Frequent Asked Questions on Executive Condominium

Section B： Finances FAQs

   1.     We are 2nd timer applicants, do we need to pay resale levy for ECs? If yes, what is the amount and is it based on my first
          direct purchase HDB flat that I bought and sold years ago or on my last resale flat. 

2^nd timer will need to pay resale levy from the Westwood Residences launch (30 May 15) onwards.   The resale levy is based on the first subsidised flat (direct purchase from HBD or first resale with CPF Housing Grant) sale. See the Table below for a summary of resale levy based on when the subsidised flat was sold.  For seller who opted to defer the payment of resale levy when their subsidised unit was sold between 19 May 1977 to 2 March 2006, there will be a compunded accrued interest onto the levy amount that need to be paid before you can collect the keys to the EC unit.

2.   Can we pay the 5% cash first for downpayment and pay the remainder 15% with the CPF refund only after selling our flat? 

No, the developer cannot wait indefinitely for you to sell your flat (see related Qn 3). 

In general, you need to do your financial planning before you book an EC unit.  Assuming you are able to secure 75% bank loan, a quick rule of thumb is a minimum of 29% of purchase price in cash/CPF is needed (see related Qn 4).

3.     I have just sold my existing HDB flat and I need to use the CPF from the sale to pay for the 15% downpayment.  When is the earliest timing that is safe for me to book an EC without forfeiture worry? 

After your HDB resale appointment, it is advisable to set aside 2 weeks for the fund to be returned into CPF account before it being used again for your next purchase.  

Since the earliest timeline to pay the 15% downpayment is 9 weeks from the booking date or 3 weeks after HDB approved your application and the SPA delivered, you can book an EC if you know your HDB resale appointment date is not more than 7 weeks away..

4.     We are first timer applicants, both SCs, currently 32 year old, with combined household income of $10.8k.  How much cash/cpf do we need in order to buy an EC of $1.0 million.  

Based on current ruling/restriction,

- For houehold income below $11,000, you are eligible for $20,000 CPF Housing Grant that can be used for the downpayment
- Your loan tenure eligibility is 30 years maximun; and at 75% LTV, maximum bank loan is $750,000
- Based on 30% MSR, assuming fixed monthly income stream and 30 years tenure, your estimated bank loan is $720,000

The amount of cash/cpf needed to purchase an EC of $1.0 million is as follows: 

a.     5% booking fee                             : $ 50,000  cash 

b.    CPF Housing Grant                        : $ 20,000  CPF                      (Dependent on total income) 

c.     Remainder 15% downpayment        : $150,000 cash and/or CPF

d.    Stamp Duty                                   : $ 24,600                              (3% purchase price - $5400)

e.     Legal Fees                                    : $   3,000                              (Approximate)

                                                          -----------------------------

*    Total within 9 wks from OTP           : $ 207,600 cash/CPF            (after CPF housing Grant offset)

**   Additional fund for stage payment   : $   80,000 cash/CPF            (80% purchase price - bank loan)

                                                         -------------------------------

     Total cash/CPF before bank loan     : $ 287,6000 cash/CPF

5.     We are first time home buyer interested in EC. Both SCs, our age is 38, combine salary is 12k and we have about $150K in CPF OA. So if the unit cost 1.1million dollars, and if I max out our CPF, how much cash upfront that I need to prepare before bank loan ? 

- For houehold income up to $12,000, you are eligible for $10,000 CPF Housing Grant that can be used for the downpayment
- At 38 years, your loan tenure eligibility is 27 years maximun; and at 75% LTV, the maximum bank loan is $825,000
- Based on 30% MSR, assuming fixed monthly income stream and 27 years tenure, your estimated bank loan is $753,000

Do note that for cash upfront calculation, other than the CPF housing grant amount, the usage of CPF monies is calculated backward from bank loan amount (not forward after 5% downpayment).  I had done a Excel worksheet program to help me compute these similar repititive iterations. Below is a partial screenshot of the financing estimation report that I created for my client.

From the computation below, the cash needed upfront for the downpayment (exclude legal fee) is about $215,600. Of the $150K in CPF monies, only $23,000 can be used at downpayment stage, the remaining $127,000 had been reserved for the later stage payment.  

6.  I am 42 yrs and my wife is at 36 yrs old, our fixed monthly income is 8K and 5k respectively. We bought our current 4 Rm HDB flat at $350K and the outstanding housing loan is $100K. We have about $120K in our CPF Ordinary Account and $150k cash. The CPF amount used for our current housing with accrued interest is about $280K. We looking at a EC unit that cost about $1.2 million. How is the payment schedule and how we can afford it? 

