5 years flew passed quickly. Our resale HDB that we bought in 2014 has MOP. What should we do next? Should we sell or continue staying? I am sure many of you are face with this dilemma. But most of you (especially those who bought BTO) do not have to face with potential NEGATIVE SALE!! Yes, that’s right. By the time our resale HDB MOP, we knew that we will take a hit on our earlier decision to buy a resale flat. So what did we do? Let’s MELEPAK and find out.
Do Our Calculations and Plan Our Next Step
When doing our calculation, it was emotionally stressful as we are facing with a huge loss. Although I am a high-risk aggressive investor profile (Find out the 3 types of investor profile and which one is you by taking this questionnaire), nobody can stomach such a huge loss. To give you a better idea of what we are facing, let me share some numbers.
Breakdown of Our Purchase in 2014
If you can recall from our post on buying the resale flat, our purchase price was $400,000. Here are the breakdown:
- Purchase Price in 2014: $400,000
- CPF Deposit: $60,000
- Grants: $40,000
- HDB Loan: $300,000
Calculation in June 2019
After 5 years of paying $1300/mth, we’ve only paid $45,000 of our principal loan and $33,000 worth of interest (Another interesting topic idea – 2.6% HDB Loan vs 1.8% Bank Loan). So in June 2019, we have an outstanding loan of $255,000. And below is our CPF calculations.
| Pak’s Calculation | Kay’s Calculation | Combined | |
|---|---|---|---|
| Total CPF Used | $116,000 | $76,000 | $192,000 |
| Accrue Interest | $12,000 | $9,000 | $21,000 |
| Current CPF OA | $48,000 | $82,000 | $130,000 |
Estimated Figures Based On Selling Price Of $350,000
Having calculated our CPF and the amount we had used throughout the 5 years, now comes the part where we calculated how much we will have after the sale. We put the sale price at $350,000 as the latest transaction in our area is $340,000 (Not looking good for us, ya?). Below are the figures:
- Sale Price: $350,000
- After deducting outstanding loan: $350,000 – $255,000 = $95,000
- Amount returned to Pak’s CPF: $95,000 x 60% = $57,000
- Amount returned to Kay’s CPF: $95,000 x 40% = $38,000
So from the figures above, we are facing a total loss ($192,000 – $95,000) of $97,000!! That is before considering the accrue interest ($21,000) that we would have gotten.
Sick To My Stomach After The Calculation
I’ve to admit, I was shocked and down after looking at the calculation. I knew and accepted that we are not going to make a profit from our resale flat. In fact, I’ve accepted that we are looking at a loss BUT NEVER DID I EXPECTED THE LOSS TO BE $100,000!!!!!
The next couple of days, I was troubled by it. Can’t really focus at work and kept on thinking what should I do. I didn’t really talked with Kay about it. Yes, she is there when we did the calculation but she’s not so into numbers and leave most of it to me. And I do not want her to be troubled by this.
What Should We Do Now That Our Resale HDB MOP?
After digesting and accepting this fact, the main question now is what do we do next? Should we wait till the market is better and sell at a higher price (hopefully)? Or do we just sell it now and cut our loss?
Keep The House
Some people advised me to hold on to it for now. Wait for the market to be better and sell it. This side of the camp includes my FIL who questions why do we want to sell it now? His reason was the market is going to get better and when it does, then we should sell it.
Sell The House
On the other side of the camp, people like a colleague of mine, suggested that I sell the house now and cut the loss. His rationale was the flat is getting older and older. Plus the value will drop as it gets older. So even if the markets get better in 2-3 years, my flat value might just be the same due to the age. Plus I would have incurred more accrue interest then.
Our Final Decision (Not a surprised if you have been MELEPAK with me for some time)
In the end, after Kay and I sat to discuss, we decided to cut our HUGE losses and sell the house. We knew from the moment we bought the house (at least for me) that we are not staying there for so long. We knew that we wanted to upgrade to a better place. Although we didn’t expect a huge loss, we do not want it to stop us from achieving our end goal (yes, it will take longer due to this set back).
Do not let setbacks and looses derail you from your end goal. It will take longer but push through these setbacks.
Pak Melepak (2019)
And so we started the process of selling the house after our resale HDB MOP which I will share in another post shared in this post. That is another setback we encountered throughout this journey.
Hope you’ve enjoyed the MELEPAK session with me and you have learnt some valuable lessons. If you’ve not learnt anything for my experience, email me and I will share 3 learning points from this home disaster of mine.
As always, I appreciate any thoughts you have. Do comment below and I will get back to you.
