You will be able to work out what you receive in cash when you sell.
Ten years after moving in, with two children and a third bedroom that was no longer spare, Farah and Hakim started talking about selling the Bedok flat. Hakim had seen a neighbour's flat sell for S$720,000. "We paid S$620,000," he said. "So we'd walk away with a hundred thousand." Farah, who had read lesson 1.1 a decade earlier, suspected the number in their bank account would be very different.
It would. Most of the sale price of a home goes somewhere before you see it. This lesson follows the money in the order it moves.
On completion of a sale, the proceeds are paid out in a fixed order.
First, the outstanding loan is repaid in full, to the bank or HDB. If you are still in a lock-in, the penalty is added. Second, every owner who used CPF for the home has their CPF refunded: the principal they used, plus the accrued interest it would have earned. Only what is left after both reaches you as cash. From that cash you pay the agent's commission, if you used an agent, the legal fees, and any Seller's Stamp Duty, which lesson 3.3, Seller's Stamp Duty if you sell too soon, showed rarely applies to an HDB flat sold after its MOP.
That order means your cash comes last. A price rise doesn't flow to you dollar for dollar. It first fills up the CPF refund, and only the rest is cash.
The refund covers every dollar of CPF used for the home: the downpayment, stamp duty and legal fees paid from CPF, every monthly instalment paid from CPF, and any housing grant, which lesson 2.2, CPF housing grants: who qualifies and where the money goes, explained comes back to CPF too. Each of those amounts has been building accrued interest from the day it left your account.
You don't need to calculate it yourself. Your CPF account, under the housing section, shows the principal used and the accrued interest to date for each property. CPF Mastery: every account and the choices you control, lesson 2.3, Accrued interest: what you refund to CPF when you sell, explains how the figure grows, so this lesson just uses it.
In this example, Farah and Hakim used S$136,600 of CPF at purchase, and S$1,500 a month for the instalments over ten years. That is S$316,600 of principal. With accrued interest at an example 2.5% a year, the refund comes to about S$378,831, of which about S$62,231 is interest. Their CPF statement would show the real figure.
The refund goes back into their own CPF accounts. It isn't lost, and they can use it for their next home. But it is not cash.
Here is their sale at S$720,000, a price they chose for the exercise rather than a forecast.
The outstanding loan, after they repriced in lesson 8.2, Work out the break-even on switching, is about S$290,127 in this example. That leaves S$429,873. The CPF refund of S$378,831 leaves S$51,042. Agent's commission at an example 2%, S$14,400, and legal fees of an example S$3,000 leave about S$33,642 in cash.
So a S$720,000 sale, S$100,000 above what they paid, puts about S$33,600 in their bank account and about S$378,800 back in their CPF. That is the number Farah suspected. Hakim's hundred thousand was never going to be cash.
Now try a lower price. At S$620,000, what they paid, the loan takes S$290,127 and leaves S$329,873, less than the full CPF refund. In that case the CPF rules decide what happens to the shortfall. For a sale at market value, owners are generally not asked to top up the difference in cash, but the rules have conditions, so check your case with the CPF Board before you price a sale. Either way, there would be no cash left at that price, and the agent and legal fees would have to come from savings.
It is worth running this case even if you expect a gain, because it tells you the price below which a sale leaves you paying to leave.
Selling takes time, and the order matters for what comes next. An HDB flat can only be sold after its MOP, and the resale process from option to completion takes weeks to months. A bank loan in its lock-in carries a penalty, and the notice period from lesson 8.1, Reprice or refinance when the lock-in ends, applies. If you are buying another home, the cash and CPF from this sale may be needed on a specific date, which is the subject of lesson 8.4, Upgrading or right-sizing in the right order.
Pick a sale price, and try a second, lower one. Then take your outstanding loan from your loan statement and your CPF principal and accrued interest from your CPF account. In the activity below, estimate the cash you would receive after the loan, the CPF refund and fees.
Estimate the cash you would receive if you sold your home at a price you choose, after loan, CPF refund and fees.
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