Repay HDB LOAN?

[wutawa]

how old r u? Do u have a stable income?

 

[BBCWatcher]

So what I do now is pay the bare minimum, take bank loan with longest possible tenor, buy HPS and service monthly via CPF. Then pump the OA to SA for 4%.

Wise?

Yes. It’d be reasonable to keep a minimum buffer of, for example, 12 months of mortgage payments in your OA. Ideally your spouse is a full partner in this endeavor, also with a well stocked SA. Before pushing OA dollars into SA you may wish to make a $7,000 cash deposit in order to collect tax relief one last time, if you qualify.

If you still have the happy problem of OA dollars piling up, after SA and a buffer, and assuming you have a reasonably long or longer time horizon ahead, then you could take a look at the CPF Investment Scheme.

I’m assuming you’re a financially responsible individual. For example, the resale unit you’re planning to buy is not too lavish in the circumstances. Just because a bank thinks you can afford something doesn’t mean you actually can or should.

Also keep in mind that a bank loan has some upside interest rate risk, over the medium to long term anyway. If the mortgage interest rate gets much higher in the future THEN (and only then) would it make financial sense to accelerate repayment.

 

[drkcynic]

Yes. It’d be reasonable to keep a minimum buffer of, for example, 12 months of mortgage payments in your OA. Ideally your spouse is a full partner in this endeavor, also with a well stocked SA. Before pushing OA dollars into SA you may wish to make a $7,000 cash deposit in order to collect tax relief one last time, if you qualify.

If you still have the happy problem of OA dollars piling up, after SA and a buffer, and assuming you have a reasonably long or longer time horizon ahead, then you could take a look at the CPF Investment Scheme.

I’m assuming you’re a financially responsible individual. For example, the resale unit you’re planning to buy is not too lavish in the circumstances. Just because a bank thinks you can afford something doesn’t mean you actually can or should.

Also keep in mind that a bank loan has some upside interest rate risk, over the medium to long term anyway. If the mortgage interest rate gets much higher in the future THEN (and only then) would it make financial sense to accelerate repayment.

Thanks. My end game is 55, so the SA is an interesting instrument @4%, albeit with restrictions. Also the fear of withdrawal age moving and out of our control.

I am going to sell my private prop, to switch to a HDB, main purpose is to decouple, meaning 5 years later I will get another private prop. Will be flushed with cash enough to settle the HDB in the meantime but wont, so need to find a place to park them but thats another story.

The main thing is that 5 years later if I am going to buy a priv prop, depleting my OA is going to detrimental. So thats a consideration. I guess i really need to sit down and evaluate if SA investment at this point is the way forward.

 

[dork32]

Thanks. My end game is 55, so the SA is an interesting instrument @4%, albeit with restrictions. Also the fear of withdrawal age moving and out of our control.

I am going to sell my private prop, to switch to a HDB, main purpose is to decouple, meaning 5 years later I will get another private prop. Will be flushed with cash enough to settle the HDB in the meantime but wont, so need to find a place to park them but thats another story.

The main thing is that 5 years later if I am going to buy a priv prop, depleting my OA is going to detrimental. So thats a consideration. I guess i really need to sit down and evaluate if SA investment at this point is the way forward.

buy hdb can decouple? under wat scheme are you buying your hdb?

 

[drkcynic]

buy hdb can decouple? under wat scheme are you buying your hdb?

If I am not wrong this is what my agent said. Buy under 2 names, but fully financed/owned by 1 party. After 5 years when the property MOP, the other non paying party can buy another property under his/her name and it will be consider his first property. That fella will not need to pay ABSD.

 

[veryhonestguy]

Ya my property agent said so also , important is to fully paid up the hdb , so it wise to get a cheap 1 below 400 k

If I am not wrong this is what my agent said. Buy under 2 names, but fully financed/owned by 1 party. After 5 years when the property MOP, the other non paying party can buy another property under his/her name and it will be consider his first property. That fella will not need to pay ABSD.

 

[angtc11]

If I am not wrong this is what my agent said. Buy under 2 names, but fully financed/owned by 1 party. After 5 years when the property MOP, the other non paying party can buy another property under his/her name and it will be consider his first property. That fella will not need to pay ABSD.

