Downsizing to a 2-room resale flat could be a good move if you’re looking to reduce your financial commitments and free up some cash, but let’s look at the details.
### 1. **Estimated Net Proceeds from Selling Your 3-Room Flat**
- **Selling Price**: $390K
- **Outstanding HDB Loan**: $120K
- **CPF Used + Accrued Interest**: $210K
- **Estimated Net Cash Proceeds**: $390K - $120K (HDB loan) - $210K (CPF) = **$60K**
After paying off the outstanding loan and returning the CPF used (with accrued interest) to your CPF account, you’re left with around **$60K in cash**.
### 2. **Using CPF and Cash for the 2-Room Resale Flat Purchase**
- **Purchase Price of 2-Room Flat**: $379K
- You can use **your CPF savings** and **cash proceeds** to cover the down payment and reduce the amount you need to borrow.
- Since you’re eligible for a second HDB loan, your **next loan amount will be based on the difference** between the new flat’s purchase price and the amount you can pay upfront (using your cash and CPF).
### 3. **Calculating the New HDB Loan Amount**
- **Purchase Price**: $379K
- **Cash Proceeds from Sale**: $60K
- **CPF Returned to Your Account**: $210K (this amount will be available for the new purchase, subject to the **current withdrawal limit**)
- Total Available (Cash + CPF): $60K + $210K = **$270K**
If you apply $270K toward the $379K flat, you would need a **new HDB loan of $109K**.
### 4. **Considerations for the Decision**
- **Lower Monthly Payments**: The smaller loan amount (around $109K) will lower your monthly mortgage, making it easier to manage.
- **Freeing Up Cash Reserves**: Downsizing will allow you to keep some cash and CPF savings available for future needs.
- **Long-Term Suitability**: Make sure a 2-room flat meets your lifestyle needs long-term, as resale options for these units can sometimes be more limited compared to 3-room flats.
### **Conclusion**
If downsizing aligns with your lifestyle and financial goals, it could be a smart decision. Moving to the 2-room flat would reduce your monthly financial obligations and allow you to retain a mix of cash and CPF for flexibility.
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