Think Thrice before you buy HDB Resale Flat!

[Goh Meng Seng]

Most of us presumed that when we buy our HDB flats, we could well pay off ALL our HDB mortgage loans by using our CPF money. This MAY NOT BE TRUE for those of us who bought our flats from the resale market.<br />
<br />
Even some property agents are either confused or unaware of the rules on how much money we could use from CPF to pay for our HDB mortgage loans. Some thought that this only applies to bank loans but not HDB loans. This is false. Most of the time, property agents won't even advise you on such matters even if they know about the rules.<br />
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<span class="messageBody" data-ft="{&quot;type&quot;:3}"><span class="userContent">You can only
use your CPF to pay for your resale flat up to 100% of the valuation
price of your flat at the time of purchase. There after, it will depend
on whether you have enough money to set aside for the prevailing minimum sum, then you
can use your CPF to pay up to additional 20% of the valuation price of your
flat. In total, you could only use your CPF to pay up to 120% of the
valuation price of your flat at the time of purchase (before 55 year
old). <br /> <br /> If you engage in a 30 year mortgage loan for your resale
flat, you may find problem in servicing your mortgage even if you have
money in your CPF because you won't be allowed to use your CPF to pay. i.e. you will have to service your HDB mortgage loan by cash alone. As a thumb of rule, normally you will face problem in paying your
mortgage after 15 years of purchase. Generally speaking, the total
amount of money you need to pay for your flat, with compounded interest
rate, is about double the amount of the initial loan. <br /> <br /> So please
THINK THRICE before you decide to buy a RESALE HDB Flat!</span></span></h5>
The following is taken from <a href="http://www.martinlee.sg/property-valuation-limit-and-cpf-withdrawal-limit/" target="_blank">an article at this blog</a>.<br />
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It basically explains the restrictions and mechanism of CPF limits on usage for mortgage payment:<br />
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Property Valuation Limit and CPF Withdrawal Limit</h1>
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If you depend on financing your home property loan using your CPF OA, do you know that you might be hit with a scenario where you can’t use your OA to pay for your housing many years down the road? (This does not apply to new HDB apartments purchased using a HDB loan)</div>
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Here are three terms you need to be aware of:</div>
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<li style="border: 0px none; list-style-image: url(http://cdn9.martinlee.sg/code/wp-content/themes/graphene/images/list-style-image.png); margin: 0px 0px 7px; padding: 0px;">CPF Withdrawal Limit</li>
<li style="border: 0px none; list-style-image: url(http://cdn9.martinlee.sg/code/wp-content/themes/graphene/images/list-style-image.png); margin: 0px 0px 7px; padding: 0px;">Valuation Limit</li>
<li style="border: 0px none; list-style-image: url(http://cdn9.martinlee.sg/code/wp-content/themes/graphene/images/list-style-image.png); margin: 0px 0px 7px; padding: 0px;">Available Housing Withdrawal Limit (AHWL)</li>
</ul>
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<b>CPF Withdrawal Limit</b></div>
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This is the maximum amount of CPF that you can use to pay for your housing. It varies from 150% to 120% of the loan amount depending on when you bought the property. From 1st Jan 2008 onwards, the limit is 120%. Note that if you refinance your housing loan, the prevailing CPF withdrawal limit will apply to your new loan.</div>
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Depending on the interest rate of the loan, the CPF withdrawal limit is likely to be hit towards the 2nd half or tail end of the loan.</div>
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Once this limit is hit, you can’t use any more CPF monies to pay for your housing loan.</div>
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<b>Valuation Limit (VL)</b></div>
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This is the lower of:</div>
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<li style="border: 0px none; list-style-image: url(http://cdn9.martinlee.sg/code/wp-content/themes/graphene/images/list-style-image.png); margin: 0px 0px 7px; padding: 0px;">Purchase price of property</li>
<li style="border: 0px none; list-style-image: url(http://cdn9.martinlee.sg/code/wp-content/themes/graphene/images/list-style-image.png); margin: 0px 0px 7px; padding: 0px;">Valuation of property at time of purchase</li>
</ul>
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Once your CPF withdrawals (for paying the property) reaches the VL, you will not be able to use your CPF to pay for your housing loan unless you have the Avaliable Housing Withdrawal Limit (AHWL).</div>
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Obviously, the Valuation Limit will be hit before the CPF withdrawal limit is hit. It can also be reached in the early years of a loan if someone uses spare monies in the OA to pay down the housing loan rapidly.</div>
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Use this CPF<a href="http://www.cpf.gov.sg/cpf_info/calculator/vl/vl_input.asp?prof=" target="_blank"><span class="Apple-converted-space">&nbsp;</span></a><a href="http://www.cpf.gov.sg/cpf_info/calculator/vl/AHWL_input.asp?propType=opt2&amp;cap=360000&amp;cpfUsed=0" style="color: #1772af; text-decoration: none;" target="_blank">calculator to estimate your CPF Withdrawal Limit and Valuation Limit</a>.</div>
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<b>Avaliable Housing Withdrawal Limit (AHWL)</b></div>
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For those below 55, the AHWL is the balance available after setting aside the Minimum Sum component. Savings in the OA, SA and amounts withdrawn for investment can be used to meet the prevailing Minimum Sum cash component.</div>
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CPF has a<a href="http://www.cpf.gov.sg/cpf_info/calculator/vl/AHWL_input.asp?propType=opt2&amp;cap=360000&amp;cpfUsed=0" target="_blank"> </a><a href="http://www.blogger.com/blogger.g?blogID=11957101" style="color: #1772af; text-decoration: none;" target="_blank">calculator that helps you estimate your AHWL</a>.</div>
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While the terms might sound confusing, any potential property owner should definitely try to understand the implications of these limits on their housing loan repayments before they buy any new property (or refinance an existing one).</div>
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Not doing so might result in an unpleasant surprise many years down the road, especially if there is not enough free cashflow to be diverted towards the housing loan.</div>
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ONCE AGAIN, REMINDER: PLEASE THINK THRICE BEFORE BUYING A RESALE FLAT!<br />
<br />
It is always more prudent to go for a BTO or new HDB flat if you are a young couple buying your first flat. This will allow you to accumulate more buying power or prevent you from over-committing yourself. For BTO or new HDB flat mortgage, the Property Valuation Limit and CPF Withdrawal Limit will not be applicable and you could safely use your CPF money to pay all the mortgage for this flat. This will allow you to have certainty in your financial planning.<br />
<br />
Goh Meng Seng<br />
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[po2wq]

