Hey, How you guys define "afford-able" ??

[Montaigne]

Need some advice on behalf of a family member:
Assuming a combine cpf of $200k, does cpf allows a wipe out refinance and is it wise to reduce downpayment by $200k at today's interest rate? Reason that couple do not use cpf is becos CPF gives 2.5% interest while bank only charge about 1%+-, If do not reduce loan by $200k, the couple will be using about 30% -40% of income in cash to service loan which is quite tight. Estimated couple current status: Combine income assuming $10knett, currently owns a honda civic with a loan(not sure how much) and have a young toddler plus ageing parents from both sides. Property bought is 1 mil 2 bedder freehold property, taken $800k loan. pls advice, thanks!

[focus]

I think for own-stay property, the price is affordable if it's <= 10yrs of your total income(passive + active).

For investment property, my definition of affordable is to set aside 2yrs installment payment with a 70% LTV?

[samsara]

Since the couple has $200k combined (I presume it is in Ordinary Account), why not just write to the bank to increase the CPF component of the monthly repayments instead? In this way they can still benefit from the arbitrage from 2.5% CPF interest and bank loan interest of 1%, as well as reduce the cash component of the monthly repayments.

Need some advice on behalf of a family member:
Assuming a combine cpf of $200k, does cpf allows a wipe out refinance and is it wise to reduce downpayment by $200k at today's interest rate? Reason that couple do not use cpf is becos CPF gives 2.5% interest while bank only charge about 1%+-, If do not reduce loan by $200k, the couple will be using about 30% -40% of income in cash to service loan which is quite tight. Estimated couple current status: Combine income assuming $10knett, currently owns a honda civic with a loan(not sure how much) and have a young toddler plus ageing parents from both sides. Property bought is 1 mil 2 bedder freehold property, taken $800k loan. pls advice, thanks!

[yowetan]

Need some advice on behalf of a family member:
Assuming a combine cpf of $200k, does cpf allows a wipe out refinance and is it wise to reduce downpayment by $200k at today's interest rate? Reason that couple do not use cpf is becos CPF gives 2.5% interest while bank only charge about 1%+-, If do not reduce loan by $200k, the couple will be using about 30% -40% of income in cash to service loan which is quite tight. Estimated couple current status: Combine income assuming $10knett, currently owns a honda civic with a loan(not sure how much) and have a young toddler plus ageing parents from both sides. Property bought is 1 mil 2 bedder freehold property, taken $800k loan. pls advice, thanks!

How old is the couple, and how many years of loan they are getting? Next year will be tricky and I am unsure if they loaned too much @ 800k?

[Montaigne]

Couple in mid thirties, loan to max, so I presume 30 years.

[yowetan]

Couple in mid thirties, loan to max, so I presume 30 years.

I understand max is 35 years.

There are many fine details that need to be consider:

1. How old is their toddler, any additional courses/classes for their kid?
2. Monthly insurance premium for toddler etc
3. Car insurances, petrol and loan(which you are unsure of)
4. Income stream reliability
5. Do they intend to have 2nd child?

and many others.

I personally feel 800k loan amount is abit high and risky.

Is this freehold unit a newly TOP or resales unit? Are they buying for own stay or investment?

[Montaigne]

It's a 2 bedder fh apartment. Currently the in laws helping to look after kid abt 2 yr old. They did give extra allowance I think, maybe not alot for in law to take care of kids. The rest m not sure, but can assume worst case scenario.. Better to be safe than sorry. since already bot house, now is the decision whether to reduce lian to $600k or just keep in cpf earning 2.5 interest. samsara's idea of getting the bank to work out a higher sum in instalments should be a good idea?

[yowetan]

It's a 2 bedder fh apartment. Currently the in laws helping to look after kid abt 2 yr old. They did give extra allowance I think, maybe not alot for in law to take care of kids. The rest m not sure, but can assume worst case scenario.. Better to be safe than sorry. since already bot house, now is the decision whether to reduce lian to $600k or just keep in cpf earning 2.5 interest. samsara's idea of getting the bank to work out a higher sum in instalments should be a good idea?

Samsara's idea is to re-finance; I am unsure your relative's loan lock-in period? Usually there is a legal clawback clause that they would need to pay if they going to change any arrangement, that is also including re-financing. If the total sum bear by your relatives, assuming 800k @ 2.5k++ per month. He/she can request to finance bulk of it through CPF OA, assuming they both earn 5K and above; OA monthly contribution would be 1.1k, so total would be 2.2-2.3kSGD. The CPF adjustment is FOC and would bear no penalty charges then.

