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.
Some people claim that DBS, OCBC and UOB are safer They always point to instances where foreign banks raise lending rates for home loans.
For some, safer means a perceived safety in terms of financial strength of the bank.
All banks in Singapore has to pass the stringent requirement set by the Monetary Authority of Singapore (MAS).The MAS is still one of the more conservative regulators worldwide, which balances regulation with free market.
In terms of safety, Singapore’s banks regardless of local or foreign are quite solvent.
The rules and requirements for both the local and foreign banks are the same.
Ms Angelina Fernandez?Director (Communications)?Monetary Authority of?Singapore said 26 Seo 2008 (My paper). ”“Our regulations also require foreign-bank branches in Singapore to maintain a proportion of the assets of their Singapore branch in safe and liquid Singapore dollar-denominated and Singapore-domiciled assets.”
Depositors have first claim to the bank’s assets ahead of other debtors. Depositors will likely get part of their money back. Now, Singapore government guarantees the deposit of all deposit accounts in Singapore.
Is it fair for banks to claim that they are safer from raising interest rates if buyers go with their variable rates home loan just because they are local?
Do the so called “lower cost of funds really translate into lower lending rates for housing loan owners?
Firstly, while some people claim that local banks are safer from raising rates, they could not categorically pin-point why in a fact-based manner.
So who can we believe?
Secondly, there is no guarantee that lower cost translate into lower lending rates, of course higher cost will almost certainly translate into higher lending rates. If the prevailing lending rates have increased, what would stop the banks from raising rates to improve their margins?
The only way to have reasonable rates is to have healthy competition amongst banks.
Many foreign banks operate like local banks, staffed with locals. They even base their support centres in Singapore. These banks may have obtained QFB status (Qualifying Full Bank) status, which makes them very much like local banks.
Source of funds
Banks such as DBS which is perceived to be the National bank have large depositor base because they have early childhood savings program. Many Singaporeans grew up knowing DBS as their first bank.
To do Singapore home loan comparison, the safety and solvency of the bank is not of critical concern, unless there is a risk of them recalling your loan.
The best safety in our opinion is that home buyers, property buyers, property investors should exercise caution and not go into excessive leverage. If they are not in excessive leverage, even in the case where a loan is recalled by a bank that is going under, there will most likely be other banks willing to take over if your debt to asset ratio is low.
Therefore we emphasize that safety should start from the time you buy your property and structure your home loan financing. Praying for, hoping for a bank to be a SAFE bank should be a secondary concern.
Therefore when you Compare singapore home loan, focus on a home loan meeting your personal requirements and cash flow needs and give yourself that safety first.
This principle applies to Singapore home loan and mortgage refinancing as well.
Safety starts with you and ends with you, you own your decision and you own your destiny. You have no control over the bank, but you can decide whether you want to make certain financial decisions.
Get practical information to what is forex – your personal guide.
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