RES exam question on Financing: Mr Salleh, 54, is the only buyer of a resale flat with 39 years of lease remaining
Mr Salleh, 54, is the only buyer of a resale flat with 39 years of lease remaining. He will use his CPF and an HDB loan. The remaining lease does not last him to age 95, and his salesperson works out what he may use. (i) His CPF use is pro-rated, as 54 plus 39 comes to 93, short of 95. (ii) His HDB loan is pro-rated on the same basis as his CPF use. (iii) Since fewer than 40 years remain, he may use no CPF at all. (iv) He may use about 90% of the Valuation Limit, being 19 years divided by 21. Which of the statements above is/are correct?
- A(i) and (ii) only
- B(i), (iii) and (iv) only
- C(i), (ii) and (iv) only
- D(ii) and (iii) only
Show answer & explanation
Answer
C. (i), (ii) and (iv) only
Explanation
Answer: (i), (ii) and (iv) only. His lease falls short of age 95 but leaves at least 20 years, so both CPF and HDB loan are pro-rated.(i) True. The lease does not cover him to age 95, so CPF use is pro-rated.(ii) True. The HDB loan is pro-rated in the same way as CPF use.(iv) True. (39 - 20) / (41 - 20) = 19 / 21, about 90%.Watch out: The cut-off for any CPF use is 20 years of lease, not 40.Rule: Full CPF use up to the Valuation Limit needs the lease to cover the youngest buyer to age 95. Otherwise, with at least 20 years left, CPF and HDB loan are pro-rated: (remaining lease - 20) / (years until the youngest buyer is 95 - 20); below 20 years no CPF may be used.Source: CPF Board and HDB, since 10 May 2019; /learn/freehold-vs-leasehold-singapore
Why the other options are wrong
- (iii) False. The floor is 20 years remaining, not 40.
Study the concept behind this question: RES Section B, Paper 2: Worked Property and Finance Cases
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