or cancel this arrangement when you wish.

Life is complicated enough already. Keep it simple.

 

[henrylbh]

Was having lunch and sort of chatted about housing loan where we are not too sure about it. Hope any expert can shed some light and advise.

Say, for eg, 30 yrs HDB loan, stayed for (finish MOP) 8 years, and $150k more to go.

If Husband and Wife co-pay 50-50 hdb loan and deducting via CPF monthly, for eg, 1k. One is working with CPF contribution, while the other is self employed(Real estate agent/Financial consultant, PHV/food delivery)without CPF.

If the self employed one finish up his/her cpf liao, whats the smart move here to carry on with the installment?

1) Top up to CPF one lump sum, and let it continue to deduct mthly with the co-pay 50-50?

2) Set ibanking to pay HDB mthly using their own savings account?

3) Mthly remember to use AXS to pay hdb loan like paying hp or electricity bills and maybe change the payment mode to say becomes 80-20 so not so xiong to cough out so much cash?

4) Ask the one with CPF contribution to absorb 100

5) Others

Any advise here is greatly appreciated

You got to be joking in asking financial advice.

Did you not say the spouse 'is self employed (Real estate agent/Financial consultant ..)'?

 

[kenapa siol]

You got to be joking in asking financial advice.

Did you not say the spouse 'is self employed (Real estate agent/Financial consultant ..)'?

I just input whatever self employed without CPF contribution i can think of to "fill in the blanks" for easy reference. It was done after a series of replies from the laojiao here.....if you noticed

 

[IcYFl4mEz]

Since this is about HDB Housing loan, hope to get some advice / help here.
If haven't take key, and can afford bank loan(5%cash with 20% CPF). Can we go the route of getting HDB loan first, then refinance with bank?
Or is this not possible due to some TNC, and best is just go with Bank loan straight?

 

[BBCWatcher]

Since this is about HDB Housing loan, hope to get some advice / help here.
If haven't take key, and can afford bank loan(5%cash with 20% CPF). Can we go the route of getting HDB loan first, then refinance with bank?

You can, although be advised anything above $20,000 each in your Ordinary Accounts -- plural, assuming you're a couple -- won't be able to stay in your OA when you take a HDB concessionary loan. Some people transfer the amount(s) above $20,000 into their Special Accounts before they pick up the keys.

Or is this not possible due to some TNC, and best is just go with Bank loan straight?

Well, that depends on your point of view. There are pros and cons.

As mentioned, HDB loans feature the "OA sweep," and some people don't like that. And the interest rate is currently much higher (2.6% versus about 1.4%). There's also a limit on the number of HDB concessionary loans you can get. However, the down payment is much smaller, meaning families maintain more liquidity -- including especially more cash liquidity. Given the other expenses involved in outfitting and moving into a flat, the extra cash liquidity can be quite valuable, to help maintain adequate cash reserves for household emergencies. Also, if market interest rates ever spike, HDB concessionary loan borrowers are better protected. (But this point doesn't matter really if you're a BTO "pump and dump" buyer, i.e. you plan to sell the flat as soon as you reach the M.O.P. You can get a 5 year fixed interest rate bank mortgage from a couple lenders.) HDB is also known to be a more forgiving lender, to a degree, if you fall into arrears.

If/when you decide to refinance you'll have some refinancing costs, but sometimes lenders will offer a promotion to rebate most or all of the costs if you're refinancing a large enough HDB concessionary loan. Please note that S$100,000 (outstanding) is the absolute minimum you can refinance, although at that level you'll likely have to pay legal and valuation fees.

 

[IcYFl4mEz]

You can, although be advised anything above $20,000 each in your Ordinary Accounts -- plural, assuming you're a couple -- won't be able to stay in your OA when you take a HDB concessionary loan. Some people transfer the amount(s) above $20,000 into their Special Accounts before they pick up the keys.


Well, that depends on your point of view. There are pros and cons.