if dun buy hdb resale, buy wat? ... buy condo? buy landed? buy sentosa cove? ...

 

[Goh Meng Seng]

Aiyoh, if you are buying your first flat, buy new BTO HDB flat lah!


Goh Meng Seng

if dun buy hdb resale, buy wat? ... buy condo? buy landed? buy sentosa cove? ...

 

[sleaguepunter]

this info was in hdb website for donkey years. if the buyers never check, can only blame themselves. that why must make full payment asap. if possible, transfer $$ from cpf into partial payment every few years when income go up. No point have $$ in cpf but still own hdb $$ at 55yo. by 55yo, all $$ in cpf OA will be transfer to retire account. liddat must use cash to pay hdb instalment.

 

[looneytan]

Origin of the phrase

The exact origin of the phrase is uncertain. The earliest citation comes from J. Durham’s Heaven upon Earth, 1685, ii. 217: "Many profest Christians are like to foolish builders, who build by guess, and by rule of thumb."[1] The phrase also exists in other languages, for example Swedish tumregel, Norwegian and Danish tommelfingerregel, sometimes in the variant "rule of fist", for example Finnish nyrkkisääntö, German Faustregel, Hungarian ökölszabály or Dutch vuistregel, as well as in Turkish parmak hesabı (rule of finger) and in Persian "قاعده سرانگشتی," which is translated as finger's tip rule. This suggests that it has some antiquity, and does not originate in specifically English-language culture[citation needed].
Thumb as measurement device

