New rules in HDB will increase complexity for man-in-the-street and more job security for civil servants. One of the most ridiculous policy is with regard to the computation of the amount a person is permitted to borrow from HDB if this is the second concessionary loan. The complexity also means greater job security for professional financial planner because nobody else could understand. Why?
According to the available information, it is now possible (assuming he or she meets other tons of criterion) for a HDB flat owner to obtain a second HDB concessionary loan even if he downgrades to a smaller flat. Previously this was not possible. However, the amount permitted to be borrowed is so complicated. After reading many times, the formula I gathered is:
Maximum second HDB concessionary loan = Valuation of purchase flat MINUS CPF refund of the sale MINUS IFF(Cash proceed>50000, 50%*cash proceed, MAX(0, cash proceed - 25000))
The complex formula is with regard to how much cash the seller is permitted to keep. Apparently the seller has to use 50% of his cash proceeds for the second flat. However, he gets to keep at least $25,000 of this cash proceed. What is this sh*t formula about? What is this magic $50,000, 50% and $25,000? What is the basis and why make life so difficult? If I am the civil servant developing this, I’ll just say that all the previous proceeds (regardless whether in cash or CPF) have to be used for the second purchase. The formula for the loan permitted to be borrowed would just be Valuation of second flat MINUS proceeds of the previous flat. Life will be much easier but this means less job security for the policy makers.
There are also more changes to HDB rules. Here are the summary which I have to download to my brain cells to remember:
|
Previous |
New changes |
|
Lease buy back only for 3 room flat and outstanding loan < $5000. Also must not had previously owned 4-rom or larger HDB flats or private. |
Lease buy back extended to 4 room flat even with loan >$5000 as long as the amount available to purchase of an annuity from CPF Life is at least $60,000. Those who previously owned a 4 room or larger HDB is also eligible. |
|
Could only get a second concessionary loan if upgrade to a bigger HDB flat. |
Can get second concessionary loan if downgrade but maximum loan permitted is: Valuation of purchase flat - CPF refund of the sale - IFF(Cash proceed>50000, 50%*cash proceed, MAX(0, cash proceed - 25000)) |
|
Minimum occupation stay 2.5 years for buyers with unsubsidized HDB loans 1 year for buyers with bank loans or no loan. |
Minimum occupation period is 3 years for unsubsidized HDB flat. |
Like this article? Subscribe to my newsletter below for more.
What do you think? Leave a comment.