Aug 25th, 2007
Thoughts on additional CPF Housing grant
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I read today’s newspapers on the CPF housing grant and how it is supposed to help low income families and first timers get a home. It’s good news, but one has to read the fine print. The fine print is that to qualify for the additional grant, one of the applicants needs to have been working continuously for at least 2 years prior to application.
I’m quite sure there are good reasons for this, but unfortunately, people like me who start a family young gets screwed over by the fine print. I just graduated and have worked for only a couple of months. My wife is a full time graduate student. Based on the latest figures provided, we would have qualified for an additional $15,000 grant if not for the 2 years criteria.
If I had worked for 2 years already, I probably don’t need the grant. I would have enough CPF and cash to pay the downpayment for a brand new HDB flat, which is 10% of the sale price. However, I just started working and therefore, my CPF and cash balances are peanuts. Yet, I don’t get additional help unless I work for 2 years. That’s a real huge disincentive to marrying early. I’m not regretting my decision to marry early but seriously, I’m going to feel the pain if I am successful in my balloting application because the 10% deposit of $200,000++ is no joke for me and my wife.
Thankfully, my parents were kind enough take the burden of the study loan off my back. Without their help, it might have been a serious dampener on marriage plans. It’s not so painful now, but still, I don’t understand why there’s a requirement to have worked at least for 2 years. Are they encouraging or discouraging people to start a family? I have no idea.
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er… don’t think the grant is meant for people like you…
yh,
The eligibility criteria can be found here
It’s clear that to qualify, you need to fit the correct income bracket and worked for at least 2 years. I honestly don’t get the 2 years part.
Aaron,
i think the grant is for people who really cannot afford a flat. Considering the potential earning power of both you and your wife, i don’t think you are in the group they are targeting when they introduced the scheme.
Seems to me like you are trying to exploit a loophole in the scheme. Perhaps the 2 years part is a mechanism to plug the loophole? Preventing graduates or potential high earners from benefiting from a scheme aimed at low income families by applying for a flat before they get jobs?
Aaron,
I think it is actually a blessing in disguise. If you wait for two years, the price of HDB flats would go down. At present rate, the price is too high. If I were you, I would wait for two more years to get the grant as well as to get a cheaper flat, because in two years time there would be an increase of new flats which are now still under construction.
If you have already applied for the flat with HDB, you can still delay your choice. Yes, I think you can. Check this out with HDB.
So, I think its good to be patient. Stay with your parents or with your in-laws for two years first. Or, rent a room nearby to your working place, which means you can save a bit on transportation cost. Money is not easy to earn nowadays.
Think about it.
The Garuda - 26 August 2007.
Halo, mr aAron ah,
Is it HDB Housing Grant or CPF Housing Grant hah?
Me has neber heard of CPF giving us a Housing Grant leh.
In all these years of taking away our money by force, CPF Board have been finding more and more ways to delay the paying out of our money, giving all sorts of excuses.
When in the world would CPF Board be so kind as to give out grants to us to lease (not purchase) a HDB flat hah?
Small Ah Beng from Pulau Huntu Kechil.
yh,
I’m going to tease out a couple of your assumptions here. By saying that our potential incomes are high, you are indirectly saying that we will never face problems with income. If that is true, we won’t see professionals and managers becoming unemployed.
Secondly, you assume that the scheme is for those who “really” cannot afford a flat. In that case, why is the government increasing the salary bracket to qualify for a grant? A household with income of 4k should be more than able to afford a 4 room flat. By your reason, I think that the government should reduce the income bracket.
Of course, having said all these, I think the fundamental question remains, that is, what is the intention of having this scheme? If it is to encourage and help Singaporeans to get their first flat to start families, then it doesn’t make sense to have the 2 year income requirement. What would make more sense is a case by case evaluation to ensure that the system is not abused.
Anyway, while you are right in saying my income potential is quite high, but that takes time to realise. By the time me and my wife realise the income potential to be able to afford housing entirely by our own means, we are already in our thirties. There will be a physical limit to how many children we can have at that age, which I presume is against the government’s interest.
Garuda,
I totally agree with you from a rational viewpoint. However, I have a slight problem here in the sense that I want to spend a few years as a couple, or “honeymoon” if you like, before the kids come along. Perhaps the market might come down in 2 years but that’s hardly the point. If we wait 2 years, we would effectively be delaying our plans to have kids for 2 years because we want that time together a a couple before the kids come along. It’ll really throw a spanner into the works to delay but I guess the price to pay will be more $$$.
