Disclaimer: Everyone’s financial situation is different. Before deciding on which of the following options to take, please consult your property agent, financial advisor and mortgage broker. There are some assumptions made in this calculation. For example, husband and wife need to be both employed.
Sell the HDB flat and buy a 3 bedroom condominium in Mr Lee’s name and a 1 bedroom in Mrs Lee’s name
Let us consider the following scenario to facilitate the explanation.
The family in question is Mr and Mrs Lee and they have 2 children.
They live in a 4 room premium apartment in Sengkang and the flat is valued at about $550,000.
The flat has been fully paid and now they wish to upgrade and rebalance their property portfolio.
They used a combination of cash and CPF to fund their Sengkang flat.
They have a combined income of about $10,000 per month. Mr Lee earns $6,000 and Mrs Lee earns $4000.
This seems to be a typical household in Singapore.
Assumption 1: They are looking for a 2 bedroom condominium which will cost them $900,000.
Assumption 2: They have $200,000 in their CPF ordinary accounts. $100,000 in each of their accounts.
Assumption 3: They have $150,000 cash in their savings.
3 bedroom condominium is for the family’s use and the 1 bedroom condominium is for investment purpose.
Sale of 4 room flat
Sale price: $550,000
Total cash from sales proceeds = $250,000
CPF Refund for Mr Lee = $150,000
CPF Refund for Mrs Lee = $150,000
The couple has $200,000 in their CPF ordinary accounts. $100,000 in each of their accounts.
They have $150,000 cash in their savings.
Amount of CPF in Mr Lee’s CPF account: $250,000
Amount of CPF in Mrs Lee’s CPF account: $250,000
Amount of cash on hand: $400,000
Mr Lee will purchase a 3 bedroom condominium
3 bedroom condominium: $1,100,000
5% Cash: $55,000
15% CPF: $165,000
Stamp Duty: 3% – $5,400 = $27,600 (CPF)
Total CPF outlay = $192,600
Total Cash outlay = $55,000
Monthly instalment = $3,252 (Based on 2% interest and 30 year loan tenure)
Mr Lee still has $57,400 in his CPF account
Mrs Lee will purchase a 1 bedroom condominium for rental income
1 bedroom condominium at city fringe: $750,000
5% Cash: $37,500
15% CPF: $112,500
Stamp Duty: 3% – $5,400 = $17,100 (CPF)
Total CPF outlay = $129,600
Total Cash outlay = $37,500
Monthly instalment = $2,217 (Based on 2% interest and 30 year loan tenure)
Mrs Lee still has $120,400 in her CPF account
Advantages
i) The couple has $307,500 in emergency cash savings after selling their HDB and buying 2 condominiums. Mr Lee also has $57,400 in his CPF account balance and Mrs Lee has $120,000 in her CPF account balance.
ii) The 1 bedroom condominium can be rented for approximately $2,800 (Based on prevailing rents in Queenstown area). This will create a positive cash flow. Mrs Lee can finance for the 1 bedroom with her CPF yet receive her rental income in cash.
iii) They did not fork out any monies for additional buyers stamp duties.
iv) They ended up with 2 private properties which should provide better upside in value than their HDB in Sengkang.
In summary,
Start:
Mr and Mrs Lee had 1 HDB flat in Sengkang, $200,000 in CPF savings and $150,000 in cash.
End:
Mr and Mrs Lee have a 3 bedroom condominium for their own stay, 1 city fringe condominium for investment (the rental pays for the instalment), $177,400 in CPF savings and $307,500 in cash.
Disclaimer: Everyone’s financial situation is different. Before deciding on which of the following options to take, please consult your property agent, financial advisor and mortgage broker. There are some assumptions made in this calculation. For example, for Mr and Mrs Lee need to be both employed.
Other options:
Option B: Keep the HDB flat and buy a 2 bedroom condominium
Let us consider the following scenario to facilitate my explanation.
The family in question is Mr and Mrs Lee and they have 2 children.
They live in a 4 room premium apartment in Sengkang and the flat is valued at about $550,000.
The flat has been fully paid and now they wish to upgrade and rebalance their property portfolio.
They used a combination of cash and CPF to fund their Sengkang flat.
They have a combined income of about $10,000 per month. Mr Lee earns $6,000 and Mrs Lee earns $4000.
This seems to be a typical household in Singapore.
Assumption 1: They are looking for a 2 bedroom condominium which will cost them $900,000.
Assumption 2: They have $200,000 in their CPF ordinary accounts. $100,000 in each of their accounts.
Assumption 3: They have $150,000 cash in their savings.
2 bedroom condominium: $900,000
5% Cash: $45,000
15% CPF: $135,000
Stamp Duty: 3% – $5,400 = $21,600 (CPF)
Additional Buyers Stamp Duty: 7% of 2nd property = $63,000
Things to take note for their 2nd property.
- The prevailing minimum sum is $166,000. The couple must set aside half of this amount ($83,000) before using the rest towards the purchase of their second property.
- The CPF withdrawal limit for the 2nd property is 100% of valuation limit or purchase price, whichever is lower.
Total CPF required = $156,600.
However, they only can use $117,000 of their CPF monies as they need to set aside $83,000 of their CPF. This means that the balance of $39,600 will have to be paid in cash.
Total CPF outlay = $117,000
Total Cash outlay = $147,600
Monthly instalment = $2,661 (Based on 2% interest and 30 year loan tenure)
In summary,
Start:
Mr and Mrs Lee had 1 HDB flat in Sengkang, $200,000 in CPF savings and $150,000 in cash.
End:
Mr and Mrs Lee have a 2 bedroom condominium for their own stay, $83,000 in CPF savings and $2,400 in cash.
If the above option is not applicable, consider this…
Sell off their HDB and buy a condominium
Let us consider the following scenario to facilitate the explanation.
The family in question is Mr and Mrs Lee and they have 2 children.
They live in a 4 room premium apartment in Sengkang and the flat is valued at about $550,000.
The flat has been fully paid and now they wish to upgrade and rebalance their property portfolio.
They used a combination of cash and CPF to fund their Sengkang flat.
They have a combined income of about $10,000 per month. Mr Lee earns $6,000 and Mrs Lee earns $4000.
This seems to be a typical household in Singapore.
Assumption 1: They are looking for a 2 bedroom condominium which will cost them $900,000.
Assumption 2: They have $200,000 in their CPF ordinary accounts. $100,000 in each of their accounts.
Assumption 3: They have $150,000 cash in their savings.
This is quite straightforward. They hire an agent to try to achieve a good price and afterwards purchase a condominium within their budget. When they dispose of the Sengkang flat, they will receive their sales proceeds which can then be used to purchase the 2 bedroom condominium.
Sale price: $550,000
Total cash from sales proceeds = $250,000
CPF Refund for Mr Lee = $150,000
CPF Refund for Mrs Lee = $150,000
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