Mah Bow Tan’s Flat Calculations Not Wrong

I’ve been hearing quite a number of arguments about Mah Bow Tan’s following statement:

Mr. Mah cited an example of how a young couple below 30 and earning a combined income of S$4,000 can pay the 5 per cent downpayment for a new four-room HDB flat with no cash after working for half a year to build up their CPF, and pay less than S$50 for their monthly mortgage payment.

He told reporters: “You would get a flat with zero deposit. Now, how many countries in the world can say that? How many housing ministers in the world can say what I have just said?”

Source: http://www.todayonline.com/SingaporeVotes/EDC110425-0000183/Housing-not-a-make-or-break-issue-at-GE–Mah-Bow-Tan

Various people are calculating here n there and concluding that this means MBT is saying that new four-room flats cost around $110,000. Their calculations mostly go like this:

As someone who has been looking at HDB flats for about a year now, and very into excel spreadsheets, I would like to clarify that the above calculation is not correct.

This does not imply that I support or do not support PAP, or MBT’s claims that HDB  flats are affordable. I simply cannot stand it when calculations are wrong. Hehe OCD sorry.

There are 2 parts to MBT’s statement:

1) CPF after 6 months is sufficient for the couple not to fork out cash during the downpayment.
2) They can pay less than $50 in cash for their monthly mortgage payment.

Both of these are true. Please read on.

Part 1: Downpayment – Edited

As long as the HDB flat costs $300,000 and below, this couple will not need to fork out any cash for their downpayment.

Assumptions:

• This couple is below 30,
• First time buyers, and
• Utilizing the Staggered Downpayment Scheme

Now for the mathematics…

The downpayment required for a $300,000 HDB flat is as follows:

5% of flat price: $15,000
Stamp duty: $4,200
Legal fees: $193
Total Downpayment Required: $19,393

Their CPF available is as follows:

Additional Housing Grant (AHG): $15,000
CPF in Ordinary Account after working for 6 months: $5,560
Total CPF Available: $20,560

Part 2: Mortgage Payment

As for the “less than $50 mortgage payment per month” part, the flat needs to cost below $273,000 for this to be true. ($50 refers to cash top up, not total mortgage payment.)

So is this true?

Well, in the April 2011 BTO just launched, the Hougang four-room flats range from $248,000-$324,000. The Sembawang four-room flats cost $255,000-$310,000.

Therefore, again, yes it is possible for the couple to pay only $50 a month for their mortgage payment, for a new four-room flat.

The End.

If I made any error above, please do correct me in the comments below and I will amend accordingly. :)