Sunday, August 16, 2015

Roy Ngerng's Zheng Tian Zhen & Ye Bei Pian, how much do they need to pay? 

So I was reading this article here by Roy Ngerng, titled "How much do you need to earn to survive in Singapore?" and since it's a Sunday.. and this article does talk about housing loans which is a current topic of interest for me, I decided to do some mucking around with the numbers since I didn't really understand the method of calculation. And since I have already done it, I will just post it.
Anyway, just a disclaimer before we go into the details. I do not disagree that it is not easy to save money. However, we have got to be careful with the numbers that are produced. Creating a picture from inaccurate facts is just plain disagreeable for me. I do think that there are possibly factors that Roy has taken into account which I did not, but since it is not stated in the article, my guess is as good as anyone else's.

Now, the female lead in the story Zheng Tian Zhen starts working at 25 and earns 2500 as a starting salary. This means that the total amount contributed to her CPF on a monthly basis is:
Ordinary Account $ 575.08    
Medisave Account $ 199.98    
Special Account $ 149.94    
Total Contributions $ 925.00    
Assuming she started work in January, by December she would have accumulated $6900.96 in her ordinary account, discounting any bonuses that she might have earned that year. If she had earned a 13th month bonus, then the amount becomes $7476.04. For further calculations we will base the salary on a 13 month salary since that is highly likely to be the case.

The article states that Zheng Tian Zhen and her boyfriend both earn the same salary with a 4% increment till they are 39. So this is a list of the CPF contributions for every year till they are 39. I have also included the Medisave amounts, because when Medisave reaches the ceiling (currently set at $48500), any contributions meant for Medisave is then channelled to OA.

Now, recall that Roy's example states that Zheng Tian Zhen and her boyfriend gets married and buy a flat at the age of 30. Roy also states that the flat that they have decided to purchase costs $300000. Disregarding any grants that they are eligible for, since we do not have that information, it is likely that at the point of purchase when they are 30 years old, Zheng Tian Zhen and her husband would have approximately $49584.21 x 2 =$99168 in their Ordinary accounts with which to pay for the flat.

Assuming that they wipe out their ordinary accounts to fund the flat, before taking up a HDB loan, they would require a loan of $200832. Using HDB's loan calculator, the monthly repayment over the maximum tenure of 25 years would be $912. 

Given that the amount paid into their ordinary accounts every month comes up to a total of $1400.08 every month at the age of 30, they can afford to set the repayment period at 15 years and not have to come up with a single cent in cash.

So, I do not understand why Roy said that this couple will need to "pay $500 every month, from their salaries, on the housing loan". I had thought that he might have meant from CPF as part of the salary, but the housing loan is not that low on a monthly basis. So the only other conclusion will be $500 cash.. but as you would have seen from my calculations as shown above, they have absolutely no need to come up with any cash at all.

In fact, in the best case scenario, given a stable job and no unexpected surprises in life, they would be able to pay down the $300000 flat by the time that they were 39 years old.

2 Adorations
And so the GE came and went... and the winds of change went to the incumbents.

There shall be no more of complaining that the huge influx of FTs, high cost of living, frequent MRT breakdowns, etc... After all, with the landslide victory, it means the masses are willing to endure and even enjoy such hardships.

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