This would help them to soften the impact then. I am just surprise that your relatives have such a good saving - 200K cash on hand to pay off 20% of the house with stamp duty etc.

Btw, is this FH unit a new one or resales? Location? OCR or CCR?

[devilplate]

Need some advice on behalf of a family member:
Assuming a combine cpf of $200k, does cpf allows a wipe out refinance and is it wise to reduce downpayment by $200k at today's interest rate? Reason that couple do not use cpf is becos CPF gives 2.5% interest while bank only charge about 1%+-, If do not reduce loan by $200k, the couple will be using about 30% -40% of income in cash to service loan which is quite tight. Estimated couple current status: Combine income assuming $10knett, currently owns a honda civic with a loan(not sure how much) and have a young toddler plus ageing parents from both sides. Property bought is 1 mil 2 bedder freehold property, taken $800k loan. pls advice, thanks!

jus apply to use cpf to pay for mthly installment will do liao

no nid rocket science

[samsara]

There is no requirement to refinance in order to utilise more CPF in the monthly installment. However, this is subject to the bank approving the increase.

Samsara's idea is to re-finance; I am unsure your relative's loan lock-in period? Usually there is a legal clawback clause that they would need to pay if they going to change any arrangement, that is also including re-financing. If the total sum bear by your relatives, assuming 800k @ 2.5k++ per month. He/she can request to finance bulk of it through CPF OA, assuming they both earn 5K and above; OA monthly contribution would be 1.1k, so total would be 2.2-2.3kSGD. The CPF adjustment is FOC and would bear no penalty charges then.

This would help them to soften the impact then. I am just surprise that your relatives have such a good saving - 200K cash on hand to pay off 20% of the house with stamp duty etc.

Btw, is this FH unit a new one or resales? Location? OCR or CCR?

[roly8]

sibei stress to loan 800k

[Montaigne]

Samsara's idea is to re-finance; I am unsure your relative's loan lock-in period? Usually there is a legal clawback clause that they would need to pay if they going to change any arrangement, that is also including re-financing. If the total sum bear by your relatives, assuming 800k @ 2.5k++ per month. He/she can request to finance bulk of it through CPF OA, assuming they both earn 5K and above; OA monthly contribution would be 1.1k, so total would be 2.2-2.3kSGD. The CPF adjustment is FOC and would bear no penalty charges then.

This would help them to soften the impact then. I am just surprise that your relatives have such a good saving - 200K cash on hand to pay off 20% of the house with stamp duty etc.

Btw, is this FH unit a new one or resales? Location? OCR or CCR?

Its fh new in ocr, 813 sanctuary, near kovan. They sold their hdb, got some cash plus $200cpf. Ok lar, not surprising.

[yowetan]

Its fh new in ocr, 813 sanctuary, near kovan. They sold their hdb, got some cash plus $200cpf. Ok lar, not surprising.

Ah, that explains why they have the cash for the downpayment.

What really motivates them to get a condo? I used to be like them till I almost retrenched last year. I have recently downgraded to HDB as I cannot take the stress over the loan repayment etc.

Are they 35 or below? If former, the risk is high with 800K loan in today economy outlook.

[devilplate]

Ah, that explains why they have the cash for the downpayment.

What really motivates them to get a condo? I used to be like them till I almost retrenched last year. I have recently downgraded to HDB as I cannot take the stress over the loan repayment etc.

Are they 35 or below? If former, the risk is high with 800K loan in today economy outlook.

they got 200k cash lying in OA leh....ok la....let say int rate up...3k/mth installment.....200k can last them 5yrs+......cannot be 5yrs jobless rite?

[yowetan]

they got 200k cash lying in OA leh....ok la....let say int rate up...3k/mth installment.....200k can last them 5yrs+......cannot be 5yrs jobless rite?

Ok, noted.

I just feel 800k loan is just too high risk. I also had a look in propertyguru for the development. It is an apartment with simple facilities and is in clutter area. Mid thirties is really prone to retrenchment; I am constantly worried for myself.

[devilplate]

Ok, noted.

I just feel 800k loan is just too high risk. I also had a look in propertyguru for the development. It is an apartment with simple facilities and is in clutter area. Mid thirties is really prone to retrenchment; I am constantly worried for myself.

actually those high income earner more worrying.....

average folks earning 5k pm can easily find another job of let say 4k during bad times?

[yowetan]

actually those high income earner more worrying.....

average folks earning 5k pm can easily find another job of let say 4k during bad times?

