selling property things consider Thats hard enough to do if youre single, let alone if you have young children or elderly parents to think about! Even if they are still within the income ceiling, they will also have to go through another anxiety-inducing round of BTO roulette with lower chances of getting a good queue number when applying as second-timers. But was there a profit for these sellers after flipping BTOs? Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. This blog was started to share with you my personal journey to FI/RE (Financial Independence Retire Early) as a young mom in Singapore and a recent graduate. Also, no new properties may be procured. Andbecame financially independent at age 26! And have a greater potential for capital growth. If you have taken grants for your previous HDB or EC purchase, a resale levy will be deducted from the proceeds of your sale. Just like how you shouldnt max out your credit cards, you shouldnt max out your TDSR. This is as good as a sure-win scenario. If not, they would have to spend more on the purchase and renovation of mature resale flats. And it isnt the only one to be sold. But we are forgetting a big cash-sink. Buying your flat first means you dont have to worry about scrambling to find a place to live before you have to move out of the flat.

If youre opting to buy a new flat before selling your current one, you need to be sure that youre financially able to juggle the costs of owning two properties at the same time. TDSR and MSR were introduced to control the amount that borrowers could loan, to prevent them from over-extending themselves and ending up unable to afford their monthly obligations. This might mean moving in with kind relatives willing to take you in, but for most, itll mean having to rent an apartment until youre able to find your own home. L3008022J) And Other Real Estate Agencies Including Huttons Asia Pte Ltd (Agency Licence No. Or are you going to rent? This flatline has been due toproperty cooling measuresthat the government implemented to control property prices. *You need to top up the additional cash within the period HDB provides. In these cases, it might be more worth your time to speak directly to the seller and see if you can work things out, before resorting to taking them to court. But the subtraction doesnt stop here. Sale proceeds from the current HDB flat. However for this to work, there are many assumptions at play. You need the stars to align for you sometimes. Even in todays depressed market, that can get pretty expensive very fast. With the governments cooling measures kicking in, todays sellers are getting far less for their flats than they initially projected. Regardless of the fact that youll be selling your current flat later, youll still be liable to pay an Additional Buyers Stamp Duty (ABSD) on the second flat depending on the citizenship of you and your co-applicants, this can run anywhere between 17 to 25 percent of the purchase price of the flat. This levy applies when a couple decides to purchase another BTO. Usually, this will fetch a much higher market price. Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. And you can always use your CPF OA to pay for another house if you like to. The key difference is that you do not have to pay the resale levy if youre not taking any grants for your resale purchase. In addition, you cannot be earning more than the income ceiling for each flat type. It is, however, a risky and expensive proposition. We also use third-party cookies that help us analyze and understand how you use this website. Lets speculate.

Necessary cookies are absolutely essential for the website to function properly. Check out the article here and the video in this link. Also, many of us will still need a roof over our heads after selling our BTO flat. Once the keys have been collected you will have 6 months to dispose of your previous property. There are additional costs to bear mainly, agent commission fees when they sell their first BTO. As you can see, the lower your household income, the more EHG grants you will receive. Theres also a tremendous amount of work and expense that comes with moving for second-timer HDB homebuyers. If youre taking a second HDB Loan, note that your total loan amount will be reduced by taking into account your full CPF monies, as well as a portion of the cash proceeds from the sale of your first flat. Fresh articles, market trends and news right to your device. After all, they still need to make it livable for the nine years they reside there. BTO applications are only open to Singapore citizens. Should second-timer HDB homebuyers buy first, then sell? If you do decide to go with the decoupling strategy, make sure that you are not over-leveraged and taking on more debt than your family should. Perhaps the couple picks theirnext BTOas a high-floored unit in Tengah (that launched earlier in May this year). Whether youve moved in with family, or rented a space, youll have to repeat the whole packing endeavour once youve finally found your new flat. If you currently own a property, youll need to dispose of the property 30 months before your application. The collection of the BTO flat key is by the Estimated Completed Date (ECD), if you sell too early you may be unable to deliver vacant possession to your buyer, if you sell your existing flat after received the HDB letter of invitation to collect the key you may under pressure to sell due to the deadline set by HDB, there are many factors affecting the timeline planning for example: Alternative housing available If you intend to use the proceeds from the sale of your existing HDB or EC, you have a short runway to liquidate your home. If you are not a citizen, you can apply with at least one other citizen or PR. Your HDB loan will be affected (if its your second HDB Loan). Others might go for this option if they are not in a rush and dont mind waiting a couple more years for another round of MOP capital gains.

You can see here that the timeline is rather messy, and timing is of the utmost importance in this exit plan. After all, the couple will have to purchase a new BTO at todays more expensive prices, requiring them to service a larger mortgage. In Singapore, most couples have the opportunity to live in government-subsidised Build-To-Order (BTO) flats. Home is where the heart is, but only after we sell off our first BTO. Can you afford to? We have an article here that covers how capital gains look like for ECs after MOP. This is the time when you can sell your BTO flat in the open market. Of course, your mileage may vary depending on the renovation costs. The good news is that you can claim a refund for the full amount paid if you manage to sell your first property within 6 months of your new purchase.