As mentioned, HDB loans feature the "OA sweep," and some people don't like that. And the interest rate is currently much higher (2.6% versus about 1.4%). There's also a limit on the number of HDB concessionary loans you can get. However, the down payment is much smaller, meaning families maintain more liquidity -- including especially more cash liquidity. Given the other expenses involved in outfitting and moving into a flat, the extra cash liquidity can be quite valuable, to help maintain adequate cash reserves for household emergencies. Also, if market interest rates ever spike, HDB concessionary loan borrowers are better protected. (But this point doesn't matter really if you're a BTO "pump and dump" buyer, i.e. you plan to sell the flat as soon as you reach the M.O.P. You can get a 5 year fixed interest rate bank mortgage from a couple lenders.) HDB is also known to be a more forgiving lender, to a degree, if you fall into arrears.

If/when you decide to refinance you'll have some refinancing costs, but sometimes lenders will offer a promotion to rebate most or all of the costs if you're refinancing a large enough HDB concessionary loan. Please note that S$100,000 (outstanding) is the absolute minimum you can refinance, although at that level you'll likely have to pay legal and valuation fees.

Thanks for the info, as far as i know for now, you dont need to do any OA sweep anymore as long as you can clear the total 10%.
I’ve a question is that. If i loan from hdb first, lets say 300k.
1 year later, can i refinance the loan e.g 280k, without forking out any cash? Is there any tnc or rules where i can read?
As for bank loan 5% must be cash, for refinance got such rule? If the loan amount is already <75% of the flat $.

 

[BBCWatcher]

Thanks for the info, as far as i know for now, you dont need to do any OA sweep anymore as long as you can clear the total 10%.

Are you sure about that? All the information I've seen suggests that OA dollars in excess of $20,000 must be used for the flat purchase as a condition of taking up the HDB concessionary loan. "Used for the flat purchase" includes the stamp fee, registration fee, conveyancing fees, and Home Protection Scheme premiums. I've almost verbatim quoted what HDB publishes, actually. (See here, for example.)

The basic logic is that HDB concessionary loans are supposed to be targeted at those who really need them (who don't necessarily have gobs of OA dollars lying about), or at least that was the theory when 2.6% was a particularly attractive interest rate. So the OA dollars in excess of $20,000 per individual buyer get "swept up" into your leasehold equity. But like I said that's easy to avoid if you wish to avoid it, and the easiest way is to transfer OA to SA -- self and/or cross-spouse. Then you can keep up to $40,000 in OA per couple as you pick up the keys.

For perspective, if you get a $300K HDB concessionary loan with a 25 year term then your monthly payment at 2.6% interest is $1,361 per month. The $40K alone in your Ordinary Accounts -- never mind cash and additional OA dollars streaming in with future paychecks -- can handle ~30 months of such a mortgage. That's a rather big buffer, actually.

I’ve a question is that. If i loan from hdb first, lets say 300k.
1 year later, can i refinance the loan e.g 280k, without forking out any cash? Is there any tnc or rules where i can read?

You can refinance all or part of the outstanding balance of your HDB loan, yes. Assuming you qualify (TSDR, MSR, the lender's own lending criteria). You can even lengthen the mortgage term if the new lender allows. One big thing you cannot do with HDB flats is "cash out" refinancing, meaning an increase in the total debt outstanding.

As mentioned there may be legal and valuation fees, but sometimes the new mortgage lender will partially or fully subsidize those fees.

As for bank loan 5% must be cash, for refinance got such rule? If the loan amount is already <75% of the flat $.

You will need to add cash and/or OA dollars if the valuation comes back and shows you've got >75% outstanding on your HDB loan, and if you want to proceed with the private sector refinancing. Otherwise, no.

Please note that the 75% LTV figure is subject to change and has fairly recently changed.

 

[IcYFl4mEz]

Are you sure about that? All the information I've seen suggests that OA dollars in excess of $20,000 must be used for the flat purchase as a condition of taking up the HDB concessionary loan. "Used for the flat purchase" includes the stamp fee, registration fee, conveyancing fees, and Home Protection Scheme premiums. I've almost verbatim quoted what HDB publishes, actually. (See here, for example.)

The basic logic is that HDB concessionary loans are supposed to be targeted at those who really need them (who don't necessarily have gobs of OA dollars lying about), or at least that was the theory when 2.6% was a particularly attractive interest rate. So the OA dollars in excess of $20,000 per individual buyer get "swept up" into your leasehold equity. But like I said that's easy to avoid if you wish to avoid it, and the easiest way is to transfer OA to SA -- self and/or cross-spouse. Then you can keep up to $40,000 in OA per couple as you pick up the keys.

