Advice on Home Financing

Dear Mr Tan,

I have read the numerous financial advice you gave on your blog, a very generous act of you to provide such valuable insight to the various investment and insurance schemes in the market.

I think NTUC Income, under your leadership, is one of the very few that really take good cares of the money invested by its customers.

I have a condo apartment which is fully paid up, and currently rented out to earn a modest rental. The condo has about 75 years lease remaining.

I am living in a landed property which I have bought 10 years ago. It has an outstanding mortgage loan, currently at 4% interest rate. The outstanding loan is about half of the market value of the property. The rental income from my condo is sufficient to cover the interest charge on this property.

I need to raise cash to finance my children's university education abroad. I am thinking of 2 options:

1. Refinance the condo and use part of the money to pay off the mortgage loan on my house. I can use the rental income to offset against the interest charge. If I sell the condo later, I have to return all the proceeds from sales to CPF (i.e. cannot be used to redeem the loan on my landed property).

2. Sell the condo, return the proceed to CPF (as it was used to pay for the condo), apply to withdraw my CPF to replay the loan on my landed property.

As the property market is slowly moving up, selling the condo now will not fetch me the best price. However, the value of the condo will also drop as it approaches 70 years. It is unlikely that the project has any enbloc potential.

I would appreciate it if you can enlighten me on your views on the options available for me, and whether NTUC has any suitable financing scheme that I can consider in refinancing my properties.

WF

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Dear WF

Apart from selling your condo now (which you are reluctant to do so, as the property market is now on the uptrend), you have the following options:

a) refinance the loan on your landed property and have an additional sum that is sufficient to provide financing for your children's education

b) take a new loan on your condo

You can take a normal loan (which requires monthly repayment) or a reverse mortgage loan (which does not require any payment). The reverse mortgage is available only to people beyond a certain age.

I will get my loan officer to contact and advise you.

Reverse Mortgage

Tan Kin Lian