Your weighted income age is 40 yrs, and the allowable loan tenure is 25years. For $13K income at 75% LTV and 30% MSR ruling, the estimated bank loan is $779K.  

For homeowners who had not sold their exisitng HDB unit, there are 3 possible options to buy an EC unit:

1)  Buy under Normal Payment Scheme (NPS)
2)  Sell existing flat before booking under NPS scheme
3)) Buy under Deferred Payment Scheme (DPS) with a Bridging Loan where the future sales proceeds from existing HDB need to be  "earmarked" against the loan shortfall.

In the first scenario,

The estimated loan shortfall to 75% LTV limit       = (75% x 1,200,000 - 779,000) = $121,000
Addtional 5% for 1st stage construction payment = (5% x 1,200,000)                  = $ 60,000
Total Additional fund needed after downpayment  = $(121,000 + 60,000)              = $181,000

In this case, the whole CPF monies ($120K) and partial cash ($61K) will be reserved for the later stage payment.  Hence this option can be ruled out as there are insufficient cash on hand to pay for the downpayment of the $1.2 smillion unit.

In the second scenario, assuming the exisitng 4 Rm HDB has been sold at $600,000 before booking. After minus the $100k outstanding loan and $40K resale levy,  there will be an addtional fund of $170K in cash and $280K in CPF  for use.  The available fund after resale:
- Total Cash Available = $(150 + 210)K  = $360k.
- Total CPF Available  = $(120 + $280)K = $400K.

From the worksheet below, the $400K CPF monies will be enough to cover the balance downpayment ($212,600) and the later stage payment ($181,000) before bank loan.  The cash needed will be for the option fee of $60,000.   So if the existing home was sold before booking and its sales procceed being used, it will be enough to cover the 1.2 million unit payment at 75% bank loan.  

However, not all homeowners may be comfortable to sell their unit beofre booking as they need to factor rental cost in the interim period before key collection.  

In the third scenario, for buying under the Deferred Payment Scheme with a Bridging Loan, there are qualifying conditions that need to be met  before Bank will help finance the purchase with a Bridging Loan.  In general, the cashfflow from future sales of existing HDB unit must not be negative and/or the returned CPF (including accrued interest) is greater than the loan shortfall. It is best to checkout this Bridging Loan arrangement before any booking as different Banks may have different assessment crtieria and timeline to sell the exisiting HDB

Typically there will be a 3% cost differential between Deferred Payment Scheme (DPS) and Normal Payment Schme (NPS) and the  same $1.2 million unit will cost $1.236 million under DPS.

Assuming the current market value of existing 4 room HDB unit is $600,000, and the Bank recognised only 80% of its value in future sales, The cashflow from future resale is as folllows:

            Recognised Sale Value = 80% x $6000,000 = $480,000
                     minus Oustanding Loan                        $100,000
                     minus  Resale Levy                              $  40,000
                     minus  CPF usage (incl accr int)            $280,000
                                                                             ----------------
-            Total Casflow from future sale                      =  $70,000    >>  Not a negative sales

             Loan shortfall @75% LTV                           = $148,000  (75% x 1236K - $799K bank loan)
             Returned CPF                                           =  $280,000    >> Greater than loan shortfall

From the above, the qualifying conditions (positive sales and returned CPF greater than loan shortfall) for a Bridging Loan are met.  The Bank may even extend a bigger Bridging Loan to cover the addtional 5% ($61,800) stage payment if there are sufficient returned CPF to cover it.  In the above case, a total of $209,800 ($148,000+61,800)  Bridging Loan may be extended, which will enable the homeowner to use his existing CPF monies for the 15% downpayment stage. 

From the screenshot below, with $209,800 "earmarked" to the bank, the current $120,000 CPF monies can be used for the downpayment.  In such situation, the cash component needed to complete the booking is $158,880.  This is close to the available $150,000 cash on hand.  This is a probable solution if homeowner can just stretch a little bit and prefer to sell their home closer to TOP.     .

 

To sum up, you can choose to book an EC unit under option 2 or 3.  While option 3 cost more under the DPS, it appeal to homeowner who are not comfortable with renting another unit in the interim period before key collection. 

 

7.     Our combined salary is about $9K per month. Based on current 30% MSR, we can probably stretch for a 2 Br EC unit around $800K. We have some fixed deposits, can these be pledged to increase the loan so that we can afford a bigger unit.

In general, the loan quantum can be increased if you have assets to pledge to the bank. The ball park estimate for a 30 years loan tenure, every $100K incremental in loan quantum will need a secured pledging of $77K or $255K for unsecured pledging.   

It is best that you speak to a bank officer with regards to the type of assets that can be pledged and how much the loan quantum can be increased.  

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