The term is thought to originate with wood workers who used the width of their thumbs (i.e., inches) rather than rulers for measuring things, cementing its modern use as an imprecise yet reliable and convenient standard. This sense of thumb as a unit of measure also appears in Dutch, in which the word for thumb, duim, also means inch. The use of a single word or cognate for "inch" and "thumb" is common in many other Indo-European languages, for example, French: pouce inch/thumb; Italian: pollice inch/thumb; Spanish: pulgada inch, pulgar thumb; Portuguese: polegada inch, polegar thumb; Swedish: tum inch, tumme thumb; Sanskrit: angulam inch, anguli finger; Slovak: palec, Slovene: palec inch/thumb, Czech: palec inch/thumb.

Another possible origin of the phrase comes from measurement, in particular in agricultural fields. The plants need a fairly precise depth to seed properly, whether planted from seed or being replanted, but the depth can sometimes be estimated using the thumb. That is, a rule "(measurement) of thumb." According to Gary Martin, "The origin of the phrase remains unknown. It is likely that it refers to one of the numerous ways that thumbs have been used to estimate things—judging the alignment or distance of an object by holding the thumb in one's eye-line, the temperature of brews of beer, measurement of an inch from the joint to the nail to the tip, or across the thumb, etc. The phrase joins the whole nine yards as one that probably derives from some form of measurement but which is unlikely ever to be definitively pinned down."

Another theory is that the coarseness of ground flour produced by windmills in England was assessed by the miller rubbing it between his thumb and forefinger.
Thumb used for regulation
Caricature condemning Buller: Judge Thumb - Patent Sticks for Family Correction - Warranted Lawful!

It is often claimed that the term's etymological origin lies in a law that limited the maximum thickness of a stick with which it was permissible for a man to beat his wife. British common law before the reign of Charles II permitted a man to give his wife "moderate correction", but no "rule of thumb" (whether called by this name or not) has ever been the law in England. Such "moderate correction" specifically excluded beatings, allowing the husband only to confine a wife to the household.

Nonetheless, belief in the existence of a "rule of thumb" law to excuse spousal abuse can be traced as far back as 1782, the year that James Gillray published his satirical cartoon Judge Thumb. The cartoon lambastes Sir Francis Buller, a British judge, for allegedly ruling that a man may legally beat his wife, provided that he used a stick no thicker than his thumb, although it is questionable whether Buller ever made such a pronouncement. The Body of Liberties adopted in 1641 by the Massachusetts Bay colonists states, “Every married woman shall be free from bodily correction or stripes by her husband, unless it be in his own defense from her assault.” In the United States, legal decisions in Mississippi (1824) and North Carolina (1868 and 1874) make reference to—and reject—an unnamed "old doctrine" or "ancient law" by which a man was allowed to beat his wife with a stick no wider than his thumb. For example, the 1874 case State v. Oliver (North Carolina Reports, Vol. 70, Sec. 60, p. 44) states: "We assume that the old doctrine that a husband had the right to whip his wife, provided that he used a switch no larger than his thumb, is not the law in North Carolina." In 1976, feminist Del Martin used the phrase "rule of thumb" as a metaphorical reference to describe such a doctrine. She was misinterpreted by many as claiming the doctrine as a direct origin of the phrase and the connection gained currency in 1982, when the U.S. Commission on Civil Rights issued a report on wife abuse, titled "Under the Rule of Thumb."[
Examples of usage

Statistical - Rule of 72: A rule of thumb for exponential growth at a constant rate. An approximation of the doubling time formula used in population growth, according to which the doubling time is roughly equal to 70 divided by the percent growth rate (using continuous compounding, the actual number would be about 69.31 or 100 times the natural logarithm of 2). In terms of money, since most people use the annual effective interest rate (which is equivalent to annual compounding) for interest rates between 4% and 12%, the number that gives the most accurate result is actually 72. Therefore, one may divide 72 by the percent interest rate to determine the approximate amount of time it would take to double one's money in an investment. For example, at 8% interest, the investment will double in approximately 9 years (72/8 = 9).
Musical: Joseph MacDonald, in his book Compleat Theory of the Scots Highland Bagpipe (ca. 1760), wrote:

