CPF rules are rather rigid, rather than work around it, it is better to follow it and make your calculations by factoring it in.
CPF is omni-present, so if you ignore it, you will regret if you forgot to factor it into your calculations When you sell your place, you think you have
cash, only to have the large part of your money being returned to your CPF
account. Even if you are not selling your place CPF regulations can severely impact the amount of cash you are borrow in a term loan.
Take a look at this example
Property valuation = $1m
Loan outstanding = $200,000
It looks like you have $800,000 equity in the house
So the term loan (Cash out) is = $800,000 – $200,000 = $600,000
The bank can lend you $600k for equity loan, this looks great.
So your new loan outstanding after disbursement is $800k.
Are you sure the calculation is correct?
The above is correct only if cash was used to pay for it’s installment and no CPF monies are used.
Just as another illustration of if CPF was used: -
Property valuation = $1m
Loan outstanding = $200,000
CPF property withdrawal = $300,000
At 80%, the bank can lend you up to $800,000. After deducting the
outstanding loan, they can still lend you $600,000.
Some banks are more receptive in dishing out home loans while some banks will not even consider home loans during certain market conditions. So sometimes it is not so much about doing Singapore home loan comparison to get the best package, it is about working out which bank will lend you the money.
But they will consider the
CPF draw-downs
The new Cash out is = $800,000 – $200,000 (loan
outstanding) – 300k (CPF accrued usage) = $300k
The Term loan is only $300,000
Homes are illiquid assets, even if you have plenty of immovable assets, you cannot move them
The bank may decide to lend out more or less of their funds yet.
SOME GET CAUGHT OUT AND HAVE CASH FLOW PROBLEMS
Some home owners who initially thought they could build or undergo A&A or
re-construct a home suddenly find themselves short of money and go into
hardship after CPF comes into the picture.
So do bear in mind CPF property withdrawals and use the above calculation methods to work out roughly how much you can borrow. Whenever you Compare singapore home loan, you may want to work out your home loan affordability first.
Get useful hints for car finance calculator – welcome to your own guide.
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