FAQ #2: Selling your Property

Most Singaporean or PR’s first home is a HDB flat. Over the years, one can shift as many as 7 times! What are the considerations before you decide to sell your flat?

SCENARIO 1:

About 5 years ago, Judy and Jack applied for their HDB Loan Eligibility (HLE) to check their eligiblity for a HDB loan (2.6%). Based on using up to 40% of their income on monthly housing repayment, they were eligible to buy a HDB flat with value up to $400,000.

Having just married and eager to start their new lives with the best, they decided to go for the biggest unit they were allowed to purchase, which in their case was an Executive Apartment. When the payments started, initially they were okay with forking out the extra cash each month, since their cpf alone was not sufficient for their monthly mortgage. But soon, the baby came along, and they started finding themselves short of cash!

Soon they realised that if they were to keep the Executive Apartment, it was going to kill them financially, and so they made the decision to sell and downgrade. They need to know:

– Are they eligible for another HDB loan (at 2.6%)?
No, they would have to take a bank loan. HDB only allows for a 2nd loan if you are upgrading and still have a combined income of $8k or less (for family nucleus scheme). For example, upgrading from a 3-room to a 4-room flat, or a 4-room to an EM. Note that moving from a smaller 4S unit to a bigger 4A unit is not considered ‘upgrading’.

– How much cash do they need to secure a smaller unit?
They would need cash for the ‘cash over valuation’ (cov) if any, and 5% cash (of valuation price) for a bank loan, stamp duty, legal fees, and the relevant miscellaneous fees.

– Other considerations?
Since they have been using their cpf in full each month, they would definitely need the proceeds from the sale of their flat to buy their new flat. Usually, when you are upgrading, you can do a hdb contra. In their case, since they are taking a bank loan, they have to take a bridging loan, in which the interest payable has to be factored in.

Conclusion: Try not to overstretch your income on housing payments.

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SCENARIO 2:

My parents have been renting out their HDB flat, and the tenant lease expires next May. They wish to sell their flat.

– Is there any way they can sell the flat before the lease expires, ie. sell the flat to the new owner with tenancy?
No, your parents cannot sell their hdb flat with an existing lease. This is because the new owner is legally not allowed to lease out his units for the first 3-5 years. By allowing the tenant to occupy the whole unit under the new owner would be a breach of HDB law, and HDB can repossess the flat from the new owner.

– Do they have other options?
Your parents have the option of talking to the tenant and coming up with a compensation plan to end the lease earlier (ie. giving him 1-2 months rent in exchange for terminating the lease). Once the tenancy has ended, they can then legally sell the flat.

Alternatively, the flat can be sold, with the tenant given the option to rent a room (or 2, depending on the unit size) from the new owner, and sign a new room tenancy agreement with him. It’s legal to rent out rooms, as long as the owner is staying in the flat.

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SCENARIO 3:

I’m thinking of selling my flat.

– Am I eligible to sell?
You must fulfil HDB’s Minimum Occupation Period (MOP) before you can sell your flat.

MOP could be 0, 1 year, 2.5 years or 5 years depending on whether what type of flat you bought, and whether you took a grant.

0 year: Applicable to owners of 1 room flats or HUDC
1 year: Applicable to owners who bought from open market without HDB loan or grant or have fully paid off HDB loan
2.5 years: Applicable to owners who bought from open market and took a HDB loan
5 years: Applicable to owners who bought new flats, or resale flats with Housing grants

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4 Responses to “FAQ #2: Selling your Property”

  1. Singapore Watch » Blog Archive » The Almost Complete Goondu’s Guide to Buying a HDB Flat in Singapore Says:

    […] 5: Questions People Ask 1) FAQ #1: Private property owners and HDB 2) FAQ #2: Selling your Property 3) FAQ […]

  2. aisha Says:

    I am a Singaporean married to a PR and we have a singaporean baby. We just purchased a resale hdb flat just last year, which is under 5 year MOP. The question is my husband intending to go back to his country to pursue his studies and work as well.
    The question is can my mum (owned a hdb flat fully paid) stay as an occupier to satisfy the MOP period and at the same time rent out her flat.
    Does she need to dispose her flat?
    If so, can she be a co joint tenant with both of us?
    I did find out there are ppl especially the elderly rent out their whole unit and stay with their children for years without getting caught.
    Please advice.

  3. Justina Says:

    Your mum can legally rent out her whole flat since she has served her MOP. Shouldn’t be a problem for her to stay at your flat while you are gone.

  4. Sun Says:

    Hi,
    I am a singaporean (just coverted)and my wife is a PR. We are having a divorce. We own a HDB in joint name which was bought without any HDB grants and just in the open market in 2009. What if that HDB flat comes to my share or her share. Can one of us exclusively own an HDB flat in a single name? Are there any charges or penalties applicable to do such a mutation? If so how much? Please advise, since I would definately want to retain this HDB flat in my sole name after divorce and do not want to sell it. Thanks a lot.

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