Nov 2016 Sales Launch (Bedok Beacon)
Total Cost
Ballot
10
Option fee (refundable)
2000
Cost of Flat
509100
Add
Cost of door + sanitary fittings
3230
Cost of floor finishes
5120
Total purchase price
517450
5% of purchase price
25872.50
Less Cpf housing grant
10000
Add Lease stamp fee
10123
Add Conveyancing fee
346.65
Total payment at lease agreement 26342.15
The other 25872.50 (5%) of the purchase price is to be paid when you collect your keys, for HDB loans. 10% remainding downpayment if you are using bank loans.
The other 25872.50 (5%) of the purchase price is to be paid when you collect your keys, for HDB loans. 10% remainding downpayment if you are using bank loans.
How is stamp fee calculated?
- First $180000 @ 1%
- Next $18000 @ 2 %
- Thereafter @ 3%.
How is conveyancing fee calculated?
- First $30,000 @ 9.0 c. per
$100 or part thereof
- Next $30,000 @ 7.2 c. per
$100 or part thereof
- Thereafter @ 6.0 c. per $100
or part thereof
- There shall be a minimum fee
of $20.
Cash outlay: $10 with $2000 option fee to be refunded once you sign the
agreement lease
CPF: as long you have enough cpf funds for 5 % of the flat you can use
this to pay. Do note that if you are using CPF funds, you are borrowing money from your future self, when
the time comes for you to sell the flat, you would have to repay back the
principle plus accrued interest to CPF. Eg. 26342.15 in 9 years after 4 years
waiting for flat completion, 5 years of stay before minimum years of occupancy
condition for sale met
26342.15 X 1.025^9 = 32897.73
The power of compounding at a rate of 2.5% (ordinary account rate) for 9 years equates to an
increase of 6555.58 (32897.73-26342.15). This amount is to be paid back to your own CPF ordinary
account for retirement needs. If you would to stay for 20 years before you
decide to sell your flat the accrued interest will be
26342.15 X 1.025^24 = 47645.73
47645.73 - 26342.15 = 21303.58
So in 20 years, the amount payble to CPF for the accrued interest is 21303.58, it is close to what was borrowed in the first place. This is just for the downpayment of 5%, not inclusive of the monthly instalments that you may wish to use your CPF to pay when your mortgage payments starts and the remainder downpayment that you are required to make at the start of your collection of key. If grants are taken, once the HDB is sold, they would have to be return plus accrued interest as well.
So the question is, should you use CPF to pay?
Cost of using CPF is 2.5%,
if you are able to invest and generate a consistent return above 2.5% yearly till the date you sell your flat,
you should use CPF to pay. Otherwise, you should pay off using cash and the unused CPF monies would be generating at a 2.5% interest, way higher
than banks interest rates. More importantly, you are not the one contributing for the accrued interest to your CPF.
Total Amount of HDB loan required 517450 - 51745 (this amount is 10%) = 465705
As you can see, the monthly payments are 2112.76 for 25 years (max allowable HDB loans). This amount can be made up of both cpf and cash. Do note that the total sum of interest payable is 168123.47. Remember that using CPF to pay these will mean that when you sell, you also will need to pay its accrued interest from the period you use CPF to pay.
If you are able to pay off an additional 500 per month the result is
You would have saved 44628.02 in interest for your additional 500 dollars of savings per month. You will be "debt free" in 226 months or 18.83 years!
In conclusion
The true cost would be the purchase price of the flat, the huge portion of interest payments and the not so obvious cost of using CPF to fund the purchase. To decide whether to pay alot of money upfront would be to forgo the opportunty to use the money to reinvest in an alternative source of income. The main question is whether it is possible for you to generate a compounding return of above 2.5% year on year from the day you use your CPF, till the day you sell your property.
One way to reduce the accrued interest would be to pay off your mortgages using cash rather than CPF. The later you touch your CPF the better.
Another is to sell off your current property after 5 years MOP, and buy another using hopefully the gains you made after you sell, using cash to fund the purchase this time around. At the very least, you are limiting the accrued interest that may take a toll due to the effects of compounding.
Total Amount of HDB loan required 517450 - 51745 (this amount is 10%) = 465705
As you can see, the monthly payments are 2112.76 for 25 years (max allowable HDB loans). This amount can be made up of both cpf and cash. Do note that the total sum of interest payable is 168123.47. Remember that using CPF to pay these will mean that when you sell, you also will need to pay its accrued interest from the period you use CPF to pay.
If you are able to pay off an additional 500 per month the result is
You would have saved 44628.02 in interest for your additional 500 dollars of savings per month. You will be "debt free" in 226 months or 18.83 years!
In conclusion
The true cost would be the purchase price of the flat, the huge portion of interest payments and the not so obvious cost of using CPF to fund the purchase. To decide whether to pay alot of money upfront would be to forgo the opportunty to use the money to reinvest in an alternative source of income. The main question is whether it is possible for you to generate a compounding return of above 2.5% year on year from the day you use your CPF, till the day you sell your property.
One way to reduce the accrued interest would be to pay off your mortgages using cash rather than CPF. The later you touch your CPF the better.
Another is to sell off your current property after 5 years MOP, and buy another using hopefully the gains you made after you sell, using cash to fund the purchase this time around. At the very least, you are limiting the accrued interest that may take a toll due to the effects of compounding.
Comments
Post a Comment