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New rules on CPF use, HDB loans to nudge buyers towards homes they will not outlive

New rules on CPF use, HDB loans to nudge buyers towards homes they will not outlive.

SINGAPORE – Younger buyers of resale flats with leases that expire before they turn 95 will be able to use less of their Central Provident Fund (CPF) savings for housing, said the authorities on Thursday (May 9).

They will also be eligible for a smaller Housing and Development Board (HDB) loan than under existing rules.

To read more: https://www.todayonline.com/singapore/new-rules-use-cpf-and-hdb-loans-friday-singaporeans-buy-home-life

The authorities illustrated the changes with two examples:

EXAMPLE 1: MORE FLEXIBILITY FOR SOME

John, 48, and Jane, 45, want to buy a four-room HDB resale flat that costs S$430,000 with 50 years remaining on its lease. The lease will cover the youngest buyer, 45-year-old Jane, until age 95.

Under the existing regulations, they can use their CPF savings for up to 80 per cent of the property’s valuation limit, which amounts to $344,000. The valuation limit is the lower of the purchase price or the value of the HDB flat at the time of purchase.

The couple can also take a HDB loan of up to 90 per cent of the property’s value, which translates to S$387,000.

Following the changes, the couple can tap on their CPF for up to 100 per cent of the property’s valuation limit (S$430,000, or up to S$86,000 more than before), if they have not set aside the Basic Retirement Sum. There is no change to their HDB loan cap.

EXAMPLE 2: MORE LIMITS FOR OTHERS

Nick and Cheryl, both 25, want to buy a four-room HDB resale flat that costs S$430,000 with 65 years remaining on its lease. The lease will not cover the couple until age 95.

Under the existing regulations, they can use their CPF savings for up to 100 per cent of the property’s valuation limit as the lease of the flat exceeds 60 years. They can take a HDB loan of up to 90 per cent of the property’s value, which amounts to $387,000.

Following the changes, the couple can tap on their CPF for up to 90 per cent of the property’s valuation limit (S$387,000, or S$43,000 less than before). Their HDB loan cap is reduced to 81 per cent (S$348,300, or S$38,700 less than before).

An online calculator is available on the websites of the CPF Board and HDB for prospective buyers to work out the allowable amounts.  

The new rules reflect the “changing needs” and “higher life expectancy” of Singaporeans, said both ministries.

DEPLETING LEASES: THE FIGURES

  • As at Dec 31, 2018, about 140,000 HDB flats (about 15 per cent of the public housing stock) have remaining leases of 60 years or less. The oldest flats are 52 years old, with 47 years’ lease remaining.
  • About 7,000 private housing units have remaining leases of less than 60 years. This is 1.5 per cent of the total stock of private housing and 3.2 per cent of the stock of 99-year leasehold private housing.


To read more: https://www.todayonline.com/singapore/new-rules-use-cpf-and-hdb-loans-friday-singaporeans-buy-home-life

Adapted from Todayonline 9 May 2019