For perspective, if you get a $300K HDB concessionary loan with a 25 year term then your monthly payment at 2.6% interest is $1,361 per month. The $40K alone in your Ordinary Accounts -- never mind cash and additional OA dollars streaming in with future paychecks -- can handle ~30 months of such a mortgage. That's a rather big buffer, actually.


You can refinance all or part of the outstanding balance of your HDB loan, yes. Assuming you qualify (TSDR, MSR, the lender's own lending criteria). You can even lengthen the mortgage term if the new lender allows. One big thing you cannot do with HDB flats is "cash out" refinancing, meaning an increase in the total debt outstanding.

As mentioned there may be legal and valuation fees, but sometimes the new mortgage lender will partially or fully subsidize those fees.


You will need to add cash and/or OA dollars if the valuation comes back and shows you've got >75% outstanding on your HDB loan, and if you want to proceed with the private sector refinancing. Otherwise, no.

Please note that the 75% LTV figure is subject to change and has fairly recently changed.

Actually if its HDB loan, OA keep 20k will do as interest is 2.6>2.5% , right?
But if bank loan, then just take max possible as 1.4<2.5% .

So for those 1 yr old flat, how do they do valuation? I will say most likely no issue refinancing and without cash outlay. As the first hdb loan is alr <75% of the flat purchase price.
E.g flat 450k, loan 300k.

Thus to refinance one year later, lets say only need to loan 280k, no need any cash outlay most likely right? Is this a way to “avoid paying 5% cash” from initial bank loan? Except some admin fee etc which sometimes bank offer which offset all the extras cost

 

[BBCWatcher]

Actually if its HDB loan, OA keep 20k will do as interest is 2.6>2.5% , right?

It depends on your point of view, but in my view not really, no. OA dollars could be earning 4.0% interest (or even in a few cases 5.0% interest inclusive of bonus interest) in SA, up to the Full Retirement Sum transfer limit anyway. There's also the CPF Investment Scheme (OA). And the more you sink into your HDB flat earlier, the less you collect from the Home Protection Scheme if one of the principle borrowers dies within the loan term. In other words, the money you used to pay the mortgage (or not borrow) earlier is wasted if the borrower dies (or otherwise qualifies for a HPS payout), because the HPS would have taken care of it.

AND there's still the option to refinance with a lower interest bank loan, something you cannot do if there's no loan (or less loan) to refinance.

So all in all, in most cases, I'm a fan of just transferring the amount above $20K (per buyer) into SA, with cross-spousal transfers if necessary. It's quick, easy, and the results should be quite good.

But if bank loan, then just take max possible as 1.4<2.5% .

Yes indeed, that's a fabulous deal.

So for those 1 yr old flat, how do they do valuation? I will say most likely no issue refinancing and without cash outlay. As the first hdb loan is alr <75% of the flat purchase price.
E.g flat 450k, loan 300k.

The HDB concessionary loan can be 90% LTV. If it's a resale flat at origination, and if the loan term is a typical one, then the 75% LTV for bank refinancing could be an issue. If it's a BTO that's then refinanced, the 75% LTV limit shouldn't be a problem. I suppose rare SERS-related scenarios are possible, too, and that too should make the 75% LTV easier to handle, too.

Thus to refinance one year later, lets say only need to loan 280k, no need any cash outlay most likely right? Is this a way to “avoid paying 5% cash” from initial bank loan? Except some admin fee etc which sometimes bank offer which offset all the extras cost

Yes, this is the sort of thing people do as I understand it, to a degree anyway.

 

[Opps-gal]

Is it advisable to take a second hdb loan since can only apply twice for hdb loan? But now bank loan interest is higher than hdb loan.

 

[reddevil0728]

Is it advisable to take a second hdb loan since can only apply twice for hdb loan? But now bank loan interest is higher than hdb loan.

do you plan to buy a new bto / resale in future thus being able to apply for hdb loan again?

 

[Opps-gal]

do you plan to buy a new bto / resale in future thus being able to apply for hdb loan again?

Most likely no, but hard to predict what happen in future?