Mortgages and CPF Monies (PDF)

Real Estate Practice Mortgages and Withdrawal of CPF monies Focus Financing the purchase of a property Process of a mortgage transaction Documents involved in a loan/mortgage Application for use of CPF money CPFB’s charge over property Documents involved in the charge to CPFB  Financi...

Real Estate Practice Mortgages and Withdrawal of CPF monies Focus Financing the purchase of a property Process of a mortgage transaction Documents involved in a loan/mortgage Application for use of CPF money CPFB’s charge over property Documents involved in the charge to CPFB  Financing a purchase of property Purchase Price Purchaser’s Purchaser’s Bank loan CPF money own funds Secured by mortgage Secured by charge over property over property Parties to a mortgage Mortgagor - provides the security in the form of the property Borrower - person for whom the loan is obtained for Mortgagee - the lender bank or financial institution Mortgagor and Borrower may be the same or different persons Types of Mortgages Direct mortgage Mortgagor and Borrower are the same person or entity Indirect mortgage Mortgagor and Borrower are different NB: paragraph 25 MAS Notice 632 for Residential Property Loans Mortgage Process 1. Apply for a loan (requires proof of regular income) 2. Bank to conduct credit assessment check 3. If satisfactory, letter of offer issued to customer 4. On acceptance, bank instructs its solicitors 5. Bank’s solicitors lodge caveat, prepare documents, conducts searches and ensures compliance with bank’s conditions 6. Mortgage documents are signed 7. Bank’s solicitors submit report on title 8. Loan disbursed and mortgage registered Security Documents Letter of Offer Accompanying the L/O is a set of Standard Terms and Conditions (usually in printed form) Mortgage Memorandum of Mortgage Additional documents, eg., Deed of Assignment of Rental Proceeds Letter of Offer Sets out the major terms such as: Type of loan – term loan or overdraft Interest Rates Repayment terms Prepayment penalties Special conditions or conditions precedent Collaterals eg charge on fixed deposits or guarantee Standard Terms & Conditions Every bank has its own set. Usually set out in a printed form and attached to the Letter of Offer. All terms apply unless negated by Letter of Offer. Plain English! Mortgage Legal document by which the loan is secured by the property. Format – available on the Singapore Land Authority’s website. However, each bank has its own set of terms. It is common for mortgages to be the ‘Open’ or ‘all monies’ format. Memorandum of Mortgage Further set of conditions Incorporated by a clause in the mortgage Has a registration no. eg. MM No. I/94778S Covenants generally concerned with protection and maintenance of the property as it is the bank’s security Other Potential Documents Supplemental Deed Assignment of rental proceeds The bank’s solicitors should always (1) read the Letter of Offer and check the standard terms and conditions; and (2) ascertain which is the correct form of mortgage. Registering a Mortgage Section 68(3), Land Titles Act Under section 77, the mortgagor has a right to obtain a discharge of a mortgage once he has fulfilled his conditions or obligations under the mortgage and he is deemed to have an equity of redemption. Common Law Mortgages / Mortgages under the Registrations of Deeds Act Cf. Section 53 of the Conveyancing and Law of Property Act Where Borrower is a Company Check Company’s Memorandum and Articles of Association Obtain Directors’ resolutions File Statement of Charge at ACRA pursuant to S131 Companies Act This charge must be filed within 30 days of creation of charge, otherwise it will be void against the creditor. CPF Monies CPF Monies may only be used for the purchase and mortgage of residential properties, not commercial ones Procedure for withdrawal: CPF member signs a letter of authorization, declaration and consent CPF member must declare that they are not a bankrupt CPF member authorises their solicitor to apply for the withdrawal of their CPF monies towards payment of purchase price, reimbursement of stamp duty and monthly instalments of the bank. CPF Board’s Statutory Charge Security Documents Application to Notify Charge. Letter of Confirmation of Priority Arrangements Memorandum IA/991901M Instrument of Postponement (where applicable) CPF Board’s Statutory Charge Application to Notify Charge This is a statutory charge. Letter of Confirmation of Priority Arrangements This set outs the priorities of distribution of sale proceeds when the member’s bank exercises its power of sale in the event of a default on the mortgage. Outstandings 1. Mortgagee’s first outstanding – outstanding housing loan plus interest on housing loan 2. CPF’s first outstandings - CPF Principal Sum and CPF monies used for stamp duty, legal and survey fees 3. CPF’s second outstandings; balance of interest due to the mortgagee CPF’s second outstandings: the principal sum, the CPF principal sum beyond 100% of the valuation limit and the accrued interest. 4. All costs and expenses which the CPF board and the mortgagee are entitled to 5. Payment of all other monies, costs and expenses which the mortgagee is entitled to Refinancing What happens when the mortgagor finds that interest rates offered are lower than what they were previously? What can they do? On refinancing, existing mortgage is discharged. The new mortgagee will disburse a loan amount to repay the previous mortgagee New mortgage registered Consent of CPF Board New letter of confirmation of priority arrangements Conclusion Process of mortgage and charge must take place within completion period (usually 6 to 8 weeks): Complete documentation Disburse money Register security documents Ensure interests of all parties are protected Notice Copyright © 2024, Singapore Institute of Legal Education. All rights reserved. The Course materials are developed by the Singapore Institute of Legal Education, based on the content, syllabus, and guidance provided by the Chief and Principal Examiners and their teams. 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