I do not agree; my household income is around 7kSGD. I am earning around 4kSGD+ gross as of now, and I have sent several resumes last year, and will be doing so this year as well.

I have difficulties in getting replies from the prospective companies. It can be quite worrying and I am 34 year old +++ now.

[devilplate]

I do not agree; my household income is around 7kSGD. I am earning around 4kSGD+ gross as of now, and I have sent several resumes last year, and will be doing so this year as well.

I have difficulties in getting replies from the prospective companies. It can be quite worrying and I am 34 year old +++ now.

i noe of a fren quite high flyer earning like 500k a yr.....but his debts aso like crazily high.....driving a 280k car wif 90% loan......staying in a landed wif ard 2mil loan

wat if he kena retrenched?

[yowetan]

i noe of a fren quite high flyer earning like 500k a yr.....but his debts aso like crazily high.....driving a 280k car wif 90% loan......staying in a landed wif ard 2mil loan

wat if he kena retrenched?

I cannot comment that friend of yours, but I am skeptical especially as I almost got retrenched late last year. I was even in the mood to get one unit in Mount Sina then and was discouraged by many kind rational forumers here.

I must admit its more of a risk management, and I must say I have weak appetitte for that.

[samsara]

Personally, I feel there are three main components for consideration:

a. what is the net position of the individual? E.g. loans = $5m but total paper value of assets = $10m means the net worth is $5m (positive)

b. what is the overall likelihood of the paper value of the assets holding? E.g. diversified holdings in stocks, properties, bonds, etc = balanced portfolio with minimal risk of net asset value dropping below total liabilities

c. what is the overall liquidity of the assets? E.g. stocks are liquid but can be volatile, properties are not as liquid but volatility is not as high, mix of holdings means liquidity and volatility of asset prices can have a balance

In the case of your friend, if his net assets value is $10m, outstanding liabilities of $3m would not be anything significant since it amounts to only 30% of his net worth.

Loans, when utilised properly, are highly effective tools for wealth creation.

Just my two cents worth.

i noe of a fren quite high flyer earning like 500k a yr.....but his debts aso like crazily high.....driving a 280k car wif 90% loan......staying in a landed wif ard 2mil loan

wat if he kena retrenched?

[kane]

i noe of a fren quite high flyer earning like 500k a yr.....but his debts aso like crazily high.....driving a 280k car wif 90% loan......staying in a landed wif ard 2mil loan

wat if he kena retrenched?

Living the high life. If get retrench, the most is the car go for lor. And you can volunteer to help him out by taking over his car.

[samsara]

If it is not too sensitive, do you mind sharing which industry you are in and what kind of job scope are you interested in?

I do not agree; my household income is around 7kSGD. I am earning around 4kSGD+ gross as of now, and I have sent several resumes last year, and will be doing so this year as well.

I have difficulties in getting replies from the prospective companies. It can be quite worrying and I am 34 year old +++ now.

[samsara]

Further to my last post, a person's salary is an illusion. It creates both fear and complacency as a comfort zone. Fear of losing the salary and complacency in the false belief that the salary can be perpetually available. Until one recognises the true nature of "salary", he will not be able to achieve financial freedom.

i noe of a fren quite high flyer earning like 500k a yr.....but his debts aso like crazily high.....driving a 280k car wif 90% loan......staying in a landed wif ard 2mil loan

wat if he kena retrenched?

[devilplate]

Personally, I feel there are three main components for consideration:

a. what is the net position of the individual? E.g. loans = $5m but total paper value of assets = $10m means the net worth is $5m (positive)

b. what is the overall likelihood of the paper value of the assets holding? E.g. diversified holdings in stocks, properties, bonds, etc = balanced portfolio with minimal risk of net asset value dropping below total liabilities

c. what is the overall liquidity of the assets? E.g. stocks are liquid but can be volatile, properties are not as liquid but volatility is not as high, mix of holdings means liquidity and volatility of asset prices can have a balance

In the case of your friend, if his net assets value is $10m, outstanding liabilities of $3m would not be anything significant since it amounts to only 30% of his net worth.

Loans, when utilised properly, are highly effective tools for wealth creation.

Just my two cents worth.

his house on 80% loan....car 90%

not a very close fren so i dun hf other details lor....hehehe

but well my point is to bring up those high income earner chalking up high debts lah....