Can you share more on how to 'buy under 2 names but fully owned by 1 party'?

 

[BBCWatcher]

This article provides some useful background on how a couple could try to work around ABSD. Spoiler: it's not as simple or straightforward as many property agents claim.

 

[henrylbh]

Can you share more on how to 'buy under 2 names but fully owned by 1 party'?

When buying a hdb flat, one can be owner/financier and the partner as essential occupier. After MOP, partner is free to own own property without absd.

 

[kennethtbh]

When buying a hdb flat, one can be owner/financier and the partner as essential occupier. After MOP, partner is free to own own property without absd.

Does this apply to bto as well? Or just resale kind?

 

[angtc11]

This article provides some useful background on how a couple could try to work around ABSD. Spoiler: it's not as simple or straightforward as many property agents claim.

Thanks BBC. The article in fact states that de-coupling HDB ownership is only possible under 6 circumstances. Unless something drastic happens HDB will not allow de-coupling.

I am wondering if the solution provided to drkcynic is to buy the HDB under a single name and the spouse is purely an occupier

 

[angtc11]

When buying a hdb flat, one can be owner/financier and the partner as essential occupier. After MOP, partner is free to own own property without absd.

Agree, but this would mean that there is only 1 buyer and he/she needs to qualify under the singles scheme? Ie: Buyer has to be 35 and above and not married?

I don't mind giving the HDB flat to my wife if it means my name can be taken out

 

[kennethtbh]

Agree, but this would mean that there is only 1 buyer and he/she needs to qualify under the singles scheme? Ie: Buyer has to be 35 and above and not married?

I don't mind giving the HDB flat to my wife if it means my name can be taken out

Would like to know on the age 35 requirement too. Normally that's for cases where the buyer is not married. But if married just that don't wanto co-own, is it still possible..

 

[angtc11]

Would like to know on the age 35 requirement too. Normally that's for cases where the buyer is not married. But if married just that don't wanto co-own, is it still possible..

Not possible that Hdb will allow married individuals to buy a flat each. If this loophole exists, some married couple would have bought a flat each

 

[CaptainTeo]

For Bank how do we pay up one lump sum

 

[lousylah]

Not possible that Hdb will allow married individuals to buy a flat each. If this loophole exists, some married couple would have bought a flat each

The other property has to be private

 

[angtc11]

The other property has to be private

If the first property is private then it's more straightforward, however the scenario painted is the first property is Hdb.

 

[lousylah]

First property hdb, second property private.

The other way around not possible.

Of course first and second private by husband/wife as individuals no problem with absd but everyone knows that.

 

[ahbuiszxc]

Hello, I am not sure if this is the right page for me to post. I will be able to get my BTO approximately 2years later which cost $330,000 after deducting 10% down payment. Suppose I would have approximately $150k by then on top of my emergency fund.. I am planning to save up for my 2nd property if possible. My queries would be:
* Should I reduce the loan by $150k or should I invest that amount?
* Should I loan for max period of 25years or shorter period to save on the additional interest charge.

 

[coconut1]

Hello, I am not sure if this is the right page for me to post. I will be able to get my BTO approximately 2years later which cost $330,000 after deducting 10% down payment. Suppose I would have approximately $150k by then on top of my emergency fund.. I am planning to save up for my 2nd property if possible. My queries would be:
* Should I reduce the loan by $150k or should I invest that amount?
* Should I loan for max period of 25years or shorter period to save on the additional interest charge.

As a young family e.g. age 25-35, I personally think should keep adequate spare cash as buffer to deal with many 1st time incidental expenses (e.g. baby, nursery, renovation, taxes, family holidays, 1 carat diamond ring, car, insurances....the unexpected expenses can just go on and on). You can always do partial prepayment of loan and CPF subsequently when the family expenses are more stable and predictable thereafter. Hence to borrow maximum amount and longest period is a good choice as it gives you financial flexibility.

For more mature families e.g. age 35-45, if you took maximum loan at 2.6% interest and you have excessive spare funds, are you able to exceed or at least match the returns +/- 0.5% consistently? If the excess funds are just sitting in a savings account without much use, then the simplest way to save money is to reduce the loan by partial or full prepayment of loan or CPF.