Housing loan wipes out CPF savings

crazy monkey SG

Sept 15, 2005
A housing loan that wipes out CPF savings

I read with utter disgust a study by OCBC Bank that Singaporeans are poor money managers.

My thirty years of CPF savings have been wiped out in three years because I took a housing loan from OCBC Bank.

Let me furnish a brief picture of what happened to me.

I withdrew all my CPF savings - $630,000 to purchase a property which provided the roof for my family.

OCBC Bank advised me to take a housing loan of $130,000 and an overdraft of $200,000. I was to discover that this was a bad piece of advice for which I have to assume some responsibility.

In early 1999, the economy was suffering. I had cash flow problems in my businesses, a travel agency and a KTV lounge, and I had to service the mortgage loan.

To cut my losses, I advertised to sell the property for more than six months. The best offer I got was $1 million, lower than Jones Lang's valuation of $1.05million.

OCBC went to the court to get an order to prevent me from selling the property for less than $1.05 million.

The reason: OCBC wanted at least $1.05M because there would only be $300,000 left after $700,000 was returned to my CPF account (principal sum plus accrued interest). Thus there was a shortfall of about $50,000.

When I could not sell the property at $1.05 million, OCBC seized it on March 4, 2000. OCBC waited till I reached my retirement age at 55 years on February 6, 2003. It sold the property in July 2003 for $830,000. After deducting the bank's charges, only $279,500 was left.

If OCBC Bank had allowed me to sell the property in 1999 for $1 million, or even if it were to auction the property in 1999 or 2000, I would have received a total of $747,600 on my retirement in 2003.

I would have more than sufficient funds to pay OCBC Bank the shortfall of about $50,000.

But OCBC held on to the property and continued to charge interest on the mortgage loan. I lost the interest payments which I otherwise would have earned from CPF. Instead, I had to continue paying OCBC Bank interest on the loan plus all the other related charges.

During the period when OCBC Bank held the property, I could not buy or rent a HDB flat. I had to rent a house for my family. Up till today, I cannot buy or rent a HDB flat according to HDB rules.

In Prime Minister Lee Hsien Loong's National Day Rally speech, he said he was looking at assisting the elderly and lower income groups to help them build up their assets.

He should also ensure that banks do not deprive people of their homes purchased with CPF funds, like what happened in my case.

Tan Chuan Siew

Atobe SG

Will the Ruling Party a.k.a the Present Singapore Government rule against the Banks in Singapore that are authorised to provide Housing Loans ?

There is a warm and close hand-in-glove relationship between the Ruling Party, the Government, and the local Banks.

DBS is Government owned through Temasek Holdings, OCBC is part family owned by the Tan Family - of which Dr Tony Tan is from the founding family, UOB maintain a correct but very close ties with the Ruling Party and the Government.

When the Ruling Party a.k.a the present Government allowed HDB to abandon the policy of financing HDB homes to Singaporeans, and allowed the local banks to take over such social responsibilities, it practically abandon Singaporeans to the mercy of the local Banks that operate on Commercial Principles, and with little regards to Social consequences.

On one hand, the Singapore Government is divesting all its commercial activities by PRIVATISATION; and on the other hand, through its ownership of Temasek Holdings and other GLCs, it is taking 100 Percent Ownership of Privatised Companies that operate with commercial goals and on commercial terms.

Presently, all social and public services, that were previously provided by various Government Departments and Agencies, are now provided by Private Companies that are owned through an intricate web of corporate ownerships.

The Ruling Party a.k.a the Singapore Government has abandon its Social Responsibility with this approach.

105090 SG

to tell you, never ever listen to the advise of bankers and banks, yes, especially OCBC. they plan out wonderfully for you on paper, but if u cant honour it, they wont help you out. no, they will be a devil and turn ugly. my parents also very angry with OCBC marketing tactics

shinta SG

let’s all slp on the streets

BillyBong SG

Its the same with every bank. They expect a client to have done his/her research and thus be FULLY AWARE of the subsequent costs and long term interest rates. With this in mind, all they have to do is provide the basic outline of the loan and the client is 'expected' to comprehend all the legal binding issues and fine print.