Small Ah Beng,
Good question! I don’t know how to answer it though. It says there on HDB website Additional CPF housing grant. I think you have to go to AMK and ask PM Lee to clarify.
i share the same thoughts too. there a serious problem for working-to-middle class folks like us in early marriage and building the familial nest, so much so we come to believe that we must work work work and save save save so we can achieve a comfortable level of financial security, or so we perceive. marry late, have kids later. the hdb flat thing is one huge impediment (not to mention the extra 7% gst on the flat, that’s like $3,500 more for every $50k you cough out).
any way, hdb has income brackets. since (on paper) they are for public housing, they are obligated to provide housing for the lowest of incomes, hence the grants and little aids. the purpose of working the 2 years to “qualify” for the grant is to help low income folk who work for 2 years and earn statistically low incomes.
back to family, i think hdb also internalises the values that it’s good to have many generations under one roof, family members helping one another (so the government won’t have to bother too much in helping). in this logic, if you fail or suffer, it’s because your family never took care of you. it’s culture la.
the government is your daddy. they’ll want to ensure you are stable enough, because when left alone, they assume you’ll squander all your savings and do/pay for things beyond your means. hence there are so many apparatuses in place to “help” us. the financial-savvy lot will find this a huge huge burden.
oh ya, with a lower combined income, you’ll not be entitled to a large loan package. i’m sure you know that. but at the same time, you qualify to get any hdb flat, cos you fall within the income bracket. i guess it’s xian1 ku3 hou4 tian2 when a young couple gets a flat. the sweeter and latter half of their lives would involve them reaching (hopefully and by right) their potential income.
any how, the idea of paying loans and debts for the rest of your life (and perhaps beyond retirement) sickens me. and old people (who should be retiring, and who don’t wanna work) shouldn’t be working. maybe we’re all jewish slaves rowing that roman ship and the commander told us to row faster.
sorry to take up too much space.
furthermore, i think this plan fits the typical graduate hubby and wife thing. cos, BY RIGHT, you’ll meet your lover in university and you’ll graduate together. you’ll work for 2 years and then you can get your flat.
even if you’re high-school sweethearts, wherein the wife will graduate 1st and work for 2 years, given the hubby’s 2-year NS downtime, it still fits pretty well for the housing plans. but of course, all the more it will delay having kids cos it can be financially pretty straining on the couple.
but for couples who fall outside this mould, one of the couple will probably have to work for 2 years and then they’ll qualify for the whole thing.
it’s never wrong wanting to marry and starting a family, but sometimes our dreams are affected/shaped by these policies.
hypothetically, i wonder how the government were to react if everyone in singapore suddenly said, “NO! we are not gonna have babies. we will not let you have our sons and daughters because we will not give them to you.”
HEY MAN!! THIS is yr jr from CNM Camp. This has NO relevance to this post of yrs but I would really like to offer my congrats on the wedding man!!
Good job! yr love story is a role model for us kids here. =)
Sam,
If that hypothetical situation is true, the government will just encourage more immigration!
Anyhow, I’m not really complaining, just that I think the government can either 1) make the policy clearer or 2) make the policy more flexible. If people are genuinely interested in starting families, it should make sense to give a little extra push to the boat until it can catch enough wind in the sails to travel by itself. Actually, I think that many more graduate couples would be more willing to start families early if there’s some help in the early days of their careers, especially the more practical minded couples. People like me who marry for love (and maybe ideals) probably wouldn’t be affected but I think I’m in the minority (or I would like to think I am).
Hi Aaron,
Thank you for your well-wishes. Hope to catch up with you in school. I have more updates about the wedding on my wedding blog. You might want to check it out.
Aiya, yh is not saying that because you and your wife’s potential incomes are high, you will never face problems with income. That is only possible if you are a minister or top civil servant in Singapore.
Even Bill Gates faces the vagaries of the market day in day out.
Appears to me that the scheme is clearly intended to help lower-income families become homeowners. It is afterall ADDITIONAL grant. Basic grants are already available to help young Singaporeans like yourself buy a flat. I think it makes sense to have the 2 year working requirement to filter out families whose income is likely to surpass the 4k requirement just after 2 years of working. If we are going to be dishing out additional subsidies, we better be giving to those who truly need it.
IMHO, the new scheme is for ppl who cannot afford HDB, even after working full time for 2 years.
I bought a condo using bank loan and CPF monies under the Pte Properties Residential Property Scheme.
The market crashed but bounced back. With my income and CPF monthly contribution, there is insufficient monthly CPF to pay the monthly bank mortgage instalment. So I have to top up using my own cash. I don’t live in the condo any more. I cannot afford to. Part of the rent I earn goes to pay the monthly bank mortgage instalment.
Do I have any advice? Get HDB rather than private property. Purchase are more affordable place than one where you find you will be stretched.
Once upon a time the CPFB had something called the Govt Bridging Loan to help those like me. (1) the criteria was so strict, I did not qualify (2) they have since discontinued the scheme.
My view: the government should tighten the RPS and give more advice/warnings to those seeking to use the RPS, particularly for private property and for first-time property buyers.
My other view is that government should help those like me who have had difficulties. They are not keen on mortgage interest relief, so I do not know what else. Maybe reintroduce the Govt Bridging Loan with more relaxed criteria, or maybe they would allow more generous use of Special Account funds to be used towards monthly mortgage payments.
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Getting grant is just the first part of the equation….
One of the other consideration is the repayment of the Housing Loan.
If we have cash to spare in the bank, should we make lump sum repayment? What are the pros and cons?
Well, if the money is just sitting in the bank earning us super super low interest rate, it is definitely better to pay off the housing loan earlier as it will save us interest.
However, if you are able to invest the money that earn you decent interest rate, (2.5% from CPF ordinary account, risk free), you should invest it and stretch out the payment period. As the amount that you are going to pay of earlier is able to make you more money than the interest that you can save.
This blog has more details and an excel sheet that can be used to calculate the above mentioned.
http://baselearning.blogspot.com/2008/10/cpf-housing-loan-early-repayment.html