Are you aware of the housing finance limits?

Many are not aware of this policies on the 100% Available Housing Withdrawal Limit (AHWL) and 120% to 150% cap on Central Provident Fund withdrawals.

For example, if you bought a unit for $300,000. After paying for it for 10years at $1,500 a month, you will hit the 100% AHWL at the halfway mark of a 20 year loan. Due to insufficient Central Provident Fund (CPF) Minimum Sum, you have to put aside that $1,500 in cash from your monthly income, which requires a big adjustment.

If flat buyer had been more aware of the policies, they could have lowered the monthly instalments, lengthened the loan period, while saving up cash as early as possible or even a downgrade. Over the next few years, those who have reached the 100% AHWL and cannot use their CPF to pay, may not have enough cash to pay their instalments.

This is especially so for many who bought their flats in the late 1990s, since the ruling came into effect only in the mid-2000s. Most people think they can depend on their CPF, and may not have enough cash savings or income to pay the instalments. Currently, owners get a notice letter only a year in advance, which may not be sufficient time for them to make the necessary adjustments, such as saving up, or even downgrading.