On one side, the onus lies on the customer (SG Citizen) to understand the implications of taking a long term loan from a bank and consequences as a result of non-payment or delayed payment. The penalties incurred are clearly (maybe not so clearly) stated in the contract when you sign it and unfortunately, unless you have friends in the banking sector proficient in financial law, you simply cannot take things for granted.

In fact, it is wiser to seek advice from such friends or others who have had prior experience. Clear all your DOUBTS on payment terms and costs before you put pen to paper. It would be foolish to sign the dotted line based on the bank's explanation alone. In fact, you are gifted the right to clarify and run through all details with a service officer and contemplate on your financial position before making such a decision.

In the end, the only person who suffers if things go wrong is yourself and your guarantor. The bank will ensure sufficient collateral in its contract to seize anything deemed an asset under your name to clear the debts. By that time, there's no use recipocating.

I feel for the man, but part of it (perhaps most of it) was also his own fault. Had he taken the legal advice on long term loans, this might have been avoided. His writing in to cry for help from the govt seems too little too late.

Heartlander SG

The smartest move for anyone is not to commit yourself to buy any item which will tie you down financially for a long period of time!If you cannot afford to buy a HDB flat by using cash or sufficient CPF fund, do not buy it!Just rent one either from the HDB or from the open market until you have enough CPF fund or cash saving to buy one!Do not forget that the interest that you have to fork out for your bank loans is also your hard earned money! So why you want to commit yourself when you cannot afford to buy a flat, a house or even a car?

When you buy everything you need in installment, that is where the problems in life started!Those conmen from the bank work very hard for the bank they work for and you know what those businessmen want when they ask to to buy their products in installment?

Many yuppies in Singapore had cash flow problems after the last few financial crisis mainly because they have the wrong mindset and they were status concious, they wanted to keep up with time and they were driven by the many Cs in their mind!If you are down-to-earth, you will always be the one who laughs last, laugh best!

Lowclassman SG

You are absolutely right~!~!~!

I will never buy a car with instalment again letting gov or bank to make my stressful earned money~!

My CPF would be enough to buy a 4rm flat without any loan. But what about CPF interest; say I withdraw 220K from my CPF account. Does it mean that the interest will still be compounding till the day I die?
Can anyone advise?

ndsef SG

I believe YES... the interest will still compound not only till the day you die. Even after the day you die, when the Executor of your Will manages to sell the place, CPF will deduct the interests from the sales proceeds and pass the rest to the Executor.

sgdiehard SG

CPF now pays 2.5% interest on yr ordinary account. If u withdraw 100k now, u owe yr acct 128k in 10 yrs, 164k in 20yrs. in other words, if you sell the house, u hv to pay back that amount to yr cpf acct. if u keep yr house till 55, u just take back less from yr cpf acct.

The picture is this, if you have 100k in yr cpf, if u don't withdraw it, in around 30yrs, u will have 200k in yr acct. if you withdraw to buy house, you will have no 200k but the house. Of course now you have to maintain min. sum blah blah.... So if yr house appreciate in 30 yrs and become 300k, then u make the right investment. if yr house was worth only 50k, then that was bad investment.

It was LKY's idea that ppl are loyal to where their money is, so if yr money and properties are here in singapore, you will have to be loyal to singapore. Properties have always a good investment till 1997. Those who bought houses in the 70s made millions, those bought in 80s made hundred of thousands, those bought just before 96 has now negative assets, i.e. even if you sell yr house you still owe bank money. So older ppl bought houses lah.

Then GCT was concerned that they could not give CPF accts holders the same return as that of market, so asked ppl to buy shares, and most if not all lost money.

Was LKY better than GCT in financial advice?? NO, politician advice is for political reasons. Never listen to the government on how you should spend yr money. You invest, by wisdom or hoping for luck, and the market decides if you make money or not. But market is hard to read.

sgdiehard SG

ALL banks are the same, offer you umbrella on sunny days but claim back when it rains. What I don't understand about this Mr. Tan is why he took the overdraft? Overdraft interests are always very high so are many of these EASY cash (easy to use but difficult to pay back). $130,000 housing loan should not be very difficult to repay but I guess his problem is with the $200,000 easy money.

Ever watch the film, Money No Enough? Banks are no different from legal loan sharks!