There are pitfalls that property owners have to avoid at all costs.
These are mistakes that could potentially cost you hundreds of thousand dollars and wipe out all your hard earned savings.
Knowing what to lookout for will safeguard your asset value.
Read on to find out how my clients and I overcome the challenges and made the best move forward.
All names are fictitious for confidentiality.
CASE STUDY 1
Learning Point : Knowledge on CPF Policies
My clients F & B, have been living in their first resale home for the past 18 years. Like most families in Singapore, they paid their monthly installments with CPF funds. However, they are not aware of the CPF Accrued Interest that comes with using CPF funds. This is a crucial knowledge that you need to know as a property owner.
What is CPF Accrued Interest?
As a person working in Singapore, you will receive monthly CPF contributions from your salary. This amount gets allocated to either the Ordinary Account, Special Account or Medisave Account accordingly. As long as the funds stays in your CPF accounts, you will be earning a pretty respectable interest amount every year.
When you use your CPF OA to finance your monthly mortgage, there will be interest accrued on that amount used. This accrued interest compounds at 2.5% per annum. When you sell off your property, the amount used will have to be returned in to your OA as well.
This all sounds simple enough and you probably won’t be concerned about it since 2.5% sounds like a negligible number. But if you were to do the calculations, this will snowball to a huge amount. This has caused numerous families to face issues in making their next move.
This was exactly what happened to my clients whose CPF accrued interest has went up to more than $150,000. Within just 1 month, their cash proceeds that they could have received from selling the property reduced by more than $8,000!
If their property value had remained stagnant in the last 18 years, they would have faced a negative sale! This means that they will not receive any cash proceeds at all from the sale of their house.
This is one situation to avoid at all cost!
CASE STUDY 2
Learning Point : Every Situation Has A Solution
My clients, Z & O bought their property back in 2013. This was a year where the property prices increased significantly and there were a lot of buyers looking for properties in the market.
There were a lot of factors that lead to the market situation back then.
Z & O, were one of those who rushed in to secure a unit for themselves. They even paid cash over the valuation of the unit so as to not miss out. 6 years down the road, they met me for a non-obligatory consultation to learn more about their current position and their eligibility to upgrade.
After doing up the calculations together, we found out that they would incur a negative sale. This is the last thing that any home owner want to hear.
We sat down and discussed together and eventually worked out a solution that works for them. This helped them move forward with their next step in their property journey.
CASE STUDY 3
Learning Point : Get Professional Consultation To Avoid Hidden Problems
Another case that I encountered is with H & M. They bought a resale unit while relying on hearsay and word of mouth in determining the potential of the property. When I look through the purchase that they have made, I realized that they paid $50,000 to $60,000 more than the actual value of the house
This is a real life example of DIY sellers and buyers who made a loss which sets them back in their real estate journey. While they are still serving their MOP now, i advised them accordingly in preparation for their next step. It is a painful experience to discover that you made an error like that, especially when you have a long term plan to accumulate retirement funds through property.
An over payment for your home will be a future issue faced when you decide to move or upgrade.
Proper research and knowledge is essential in property purchase. Do not leave it to luck. This is the most expensive purchase that you will possible make.
Have a home that grows with you and your family. Make the right move and make informed decisions for your future.
I believe in empowering my clients with knowledge and logical figures which will lead you to making the best choices that will ultimately benefit you and your family.