Saturday, October 3, 2009

Freshly married DINO (Dual Incomes, No kids), all their plannings and efforts finally paying off, they moved into their brand new, well renovated flat. A few years later, became SITK (Single Income, Two kids), ...coz she quit job to look after young ones. then unplan event strike, hubby die suddenly!, over-nite became NITM (No Income, Three Mouths-to-feed). among her major regrets ? did not plan for contingency, thus taking only minimum loan and opting for short repayment period, thus exhausting most of their CPF/Cash savings in the process. Have they instead max-up on their housing loan and stretch the repayment period, HPS(Home Protection Scheme) will have pay off rest of housing loan upon his demise, and there could have been a couple hundred thousands more left, to support surviving members of family. She manage to get a job, but with two young kids, still Money No Enough, unlike with private property, - you cannot re-mortgage your HDB flat left with a small residual loan, for a larger loan, - you also cannot pledged a fully paidup flat for a fresh loan so she finally sold it, downgrade to smaller flat, choosing this time to max-up on both loan quantum and repayment period, inorder to have a higher buffer level of savings reserve, just in case kenna retrench, and overnite family again became NITM again (No Income, Three-mouths-to-feed). (above is a real life case) Morale of story: ========== For majority of Sporeans, the HDB flat is their single biggest asset, but most spend much more times planning on renovations and what appliances to buy for their new homes few gave much thoughts on how to finance their flat purchase, most simply take "lazy" approach:- "just deduct from CPF for monthly payments" - until kingdom come! fullstop. But how you plan to handle the financings, may have great impact on your family's livelihood for many more years to come. what happen if lose job and no more income ? (so better have more reserves in place) what happen if one, or sole breadwinner drops dead ? What happen when CPF dries up in year-X ? still able to fund monthly mortgage payment with CASH ? if you forsee future contingency, then it may allow allow you more time, and to take remedial actions much sooner eg. not spending a bomb to renovate like a palace, if already have little savings, or maybe even planning to sublet out a room or two, and make it self-fundings to some extent (ofcourse pls dun do anything illegal) Bottom-line ======== If you qualify for HDB Concession Loan (which had interest pegged at 0.1% above CPF Ordinary Account rate), and if you intend to stay in your flat for many more years to come, ==> then GENERALLY, it's better to go for maximum loan quantum available, and stretch to maximum repayment period (unless, you know of some very good reasons, why in your situation, you are better off not to)

The HDB Concession Loan - you are allow to take ONLY TWO such loans within your lifetime
arguably, the terms are about the best you ever find around, for a longterm housing loan.

Ofcourse also MAKE SURE your have adequate HPS cover, especially if you have a young family depending on you.

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