The first Composers of Pipe Music having never heard of any other Instrument or known any of the Rules ever invented of Musick ... it may not be improper to discover the general rule by which they Taught & regulated their Time (having neither of Common or Triple Time, Crotchet or Quaver) but only their Ear to which they must only trust. This Rule we may more properly Call The Rule of Thumb. In effect it is Much the same, for it was by the four Fingers of the Left hand that all their Time was measurd & regulated E.G An Adagio in Common Time of Such a Style must not exceed or fall short [of] Such a number of Fingers, otherwise it was not regular. If the March was to be but a short Composition, the Ground must be of So many fingers; for Bars they had no notion of; if a Gathering, commonly of Such a Number, If a Lament, If a March, & c. according to the Occasion it must Consist of Such a Number.
Tailors' Rule of Thumb: This is the fictional rule described by Jonathan Swift in his satirical novel Gulliver's Travels:

Then they measured my right Thumb, and desired no more; for by a mathematical Computation, that twice round the Thumb is once around the Wrist, and so on to the Neck and Waist, and by the help of my old Shirt, which I displayed on the Ground before them for a Pattern, they fitted me exactly.
Oersted's rule: Hold right hand with the fingertips in the direction of current. The line shall be between the magnet and the palm. Magnet north pole will then turn to the thumb side. Named for Hans Christian Ørsted (often rendered Oersted in English; 14 August 1777 – 9 March 1851), a Danish physicist and chemist who discovered that electric currents create magnetic fields, an important aspect of electromagnetism.

http://en.wikipedia.org/wiki/Rule_of_thumb

 

[MBSSLOTS]

talk cock sing song is goh meng seng style....create amthread to scare people.

 

[maozedong]

To po2wq

Who's the girl in you Avatar? She's pretty.

+1 for your Avatar.

if dun buy hdb resale, buy wat? ... buy condo? buy landed? buy sentosa cove? ...

 

[Narong Wongwan]

If you engage in a 30 year mortgage loan for your resale
flat, you may find problem in servicing your mortgage even if you have
money in your CPF because you won't be allowed to use your CPF to pay. i.e. you will have to service your HDB mortgage loan by cash alone.

I dun believe the above is true

 

[batman1]

this info was in hdb website for donkey years. if the buyers never check, can only blame themselves. that why must make full payment asap. if possible, transfer $$ from cpf into partial payment every few years when income go up. No point have $$ in cpf but still own hdb $$ at 55yo. by 55yo, all $$ in cpf OA will be transfer to retire account. liddat must use cash to pay hdb instalment.

Yes,at age 55,your CPF ordinary a/c balance is transferred to cpf retirement account under Minimum Sum Scheme Or under the CPF Life Scheme.
My understanding is that u can withdraw the excess amount
if your CPF retirement balance is greater than your specified
Minimum Sum Amount.

 

[chootchiew]

I think is better to think more than thrice if you are paying $ above valuation. Since 100-120% still can be used from cpf, the idea is not to buy above valuation.

 

[zhihau]

truth be told, there are so many things to think about when buying resale.
just the ridiculous pricing and the COV puts me off already

 

[sleaguepunter]

If you engage in a 30 year mortgage loan for your resale
flat, you may find problem in servicing your mortgage even if you have
money in your CPF because you won't be allowed to use your CPF to pay. i.e. you will have to service your HDB mortgage loan by cash alone.

I dun believe the above is true

uncle, u better believe it the true.

example, the flat valued at point of sale at $100k, and u took a loan of $80k over 30years. So your cpf deduction max only $120k max. any interest exceeding the $120k will have to pay in cash. the long the loan tenure, the more interest will be compounded. The 30yrs loan tenure start in the 1990s, so the problem of ppl unable to pay the last remaining years will start to surface after 2020.

