1 Oct 2024
SOURCE: CPF Board
The driving force behind our goals often reveals the core of who we are. For some, it's a personal ambition or a quest for knowledge. For others, like 37-year-old Kent, it's family. Recognising that a loving, stable home is built on a foundation of financial security, Kent has made it his mission to become financially savvy.
Whether it’s budgeting smartly, investing wisely, or planning for the future, Kent’s dedication to positive money habits has helped to create an ideal environment for his family.
Home purchase for peace of mind
Planning for their first home was a big part of Kent and Cui Xia’s dream life together. They had countless discussions about costs, whether to go for BTO or resale, and whether to tap on their CPF savings for the purchase.
Kent was mindful that certain expenses would need to be paid in cash, such as:
- Option fees
- Purchase price above market valuation, resale levy and agent’s commission, if they go for resale flats
- Renovation, furniture, and home appliances
After considering the stable and risk-free interest for their CPF savings, Kent and Cui Xia made a deliberate decision not to use their CPF savings in their Ordinary Accounts (OA) for their home purchase and to pay for their house fully in cash instead.
While Kent’s strategy might not suit everyone, using a mix of cash and CPF for home purchases is a worthwhile consideration too. As your OA savings also contribute towards your retirement nest egg, it’s important to strike a balance between using your OA for housing and saving for the future. Avoid depleting your OA entirely for your home purchase to set aside savings for your golden years!
Finding the right financial balance for their home
Starting a new financial journey together often comes with some trial and error. Kent and Cui Xia make it a point to discuss all issues with each other and carefully weigh the benefits before making any joint decisions.
This way, they steer clear of any impulse purchases. These open conversations keep them on track and help maintain their financial harmony.
If you’re considering a home purchase, you will need to know about the Mortgage Servicing Ratio (MSR). This refers to the portion of a borrowers’ gross monthly income that goes towards paying all property loans. A good rule of thumb is to keep this ratio within 25% of one’s gross monthly income, for peace of mind in managing mortgage payments in the long run.
* HDB and financial institutions will ensure that MSR is capped at 30% of a borrower’s gross monthly income (for HDB flats and executive condominium only). However, we encourage members to cap their MSR to 25% for prudence.
Planning for their next big milestone together
Kent is a firm believer in setting ambitious goals. He sees it as a form of personal growth and shares that it gives him a great sense of satisfaction when those goals become a reality. Right now, he and Cui Xia are focused on their next big goal: buying their next home.
This significant milestone requires careful planning and in-depth discussions on how to manage their cash flow. Guided by their belief in the importance of prudence from their home purchase experience, they document their thoughts and considerations in a shared spreadsheet.
Kent also finds the CPF Home Purchase Planner (HPP) a useful tool. The HPP recommends a home purchase budget based on your income, savings, expenses, and sales proceeds from your current home. Plus, it shows how the home purchase will impact your future retirement payouts.
"Love and support from my family makes it worthwhile"
Kent and Cui Xia understand that navigating their financial journey, whether it’s budgeting for a new home or planning for retirement, requires both discipline and strategic thinking. Balancing these challenges is never easy, but the love and support from their family makes every challenge worthwhile.
The information provided in this article is accurate as of the date of publication.
