Divorced – and facing housing woes

Leong Sze Hian

Mr Tan (not his real name) came to see me recently at the one-on-one financial counselling (every Thursday 8 pm to 10 pm) at Blk 108, Potong Pasir Ave 1.

He is 50-years old and a divorcee. He has been given one-hour visitation rights every weekend with his two children. According to Mr Tan, as his wife’s monthly income is about $6,000, he does not have to pay any monthly maintenance to her or the children.

No spouse, no children, no HDB, no CPF?

As the divorce court order was that the HDB flat which he co-owned with his ex-wife be entirely given to her, although he had contributed 60 per cent of the monies for the flat. he had nowhere to stay. The CPF which he has utilised for the flat, is also entirely given to his ex-wife. So, he approached the HDB and his Member of Parliament for help to rent a HDB flat.

As he has been unable to find a full-time job, he has been working part-time, and earns about $1,400 or less a month.

No cash to pay rental or COV, no housing loan?

The HDB informed him that as a divorcee, his housing options are to rent a room or a flat in the open market, noting that he has sufficient CPF savings to buy a flat.

The HDB’s reply to him said: “We have assessed your application and note that you have sufficient CPF savings for home ownership flat. Hence, please consider using the CPF savings for the option of buying a flat within your means.”

The cheapest room that he has been able to find is about $500, and the cheapest rental for a flat is around $1,500.

As his CPF Ordinary Account balance is only about $140,000, it is not enough to buy any resale flat in the open market. No bank will lend him a HDB housing loan, because his income is below their minimum household income requirement of about $2,000.  (Note: HDB bank loan interest rates are now at around one per cent per annum, compared to HDB loans at 2.6 per cent.)

Also, the minimum HDB housing loan that the banks require is about $100,000, and Mr Tan does not have cash to pay for the Cash-over-valuation (COV) that practically every HDB 2 or 3-room flat seller would ask for.

The cheapest HDB resale flat that he has been able to find is about $280,000, with at least $15,000 COV.

Normally, in financial counselling, for such cases, we may suggest to people like Mr Tan to try to apply to the HDB for a second HDB loan, on the grounds that no bank is willing to offer a housing loan.

However, in Mr Tan’s case, as the maximum tenure of a HDB loan is until age 65, the monthly mortgage repayment for a $140,000 HDB loan (assuming the cheapest 3-room flat at $280,000 less his $140,000 CPF) at 2.6 per cent for 15 years, is about $940.

Therefore, it may be pointless for Mr Tan to apply, because how can he afford to pay $940, when his income is less than $1,400?

In the debate in Parliament in 2002, to allow banks to offer HDB housing loans, members of the house were given the assurance that Singaporeans will not be disadvantaged by this change in the legislation.

As Mr Tan was in a ‘homeless’ situation, he was offered a room in a shared 3-room flat at Blk 29, Havelock Road, at $250 a month, under the Interim Housing Scheme.

I understand from previous tenants under the Interim Housing Scheme that when their initial temporary lease is up, which in Mr Tan’s case is 5.5 months, they may be “pressured” with a rental increase to around $400 which is the normal rate, or to move out to rent in the open market.

Of course, he can try to apply for a HDB rental flat, if he can find another single Singaporean male age 35 and above to share the flat, whose combined monthly income with him is not more than $1,500.

So, in his case, he would have to find another flat-mate who must also meet all the HDB rental eligibility criteria, and whose income is not more than $100 a month since Mr Tan’s salary is already S$1,400 a month.

By the way, I understand that the waiting list for rental flats is in the thousands, and the typical waiting time is more than a year.

According to the Department of Statistics, the number of divorces and annulments has risen to a record high of 7,386 against 26,081 marriages in 2009. http://www.singstat.gov.sg/stats/themes/people/marriages.pdf

So, given the HDB’s policies on divorcees, how many divorcees may have housing woes like Mr Tan?