 

[zhihau]

example, the flat valued at point of sale at $100k, and u took a loan of $80k over 30years.

100K flat is 80K loan, 2.6% per year interest 78% in 30years. 62.4K in interest, 142.4K minus 120K from CPF means 22.4K in cash.
good luck to those million dollar home owners, 224K in cash for repayment.

 

[Cestbon]

Aiyoh, if you are buying your first flat, buy new BTO HDB flat lah!


Goh Meng Seng

100% agree ifbuy 1st property must be BTO. If not next time will not have chance.

 

[sleaguepunter]

100K flat is 80K loan, 2.6% per year interest 78% in 30years. 62.4K in interest, 142.4K minus 120K from CPF means 22.4K in cash.
good luck to those million dollar home owners, 224K in cash for repayment.

Don't think the interest got so much as it's reducing balance but the CPf must include the initial deposit as most use CPf to pay. But as the loan amount go up, the interest also go up. In another 10 yrs, it will the govt of the day biggest problem.

 

[Clone]

+1 for your Avatar.

Origin of the phrase

The exact origin of the phrase is uncertain. The earliest citation comes from J. Durham’s Heaven upon Earth, 1685, ii. 217: "Many profest Christians are like to foolish builders, who build by guess, and by rule of thumb."[1] The phrase also exists in other languages, for example Swedish tumregel, Norwegian and Danish tommelfingerregel, sometimes in the variant "rule of fist", for example Finnish nyrkkisääntö, German Faustregel, Hungarian ökölszabály or Dutch vuistregel, as well as in Turkish parmak hesabı (rule of finger) and in Persian "قاعده سرانگشتی," which is translated as finger's tip rule. This suggests that it has some antiquity, and does not originate in specifically English-language culture[citation needed].
Thumb as measurement device

The term is thought to originate with wood workers who used the width of their thumbs (i.e., inches) rather than rulers for measuring things, cementing its modern use as an imprecise yet reliable and convenient standard. This sense of thumb as a unit of measure also appears in Dutch, in which the word for thumb, duim, also means inch. The use of a single word or cognate for "inch" and "thumb" is common in many other Indo-European languages, for example, French: pouce inch/thumb; Italian: pollice inch/thumb; Spanish: pulgada inch, pulgar thumb; Portuguese: polegada inch, polegar thumb; Swedish: tum inch, tumme thumb; Sanskrit: angulam inch, anguli finger; Slovak: palec, Slovene: palec inch/thumb, Czech: palec inch/thumb.

Another possible origin of the phrase comes from measurement, in particular in agricultural fields. The plants need a fairly precise depth to seed properly, whether planted from seed or being replanted, but the depth can sometimes be estimated using the thumb. That is, a rule "(measurement) of thumb." According to Gary Martin, "The origin of the phrase remains unknown. It is likely that it refers to one of the numerous ways that thumbs have been used to estimate things—judging the alignment or distance of an object by holding the thumb in one's eye-line, the temperature of brews of beer, measurement of an inch from the joint to the nail to the tip, or across the thumb, etc. The phrase joins the whole nine yards as one that probably derives from some form of measurement but which is unlikely ever to be definitively pinned down."

Another theory is that the coarseness of ground flour produced by windmills in England was assessed by the miller rubbing it between his thumb and forefinger.
Thumb used for regulation
Caricature condemning Buller: Judge Thumb - Patent Sticks for Family Correction - Warranted Lawful!

It is often claimed that the term's etymological origin lies in a law that limited the maximum thickness of a stick with which it was permissible for a man to beat his wife. British common law before the reign of Charles II permitted a man to give his wife "moderate correction", but no "rule of thumb" (whether called by this name or not) has ever been the law in England. Such "moderate correction" specifically excluded beatings, allowing the husband only to confine a wife to the household.

