Sunday, 16 September 2018

CPF OA-SA Transfer for Millenial.. BTO How?!

The post today is inspired after sharing my last post on InvestingNote about my CPF transfer. 

Read: Peep into 20-year-old boy CPF Account - OA to SA transfer

This post has sparked off a certain level of controversy and a fair amount of input from wise seniors from InvestingNote regarding the OA account for first property.

All the comments are wise inputs which I acknowledged to and is learning from.  

Let's take a look at some of them:

For those that are curious, here's the link to the post which you guys may refer to. There's more comments that are added but I will likely not include everything here.

While I'm certain for now that the upcoming years will stay as per planned, I hold no crystal ball. 

Should god give me a beautiful princess to love and that I've decided to move on to Chapter 6 of my life directly, things will be changing. 

For those that are wondering what Chapter 6 is, please refer to the post below for more clue. 

Read: A letter to my 30-year-old self - 10 years ago

Having that said, I've decided to look into and write a little more about the BTO processes and what I thought about it. I'm not too sure about the exact procedure so readers that has experience in this, please feel free to drop by in the comment section below to add in more for me :)

Taking a look into HDB's official website, there's certain criteria for which one will have to look out for when the couple decides to go for a BTO application. Apologies for readers aboard as this will be a post more to Singaporean's context.

I've mentioned several times in many of my other posts that it is extremely important for one to consider their own profile before acting and numerous time I've repeated that it is important for us to know ourselves. 

As the topic of HDB is a really big one and there is too many different ways to work around with it, I will simplify it as much as I could and lean towards to most mainstream cases to tackle the debate between OA-SA transfer. 

Well, at least for my personal stand.

To make it simple, if you'd like to apply for a HDB flat in Singapore. Be it resale flat/BTO, here's the thing one should look at first

1. For singles that are unmarried/divorced you have to be 35 years old and above while those that are widowed/orphan could apply for one if they're 21 years old and above.

2. For those with a beautiful second half, both of you will have to be at least 21 years old.
For those that have yet to wed, you will have to ensure that you obtain a marriage certificate within 3 months of your completion date for your HDB.

There's a many different schemes available but the top two are the main criteria one should look at prior to selecting on the schemes.

Moving forward, I guess this is the area where most are curious in. 

I guess the main concern here today is the funds that you will require upfront as opposed to the mortgage that one will service when the flat arrives since the duration of wait should technically serves as a buffer for one to build more funds in their OA unless you're not working.

The financing part. 

There's 2 main types of financing means for you to choose from: 

1. Housing Loan from HDB
2. Housing Loan from Bank

Here's the downpayment you will need to fork out:

Read more on HDB website here.

So keeping things simple again, we will assuming we were to take up HDB housing loan, we will require 10% of the purchase price and 20% for those taking up a bank loan.

This downpayment can be paid using your CPF OA account/Cash.

Should you be able to use your CPF OA savings entirely for the downpayment, I believe one will probably smile as they do not require to fork out a cent from their own pocket.

Retrieving the records from HDB Feb 2018's BTO launch in Woodlands for a 66 sqf 3-room flat, this is what you'll need minimally:

Or slightly bigger if neccessary

Definitely you could pick a slightly better area and I'm sure it will cost more. But taking this example into consideration for BTO application.

A fair amount of S$15,500 - S$24,500 is needed for your BTO application for this particular launch. Meaning to say the combined OA balances between you and your honey will have to make up this amount for you to make the downpayment.

So how difficult is that?

Below the age of 35, one will receive 23% of their salary channeled to their Ordinary Accounts each time they draw their salary.

Meaning to say, if one is earning S$3,000, we're looking at S$690 into their OA monthly. To save up S$10,000 in their OA will require 14 months of employment with that salary.

If you're taking home S$6,000, you will then need 7 months of employment to build up this chest here.

Should you require a larger the deposit the time will then stretch longer.

See? Everyone has a different profile! 

And this is where it is important for you to consider on your own situation before acting! 

Read here for more details about Feb 2018's HDB Launch.

But let's not forget that there are other fees involved that will require cash from your pocket. But that is insignificant since our topic today is more on the bigger tickets and primarily addressing the issue towards the transfer of OA-SA.

Hence if we were to ever do any CPF OA-SA transfer we should be reminded that the transfer is irreversible.

For those millenial that are single today at my age, that is pretty much looking towards getting your own flat at 35, I'm very sure that the timeframe ahead is relatively long and you're actually on the safer end.

