I WOULD like to highlight an issue on housing finance in Singapore.

Through recent conversations, I realised that many of my friends who have bought Housing Board and/or private condominiums are not aware of the policies on the 100per cent Available Housing Withdrawal Limit (AHWL) and 120per cent to 150per cent cap on Central Provident Fund withdrawals if they bought a unit recently.

For example, my friend bought a unit for $300,000. After paying for it for 10years at $1,500 a month, he hit the 100per cent AHWL at the halfway mark of a 20-year loan. Because he has insufficient Central Provident Fund (CPF) Minimum Sum, he has to put aside that $1,500 in cash from his monthly income, which requires a big adjustment.

If he had been more aware of the policies, he could have lowered his monthly instalments, lengthened his loan period, while saving up cash as early as possible.

Over the next few years, those who have reached the 100per cent AHWL and cannot use their CPF to pay, may not have enough cash to pay their instalments.

This is especially so for many who bought their flats in the late 1990s, since the ruling came into effect only in the mid-2000s.

Most people think they can depend on their CPF, and may not have enough cash savings or income to pay the instalments.

I hope the HDB and CPF Board can come together to organise programmes to create more public awareness about the issue, and also review their policies to allow owners to maximise their CPF before they hit the AHWL. This is so that home owners do not inadvertently have to depend on cash, while their CPF remains locked in.

Currently, owners get a notice letter only a year in advance, which may not be sufficient time for them to make the necessary adjustments, such as saving up, or even downgrading.

Ng Cheow Siang

This letter was first published in The Straits Times on June 14, 2008.