Refinance Home Loan In Singapore But Remember To Calculate CPF Funds
How CPF can seriously limit your cash flow!
Most people forget that after all
these years, CPF is still king. When you let go of your home, 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.
Example of how to get term loan
Property valuation = $1m
Loan outstanding = $200,000
Looks like you have $1m =-$200K = $800k equity in the home.
The equity loan allowed is $800k-$200k = $600k. The bank can lend you $600K.
That means the bank will lend you $600,000 of cash as Term Loan
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 If CPF was considered, the loan size will no longer be 600k
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.
Banks will consider the CPF funds being used
The term loan (CASH out) obtainable = $800,000 – $200,000 (loan
outstanding) – 300k (CPF accrued usage) = $300,000
If you are thinking of building your perperty, 300k is very tight to budget for.
So although it may seem that there is substantial equity in the property.
In fact, the amount that can be borrowed is not that much.
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 take note of this.It can be easy to forget about this part of the
calculation. Whenever you Compare singapore home loan, you may want to work out your home loan affordability first.
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To Our Success,
Mark
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