For millenials that are of my age today that has a beautiful wife waiting, the choice of OA-SA transfer will be largely dependent on how early you decide to get a HDB flat with your other half. 

If the thought of getting a HDB flat with your other half is within the next few years, it might not be a good choice to do the transfer since you'll be needing a fair amount of monies to be paid in time soon.

Like I always mention, I'm not a smart person. This is why I decided that I shall keep things simple for myself and should I ever want or think of getting a house, it's important to have choices and plan 
for the important decision.
What's more important is the peace of mind in doing so. I guess I'm being too simple minded and there's too many things to consider, this post today might probably end up as a hilarious one. But it's too much for my brain to process!

Ok.. let me not complicate myself again. 

So will I go for a BTO balloting next year?

I'm sure I won't!

The year after? 


But I'm sure I would one day and right now I'm anticipating to see my CPF yearly statement that will be coming to me in 2 months time!

How about you?

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  1. Earn more. Up skill. Progress well in your career to hit the mandatory CPF contribution limit as soon as possible. It is how to secure your CPF accounts for retirement and buying BTO too.

    1. Hi Uncle CW,

      Yes. This is the biggest key here. So long one is earning sufficiently to hit the CPF cap of $37,740 yearly. There is practically nothing too much to worry about.

      Very straightforward answer that I can’t agree more too.

  2. sleepydevil (I triple checked!)


    All these "controversy" for just around $8K?

    Its not as if its $80K or something ;)

    I'm glad you've made a decision!

    I suspect most readers don't realise its more of a trial run, test order, or pilot run kind of thing ;)

    If you are still blogging when you've reached 30, either way, you would have something to share with us - contrast with you not taking any action today ;)

    It could be your best financial decision ever!

    Or it could be another of one those, "Boy, was I dumb or what?" reflections.


    1. Hehe. Ok ok. This time I’m not sillyinvestor HAHA.

      I’ve made a decision that I hope I will not regret in the future. Maybe the readers are right! One fine day I might regret on this decision I take today!!

      There’s always 2 sides to a coin and our perspective is largely reliant on which side we’re viewing it from.

      Don’t forget! I recall that there’s a big cohort that hates the CPF system!

  3. Suppose you get hitched. BTO is not the only option... You can choose to rent, at least for a few years or even stay at either parents house or even "live apart together". To me, having a house to yourselves is not mandatory and more of a privilege. Of course, your partner may think otherwise but you should try to put your own interests first. Think rationally. Don't be blinded by "love". Just some advice from a guy that just reached thirty.

    1. Hi OWQ,

      Thank you for the wise insights.

      Yes. This is one main highlight as well. Which is called alternatives. There is always a number of different solutions for each problem and as much as I know, we should choose one that works best for us.

      And not because it works for someone else.

      I hope that readers will also consider this important factor before mirror-ing any move which is very devastating to their situation as no one is exactly the same.

  4. Oh, just to add on. I did the OA to SA transfer a few times until I realised it might be better to use the OA amount on STI ETF and/or some dividend stocks. Of course, this is riskier with higher returns compared to 4% compounded. But note that SA is very illiquid and also subject to policy risk.

    1. Hi OWQ,

      The CPF SA account is very illiquid as compared to OA as the main aim for SA is for retirement.

      For what I’m heading to now, is the 40k mark for CPF SA account to capitalize more on the 1% higher interest, which will make up 5%

      The OA is a more flexible account which can be used for numerous situation such as housing needs, educations, investments.

      Any employed worker that does not own a house or that their monthly mortgage that they are servicing are lower than their OA inflow, the OA funds will accumulate over time.

      With a sufficient OA balance above 20k, this is when they will be able to channel it into CPFIS OA account to capitalize on weaker market situation. Else, the 2.5% guranteed interest seems like a good deal :)

      Everyone has a different profile, risk appetite and definitely situation. It is always good for one to consider all of the above before making a decision.

      I’m sure you made a good one! And I’m looking towards learning more from you about your venture with CPFIS!

  5. Have been considering moving some of my OA to SA for awhile but in the meantime, I top up 2k cash every year to my SA to enjoy the interest and tax rebate at the same time.

    1. Hi Alexander,

      Nice! I'm sure your SA Account is gaining a decent amount of interest today :)

      I will do the same too when my employment income is higher that taxes comes knocking onto my door! :)

      Killing two birds with one stone