CPF Changes from 1 Jan 2006

[Dennis Ng]

Changes to CPF were announced in year 2003. Some of the changes are "in steps"...perhaps many people have forgotten about them already. Here's a summary of the CPF Changes that would take effect from 1 Jan 2006 for your easy reference:

CPF Changes on 1 Jan 2006



1. for age 51 to 55 - total CPF contribution reduced to 27%.

2. for age 56 to 60 - CPF going into Ord account is only 10.5% and drop to 2.5% from age 61 to 65.

3. Monthly Salary ceiling for CPF contribution is lowered to $4,500. ie. anyone earning more than $4,500 a month actually would suffer a "drop in income" due to this.

4. CPF Housing withdrawal limit is reduced to 132% . It would be reduced to only 120% by year 2008. This does not apply to people who buy HDB flat buy paying concessionary rate loan.

If someone in year 2008 buys a property, max amount he can
withdraw from CPF for this property is 120% of the valuation limit.

Valuation limit = the lower of purchase price or valuation

eg. purchase price $200,000, valuation $220,000 - valuation limit is $200,000

Max withdrawal is 120% x $200,000 = $240,000

If this person pays for 20% of the price - 5% cash, 15% CPF ($30,000). If he takes a 80% loan ($160,000) and repayable over 25 years. Assuming average interest rate of 4%, monthly instalment works out to abut $845.

In this case, from 9th month of 20th year onwards, he would have fully utilised the 120% withdrawal limit and from then onwards till year 25, he needs to pay the housing loan instalment of $845 entirely in cash.

Thus, anyone who is thinking of purchasing a property, it would be in your interest to seek advice from a competent person to work out your financial cashflows to ensure that you would not be "shocked" in future.

Leverage provides a FREE Housing Loan analysis service on a no-obligation basis. You can email to dennis@leverageholdings.com for us to help you plan your finances in buying a property.

[charmonix]

.....

If someone in year 2008 buys a property, max amount he can
withdraw from CPF for this property is 120% of the valuation limit.

Valuation limit = the lower of purchase price or valuation

eg. purchase price $200,000, valuation $220,000 - valuation limit is $200,000

Max withdrawal is 120% x $200,000 = $240,000

If this person pays for 20% of the price - 5% cash, 15% CPF ($30,000). If he takes a 80% loan ($160,000) and repayable over 25 years. Assuming average interest rate of 4%, monthly instalment works out to abut $845.

In this case, from 9th month of 20th year onwards, he would have fully utilised the 120% withdrawal limit and from then onwards till year 25, he needs to pay the housing loan instalment of $845 entirely in cash.

.....

If the loan is from the bank and it is a variable rate package. Assuming that the interest is rising in most of the years, this person might have to pay cash even BEFORE 9th month of 20th year

[Dennis Ng]

what I mean is that in this case from the 9th month of the 20th year of the loan onwards, the person needs to pay Housing Loan instalment in cash.

Hope that clarifies.