[samsara]

If the high-income earner does not have correspondingly high net asset value and he chalks up large amounts of debt then he is asking for trouble. On the other hand, if the high-income earner chalks up debt as a utility to increase his net asset value, then he is able to create wealth much faster than he could ever have had without monetary tools such as loans.

his house on 80% loan....car 90%

not a very close fren so i dun hf other details lor....hehehe

but well my point is to bring up those high income earner chalking up high debts lah....

[Eastboy]

Living the high life. If get retrench, the most is the car go for lor. And you can volunteer to help him out by taking over his car.

LOL. i sold my SLK recently to make a small profit...also to release some spare cash.

anyway yup i know that if i get retrenched, i must have enough savings to tide me over next few months, but it is never much a worry for me because my passive income is actually quite ok.

a lot of singaporeans mindset is to work hard at work so they have stable income. i think that's not for me - i make sure i work very hard at creating a stable passive income, so that my day job income actually becomes redundant. but of course i am still young so i should continue to climb the corporate ladder.

with stable passive income, you don't have to worry about being made redundant. and because when you are good at what you do, companies fear losing you as an asset. so never forget to develop and upgrade your skills, develop a niche for yourself that companies will find you indispensable.

[yowetan]

If it is not too sensitive, do you mind sharing which industry you are in and what kind of job scope are you interested in?

I am in lifescience/biotechnology industry, engineering and customer service. The outlook doesn't look favorable, and I reckon I will have any breakthrough.

I am looking for similiar capacity, managerial role if possible. The bottomline is a steadier job background with reasonable package.

[devilplate]

If the high-income earner does not have correspondingly high net asset value and he chalks up large amounts of debt then he is asking for trouble. On the other hand, if the high-income earner chalks up debt as a utility to increase his net asset value, then he is able to create wealth much faster than he could ever have had without monetary tools such as loans.

but i am not toking abt debt mgmt hor....

[yowetan]

LOL. i sold my SLK recently to make a small profit...also to release some spare cash.

anyway yup i know that if i get retrenched, i must have enough savings to tide me over next few months, but it is never much a worry for me because my passive income is actually quite ok.

a lot of singaporeans mindset is to work hard at work so they have stable income. i think that's not for me - i make sure i work very hard at creating a stable passive income, so that my day job income actually becomes redundant. but of course i am still young so i should continue to climb the corporate ladder.

with stable passive income, you don't have to worry about being made redundant. and because when you are good at what you do, companies fear losing you as an asset. so never forget to develop and upgrade your skills, develop a niche for yourself that companies will find you indispensable.

You probably in total control of your life, the way you wanted it to be.

Unlike you, I have one kid and expecting another one in June. My wife and myself are not high flyers and our combine household income is just a humble 4+3 = 7++KSGD gross. We have had the ambitious vision/dream to send our kid to Henry Park primary last year and somehow I woke up from the tempting dream after I almost retrenched. It was a close shave, and somehow the reality catches up with me.

Though I armed with an average degree with a master, I am somehow downright sandwiched in the middle, and probably lower middle rung of our society. I am not very optimistic and cautiously we downgraded to HDB for a peaceful sleep at night.

[samsara]

Your grasp of financial knowledge is sound and it is likely that you should be able to achieve financial freedom very easily (if you have not already done so) from this point on as long as you do not get distracted.

At age 25, active income: 100%, passive income: 0%
At age 30, active income: 80%, passive income: 20%
At age 35, active income: 60%, passive income: 40%
At age 40, active income: 40%, passive income: 60%
At age 45, active income: 20%, passive income: 80%

Once you are able to achieve at least 60% passive income, you are financially free and will be able to pursue any form of active income opportunity that is based on your personal beliefs and passions. Ironically, when this happens, your active income will then grow quickly as well (catch up with your passive income and overtake it) because you are no longer entirely dependant on it for subsistence, allowing you to do better than your peers in that area.

At that point, you no longer work for money but money continues to come in without much effort.

LOL. i sold my SLK recently to make a small profit...also to release some spare cash.

anyway yup i know that if i get retrenched, i must have enough savings to tide me over next few months, but it is never much a worry for me because my passive income is actually quite ok.

a lot of singaporeans mindset is to work hard at work so they have stable income. i think that's not for me - i make sure i work very hard at creating a stable passive income, so that my day job income actually becomes redundant. but of course i am still young so i should continue to climb the corporate ladder.

with stable passive income, you don't have to worry about being made redundant. and because when you are good at what you do, companies fear losing you as an asset. so never forget to develop and upgrade your skills, develop a niche for yourself that companies will find you indispensable.