A LITTLE PROPERTY EDUCATION – THE CONTRA FACILITY
In today’s edition of A Little Property Education, we will be covering about the Contra Facility. If you missed last week’s sharing you can click here. Last week, we shared about financing your HDB house, whether to use HDB Loan or Bank Loan.
Alright, let’s go!
The Contra Facility was introduced to lighten the financial burden of flat owners who are eligible for a housing loan from HDB by reducing the cash outlay needed. Hence, if you own a flat and are in the process of buying a new flat, the Contra Facility will help you to reduce the amount of mortgage loan required and the subsequent monthly repayments. In addition, the facility enables you to take possession of and renovate your new flat while selling your existing flat.
To qualify for the Contra Facility, you have to:
i) book a new flat and are invited to take possession of it, and
ii) submit an application to sell your flat.
You must ensure that:
i) you are eligible for HDB’s housing loan.
(therefore, if you are using bank loan, CONTRA is no longer an option)
ii) the funds that you have and are eligible for are enough to cover the full purchase price of the new flats.
a) your CPF Ordinary Account balance,
b) both cash and CPF proceeds from the resale of your current flat, and
c) the maximum loan you can be eligible for after you are credit assessed
iii) if the above funds are not enough, you must be able to top up the shortfall within a given period before the request for the contra facility can be approved.
You must submit your request for the Contra Facility together with your application for resale of your current flat. You can download a copy of the Request Form for Contra Facility. After you submit your resale application through e-Resale or Estate Agent Toolkit, you have to submit the Request Form for Contra Facility separately by fax, post or over the counter latest by the next day after your electronic submission.
i) The proceeds from the sale of your current flat cannot be used in the contra arrangement to pay for the downpayment of the new flat.
ii) If the contra arrangement is approved, you will be invited to take possession of the new flat on or before the first resale appointment date.
iii) You can choose to use CPF contra or CPF and Cash contra arrangement for the purchase of the new flat.
iv) You will be allowed to use cash contra arrangement alone only if there is no CPF refund from the sale of your current flat.
v) You will have to use all the balance in your CPF Ordinary Account, as well as the CPF refund from the sale of your current flat before you are given an HDB mortgage loan.
vi) Under the Contra Facility, a temporary mortgage loan may be granted to you before the completion of sale of your current flat.
Temporary Housing Loan
i) At the time you take possession of your new flat, you will be granted a temporary housing loan after fully using up the CPF balance in your Ordinary Account.
ii) You have to redeem the portion of the mortgage loan above the loan amount you are eligible for, using the sale proceeds of your current flat.
iii) Interest will be charged for the additional loan temporarily granted.
iv) You will be considered as taken one concessionary interest rate loan even if you fully redeem the mortgage loan subsequently.
Taking Possession & Renovation
i) After taking possession of your new flat, you may proceed to renovate it while the resale transaction of your current flat is in progress.
ii) At the point of resale completion (estimated to be two months after taking possession of the new flat), the proceeds (CPF refund or cash, or both) will be used to partially redeem the mortgage loan.
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Have a great week ahead!
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References: Information are edited from the HDB website.