Query on property pledge for Min Sum

(19-07-2014, 11:53 PM)kichialo Wrote:

(19-07-2014, 09:21 PM)CY09 Wrote: Hi Kichialo,

Thanks for the clarification. Does it mean assuming I am 55 and have a CPF balance of $188,000; I can pledge only $77,500 from my CPF balance, withdraw $110,500 and pledge the remaining using property instead of pledging $155,000 into CPF life and withdrawing only $33,000. However, my payout will be based on $77,500 that remains?

I remember listening to Moneymind and someone called in to ask something similar. The reply from the financial expert on the show is similar to what you said, but he said best is always double check with CPF.

I thought my first reply is clear, or maybe you are not convinced of my reply.

By pledging property, it only reduce the mandatory requirement of min sum by half. CPF do not "fund" or "top up" the other remaining half. You can simply view it as you are just putting in $77,500 into min sum, and you get what you put in.

On your question of if one has $188K, if he pledge his property, his min sum requirement is now $77.5K, so yes he can withdraw all the remaining $110.5K. If he sell house later on, he need to top back the half back. If he do not pledge the property, his min sum requirement is $155K, and get back $33k at 55.

See, direct from CPF:

http://mycpf.cpf.gov.sg/NR/rdonlyres/4DB...nglish.pdf

I hope piggo and Zelphon are reading this thread. They had the mistaken impression that pledging ones property for the MS is a form of reverse mortgage and can end up losing ones roof.

Note that the pledge cannot be more then what u paid using OA for your property.

It is true that using CPF to pay for HDB inflats the price of HDB...
same as 100% loans for buying car+COE...

:O

(20-07-2014, 12:32 PM)WolfT Wrote: Note that the pledge cannot be more then what u paid using OA for your property.

I'm afraid this is not correct, but its the opposite. How much that can be pledge depends on "residual" value of the house. Generally, residual value is market price less outstanding loan and less what has been paid using CPF. Or simply how much cash you will get after you sell the house. This is because when house is sold, it need pay back outstanding bank loan and top back any amount used from CPF (including interest).

So the lesser you have used CPF to pay loan, the more you can use to pledge (limit to $77.5k). But if house has very residual value, then no need to bother.

(20-07-2014, 01:28 PM)aspeed Wrote:

(20-07-2014, 12:32 PM)WolfT Wrote: Note that the pledge cannot be more then what u paid using OA for your property.

I'm afraid this is not correct, but its the opposite. How much that can be pledge depends on "residual" value of the house. Generally, residual value is market price less outstanding loan and less what has been paid using CPF. Or simply how much cash you will get after you sell the house. This is because when house is sold, it need pay back outstanding bank loan and top back any amount used from CPF (including interest).

So the lesser you have used CPF to pay loan, the more you can use to pledge (limit to $77.5k). But if house has very residual value, then no need to bother.

Didn't see any mention of own cpf used to pay for the property in the cpf board's examples for property pledge. Residual value seems to be valuation minus loan only. So is it actually unrelated to own cpf usage for the property?

The url provided by aspeed in post #11 clears up some confusion. It is the first time I encounter CPF explain in clear english that retirement payouts will be smaller in property pledge situation.


Some CPF members have mistakenly thought the property pledge is to help to fund retirement payout, ie, a CPF member will get $1,200 monthly payout for both of the following situations:

a) have $155k in OA+SA
b) have $77.5k in OA+SA and pledge $77.5k in property


If is now clear that situation (b) will get possibly $600 in monthly payout only.



Pledging property is to let a CPF member withdraw more funds, at the tradeoff of getting less payout. There is no need to pay back any refund or to sell the property upon the demise of the member (which is what CPF replied in post #1 of this thread), since the amount pledge was not used to fund retirement payouts

Don't understand the logic...

If 155k gets you the 1.2k/mth payout plan, 77.5k gets you the 600/mth plan... then what's the point in pledging?

If they don't need the additional 77.5k in pledges, why make us pledge our property?

cos you cant sell what you pledged and if you dont pledged you dont get even the 600/mth plan..........just my 2cents on why......

(20-07-2014, 02:27 PM)smallcaps Wrote: Didn't see any mention of own cpf used to pay for the property in the cpf board's examples for property pledge. Residual value seems to be valuation minus loan only. So is it actually unrelated to own cpf usage for the property?

Yes you are right, residual value is minus loan only. but how much can one pledge do factor in how much cpf is used.

See link:

http://mycpf.cpf.gov.sg/NR/rdonlyres/1CD...pledge.pdf