facebookSelling HDB and buying another resale flat - Seedly

Advertisement

Anonymous

Edited 13 Mar 2024

Property

Selling HDB and buying another resale flat

I am looking to sell my current HDB flat and expect a sale proceeds of $300k cpf and $300k cash.

To qualify for the second HDB loan, my cpf of $300k and 50% of the cash proceeds of $150k must be paid as the downpayment for my next house.

I am looking to buy a house with an asking price of $1million, which is $100k cash over valuation. Understand that HDB loan has an 80% loan to value, 80% _ $900k (market value) = $720k. By paying the $450k as down payment, I am essentially paying 45% of the asking price to fulfil the second HDB loan condition, which is more than $100k COV + the required 20% downpayment, 20% $900k = $180k, total of $280k._

For my situation, do I still need to pay the $100k in addition of the $450k?

Discussion (1)

What are your thoughts?

Learn how to style your text

Hey there!

For your situation, you wouldn't need to pay the $100k in addition of the $450k if you are taking a HDB loan.

However, you might want to consider the pros and cons of you taking a HDB vs Bank loan for your next property.

The cash proceeds of 150k is only applicable if you take another HFE (HDB Loan), while if you go for a bank loan, 50% of the proceeds is not a requirement to be put into the next property purchase.
3 benefits of the HDB Loan:
1. No need to put up 5% in cash. However, as 50% of your cash proceeds exceed the 5% cash downpayment ($1mil X 5% = $50k), this defeats the benefit of this.

  1. HDB Loans are currently at a floating rate of CPF OA (2.5%) + a spread of 0.1% = 2.6%. CPF interest has not changed in the past 21 years at 2.5%, making it stable and better than today's lowest bank loan of close to 3%.

  2. HDB Loans have a higher Loan-To-Valuation (LTV) of 80% as compared to Bank Loans at 75%, but you are required to wipe out your CPF OA with a choice of retaining up to $20k before the loan quantum is decided. Bank Loans, on the other hand, do not have any rules forcing you to use up your CPF monies first before the loan is applicable. Depending on the situation, this "Benefit" may or may not be in your favour.

Quoting your example: You have $300k in your CPF, Cash Proceeds of $300k, and are looking to buy a $1mil HDB.

Getting a HDB Loan:

Amount To Pay

50% of Cash Proceeds = $150k

CPF OA = $280k

Loan = $570k

Remaining Cash/ CPF: $20k (CPF) + $150k (Cash Proceeds)

Getting a Bank Loan:

5% Cash Downpayment = $50k

Additional 20% Downpayment = $200k (We'll assume this comes from CPF, but can come from either CPF or Cash)

Loan: Up to $750k

Remaining Cash/ CPF: $100k (CPF) + $250k (Cash)

With a bank loan, your funds will be freed up for your other needs.

That being said, if you still prefer the "stability" of a HDB Loan, want to pay a lower rate, or won't be able to get the $750k Bank Loan, please go ahead with the HDB Loan.

Hope this helps! :)

Write your thoughts

Advertisement