Q MY WIFE and I are servicing our housing loan using cash and Central Provident Fund (CPF) savings.
We recently refinanced our loan in order to enjoy lower interest rates and in the process, the bank took over the first charge on the house from the CPF Board.
Both of us are under 55.
A recent Sunday Times article made us think about certain consequences if we sell out.
If we sell our house for $500,000 and the outstanding loan is $300,000, can all the sale proceeds go back to our CPF accounts?
Can the bank mortgagor claim the outstanding loan from the CPF?
A When you sell your house, it is not possible for you to arrange that all sale proceeds go back to your CPF account.
This is how the proceeds will be distributed:
Firstly, to repay your outstanding loan of $300,000.
The remainder can be used to repay funds back to your CPF Ordinary account. This would include the amount of CPF initially withdrawn plus accrued interest of 2.5 per cent per annum that you would have earned if the money had not been withdrawn.
Any excess after this would be paid to you in cash.
As mentioned, the bank has first claim on the sale proceeds to clear the mortgage. These funds will not go to the CPF first, as you suggested, but directly to the bank.
If you sell your house for $500,000, the housing loan of $300,000 would be fully repaid from the sale proceeds, thus settling your liability on your housing loan.
Let's say you had withdrawn more than $200,000 from your CPF account for the mortgage payments over the years - for example, a total of $400,000.
After paying off the outstanding bank loan of $300,000, the remaining $200,000 would be refunded to your CPF account.
There would be a shortfall for refund to your CPF account, and that would be considered an investment loss by you.
Dennis Ng
Spokesman for www.HousingLoanSG.com, a mortgage
consultancy portal