Nonetheless, belief in the existence of a "rule of thumb" law to excuse spousal abuse can be traced as far back as 1782, the year that James Gillray published his satirical cartoon Judge Thumb. The cartoon lambastes Sir Francis Buller, a British judge, for allegedly ruling that a man may legally beat his wife, provided that he used a stick no thicker than his thumb, although it is questionable whether Buller ever made such a pronouncement. The Body of Liberties adopted in 1641 by the Massachusetts Bay colonists states, “Every married woman shall be free from bodily correction or stripes by her husband, unless it be in his own defense from her assault.” In the United States, legal decisions in Mississippi (1824) and North Carolina (1868 and 1874) make reference to—and reject—an unnamed "old doctrine" or "ancient law" by which a man was allowed to beat his wife with a stick no wider than his thumb. For example, the 1874 case State v. Oliver (North Carolina Reports, Vol. 70, Sec. 60, p. 44) states: "We assume that the old doctrine that a husband had the right to whip his wife, provided that he used a switch no larger than his thumb, is not the law in North Carolina." In 1976, feminist Del Martin used the phrase "rule of thumb" as a metaphorical reference to describe such a doctrine. She was misinterpreted by many as claiming the doctrine as a direct origin of the phrase and the connection gained currency in 1982, when the U.S. Commission on Civil Rights issued a report on wife abuse, titled "Under the Rule of Thumb."[
Examples of usage

Statistical - Rule of 72: A rule of thumb for exponential growth at a constant rate. An approximation of the doubling time formula used in population growth, according to which the doubling time is roughly equal to 70 divided by the percent growth rate (using continuous compounding, the actual number would be about 69.31 or 100 times the natural logarithm of 2). In terms of money, since most people use the annual effective interest rate (which is equivalent to annual compounding) for interest rates between 4% and 12%, the number that gives the most accurate result is actually 72. Therefore, one may divide 72 by the percent interest rate to determine the approximate amount of time it would take to double one's money in an investment. For example, at 8% interest, the investment will double in approximately 9 years (72/8 = 9).
Musical: Joseph MacDonald, in his book Compleat Theory of the Scots Highland Bagpipe (ca. 1760), wrote:

The first Composers of Pipe Music having never heard of any other Instrument or known any of the Rules ever invented of Musick ... it may not be improper to discover the general rule by which they Taught & regulated their Time (having neither of Common or Triple Time, Crotchet or Quaver) but only their Ear to which they must only trust. This Rule we may more properly Call The Rule of Thumb. In effect it is Much the same, for it was by the four Fingers of the Left hand that all their Time was measurd & regulated E.G An Adagio in Common Time of Such a Style must not exceed or fall short [of] Such a number of Fingers, otherwise it was not regular. If the March was to be but a short Composition, the Ground must be of So many fingers; for Bars they had no notion of; if a Gathering, commonly of Such a Number, If a Lament, If a March, & c. according to the Occasion it must Consist of Such a Number.
Tailors' Rule of Thumb: This is the fictional rule described by Jonathan Swift in his satirical novel Gulliver's Travels:

Then they measured my right Thumb, and desired no more; for by a mathematical Computation, that twice round the Thumb is once around the Wrist, and so on to the Neck and Waist, and by the help of my old Shirt, which I displayed on the Ground before them for a Pattern, they fitted me exactly.
Oersted's rule: Hold right hand with the fingertips in the direction of current. The line shall be between the magnet and the palm. Magnet north pole will then turn to the thumb side. Named for Hans Christian Ørsted (often rendered Oersted in English; 14 August 1777 – 9 March 1851), a Danish physicist and chemist who discovered that electric currents create magnetic fields, an important aspect of electromagnetism.

http://en.wikipedia.org/wiki/Rule_of_thumb

 

[I_Hate_Pappies]

Anything above 120% have to use cash.

Solutions;

1) Refinance the property

2) Vote the PAPpies OUT!:oIo:

 

[tonychat]

why buy any sinkie flat when you have to pay mortgage and then when fully paid, you do not own it legally.. stupid sinkies.

 

[po2wq]

+1 for your Avatar.

u gonna kena -1 from dat samburger ...

 

[po2wq]

To po2wq

Who's the girl in you Avatar? She's pretty ...

hong soo-hyun ...

...