CPF Minimum Sum Raised to $155,000
Sometimes I feel that CPF is bad, but then again, for people who don't know how to manage their money, actually it's a good thing, my father for example, he is the generous type of person, you can say he is very steady, when he has money, he will go around giving treats to friends, or give money to his siblings and my sister (wonder why he didn't give me), and when he goes broke, he will go slog at work from morning till late night and live from paycheck to paycheck. He is getting old, he is now 57 years old, I really don't think he can or should continue with this kind of lifestyle, but luckily he owns a fully paid 3-room HDB flat in a mature estate, and he bought it at $40K+ in early 1980s, if I remember correctly I think it was $48,000, and according to the X-Value Calculator from srx.com.sg, the unit is worth $341,000.
Now that I am moving out soon, finally he has the chance to unlock the value of his flat, after slogging so hard for so many years, I'm glad that he can finally see some light. I did a search on the internet and found this page, seems like he can choose to rent out his unit/room, apply for lease buyback scheme or downgrade to studio. Yesterday I spoke to him and he mentioned that he has the intention to downgrade to studio, I asked him why not rent out the whole unit and go live in Malacca (my mother's hometown), or just rent out one room but sounds like he is leaning towards the studio option, I think because he can get a $20,000 cash bonus. Actually after looking at the scheme, I think there are pros and cons, but overall it's good for him, let's take a look, we assume he sell his 3-room flat at $341,000 and buy a studio.
Selling price of existing property: $341,000
Less outstanding loan: $0
Less CPF refund: $61,680*
Less resale levy: $0#
Less housing transaction fees: $15,000^
Less studio apartment: $94,000?
Net sale proceeds: $170,320
Less top-up CPF Retirement Account: $60,000<
Less further top-up: $10,320>
Add silver housing bonus: $20,000~
Net cash: $120,000
* Assume he borrowed $48,000 and repaid in 20 years, annual interest rate at 2.6%.
# There is no resale levy if buying studio from HDB.
^ Up to $15,000, not sure what this is for but just deduct since it's mentioned.
? Take the average of a 37sqm studio in Bukit Gombak Vista (Jan 2014 BTO).
< Net sale proceeds of more than $160,000 must use $60,000 to top-up CPF RA (can split 30/30 if couple).
> Net sale proceeds of more than $160,000 can keep $100,000 cash, the rest is further top-up to RA (if couple then will top-up to the one with the lowest RA balance).
~ Get $20,000 cash bonus if downgrade to studio, 2-room or 3-room flats.
The bad thing about studio is they come in 30 years lease, you may be wondering what will happen if the elderly outlive the 30 years, no worries, according to this page for lease buyback scheme, seems like HDB has some arrangement in place, I'm sure it's the same for downgrade to studio, what is the likelihood of them throwing you out before you have a place to stay?
What if I outlive the 30-year Lease?
There may be cases where the flat owner outlives the 30-year lease. Such cases will be dealt with on an individual basis and appropriate housing arrangements will be provided to those flat owners who are not in a position to pay for the lease extension.
No elderly flat owner will be left homeless if he/she outlives the 30-year lease of the LBS flat.
Another bad thing is my father will have too much cash on hand, I can already imagine what he will do when he has so much money, he will be playing Santa Claus, not good, but the good thing is with the top-up to his and my mother's RA, both of them would probably be able to sign up for CPF LIFE, this will ensure they have money to spend each month regardless of whether they are working or not when they reach 63 (drawdown age), I really hope the $120,000 is enough for them to last until their DDA. And I read that the DDA is going to increase to 64 next year, and 65 in 2018. Anyway don't think my father can sell so fast, he also need to book a studio, it takes time to build, probably 3 years, by then he would be 60 or 61, sell his 3-room and the cash should be able to last him until his DDA. If need be I can also top-up his RA, but only when necessary.
Actually I should worry for myself, I still have a 25 year housing loan to pay, by the time I reach 55 it would be the year 2038, who knows what the minimum sum would be, at least my father's path is more or less clear, mine still long way to go and with so many uncertainties!
Now that I am moving out soon, finally he has the chance to unlock the value of his flat, after slogging so hard for so many years, I'm glad that he can finally see some light. I did a search on the internet and found this page, seems like he can choose to rent out his unit/room, apply for lease buyback scheme or downgrade to studio. Yesterday I spoke to him and he mentioned that he has the intention to downgrade to studio, I asked him why not rent out the whole unit and go live in Malacca (my mother's hometown), or just rent out one room but sounds like he is leaning towards the studio option, I think because he can get a $20,000 cash bonus. Actually after looking at the scheme, I think there are pros and cons, but overall it's good for him, let's take a look, we assume he sell his 3-room flat at $341,000 and buy a studio.
Selling price of existing property: $341,000
Less outstanding loan: $0
Less CPF refund: $61,680*
Less resale levy: $0#
Less housing transaction fees: $15,000^
Less studio apartment: $94,000?
Net sale proceeds: $170,320
Less top-up CPF Retirement Account: $60,000<
Less further top-up: $10,320>
Add silver housing bonus: $20,000~
Net cash: $120,000
* Assume he borrowed $48,000 and repaid in 20 years, annual interest rate at 2.6%.
# There is no resale levy if buying studio from HDB.
^ Up to $15,000, not sure what this is for but just deduct since it's mentioned.
? Take the average of a 37sqm studio in Bukit Gombak Vista (Jan 2014 BTO).
< Net sale proceeds of more than $160,000 must use $60,000 to top-up CPF RA (can split 30/30 if couple).
> Net sale proceeds of more than $160,000 can keep $100,000 cash, the rest is further top-up to RA (if couple then will top-up to the one with the lowest RA balance).
~ Get $20,000 cash bonus if downgrade to studio, 2-room or 3-room flats.
The bad thing about studio is they come in 30 years lease, you may be wondering what will happen if the elderly outlive the 30 years, no worries, according to this page for lease buyback scheme, seems like HDB has some arrangement in place, I'm sure it's the same for downgrade to studio, what is the likelihood of them throwing you out before you have a place to stay?
What if I outlive the 30-year Lease?
There may be cases where the flat owner outlives the 30-year lease. Such cases will be dealt with on an individual basis and appropriate housing arrangements will be provided to those flat owners who are not in a position to pay for the lease extension.
No elderly flat owner will be left homeless if he/she outlives the 30-year lease of the LBS flat.
Another bad thing is my father will have too much cash on hand, I can already imagine what he will do when he has so much money, he will be playing Santa Claus, not good, but the good thing is with the top-up to his and my mother's RA, both of them would probably be able to sign up for CPF LIFE, this will ensure they have money to spend each month regardless of whether they are working or not when they reach 63 (drawdown age), I really hope the $120,000 is enough for them to last until their DDA. And I read that the DDA is going to increase to 64 next year, and 65 in 2018. Anyway don't think my father can sell so fast, he also need to book a studio, it takes time to build, probably 3 years, by then he would be 60 or 61, sell his 3-room and the cash should be able to last him until his DDA. If need be I can also top-up his RA, but only when necessary.
Actually I should worry for myself, I still have a 25 year housing loan to pay, by the time I reach 55 it would be the year 2038, who knows what the minimum sum would be, at least my father's path is more or less clear, mine still long way to go and with so many uncertainties!
Comments
Not sure about that but in my father's example, he doesn't have to take any loan, he can fully pay for the studio and still have $120K in cash!