The cookie is used to store the user consent for the cookies in the category "Performance". Under current TDSR regulations, a person may only use a maximum of 60 percent (70 percent if theyre self-employed) of their monthly earnings to pay off any loan obligations they have this would include home loans. Our BTO has added at least $100k more to our net worth. To make money. Agent fees for sale are typically 2% of the flat selling price: $9,600. Heres a breakdown of how much they paid after staying there fornineyears: To figure out how much they earned from selling their home, we first have to consider the resale levy that has to be paid. The difference between these loans is mainly the interest rates, as well as the initial down payment required. To build sustainable wealth, the easiest way is to live within our means. Its a pretty complicated process for second-timer HDB homebuyers since it involves the coordination of 3 parties (you, the buyer of your flat, and the seller of the flat youre interested in), so we would recommend hiring an agent if youre attempting this. Also, they come with a fresh lease of 99-years. Unlike BTOs, resale flats are often occupied at the point of sale. The plan for round 2 is all centred on the assumption that you get lucky with a favourable queue number for the next property. Under your application status, you can also see the application rate of the BTO project that youre eyeing on. Firstly, the couple has to be eligible to apply for another BTO. Still pretty good! Now we are at the interesting part. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. Stay with your parents? This is a great way for second-timer HDB homebuyers to avoid the stress and work of shifting houses, while still allowing them to upgrade to a larger flat. Under the old AHG scheme, before it got enhanced in 2009, they would have been entitled to $5,000 in CPF grants. For resale HDBs, the process is a lot simpler. In A Team Model Serving Both Home Sellers And Buyers Together. The Punggol BTO which we used above as an illustration almost perfectly rode this wave. Once you get a good queue number and plan to commit to the decision, you need to know that: Once you have booked the flat, you will have 4 months to signing the lease agreement (where the down payment is due). If you arent able to buy a new flat in time, you may have to find yourself alternative lodging in the interim. If there are no good offers from buyers, this might lead to a less than ideal sales price for your property. The cookies is used to store the user consent for the cookies in the category "Necessary". Youll basically be allowed to keep $25,000 or half of the sales proceeds from the sale of your flat (whichever is greater) the remainder will go straight towards paying off the cost of your home. Oxley BizHub 2, Singapore 408734. The exact financial details of the extension can be worked out privately between yourself and the seller. Likewise, if your queue number is far behind, your dream unit may be snapped by another person before you. Whats next after you sell your home? Our Listing Managers & Listing Specialists Are Full Time Professional Real Estate Salespersons Licenced For people who want to avoid potentially stressful situations with timing, it might be better to fund the down payment with cash or CPF.

Many of us may procrastinate on refinancing our home loans due to the complicated process of refinancing. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. 62 Ubi Road 1 #11-15 Again, the 6 month timeline applies once you have exercised the option to purchase the private property whether it is a new launch or a resale private property. If youre looking to start building sustainable wealth, dont forget to check out my Tools for referral links and exclusive offers.

Salespersons Working Collaboratively In A Joint Marketing And Joint Cobroking Arrangement Co-Operatively Step 4: Profit! PropertyLimBrothers Is An Independent Real Estate Media Technology Brand And Company. To summarise what we have discussed so far, here are the things you should look out for when you decide to sell your HDB or EC after MOP: Note down the timeline of when you have to sell the property, Have proper accommodation plans to make sure you dont end up without a place to live, If you intend to bankroll the down payment with your previous property, you will need to seek out alternative living arrangements while waiting for your new place, Watch out for potential delays in your plans to move in to your new place, Do a detailed analysis of your next property to make sure it has strong intrinsic value. Loan of your new BTO flat You have the choice of taking either a HDB loan or a bank loan. We are also assuming this is a frictionless move between houses that is, they do not need to make rental arrangements while waiting for their next home to be ready. The key perk of going into private property is that you may rent out the entire property immediately from purchase. If you are a First-timer applicant, you will have privileges in terms of balloting and subsidy. Under the new cooling-off regulations, the maximum bank loan you can get will be affected by the number of outstanding loans you have in this case, having 1 outstanding loan means youll only be able to get a loan of between 25 to 45 percent (depending on the tenure of the property and the borrowers age). This potentially brings the total cost of renovation sunk into both homes up to$88,000. As CPF is primarily for retirement, this is in place to ensure retirement needs can be met. Since resale flats are already constructed, there is less uncertainty over construction delays. With this option being 2 years shorter than the 5 year MOP, there is a little more flexibility for investors looking to exit sooner in their property moves. So because theyre subsidised, does the process of flipping our first BTO go like this? Furthermore, you may move in (hopefully) after your purchase is complete if there are no hiccups with the seller moving out. Maybe venture into private property? For instance, they are usually bigger when compared to the same flat type. This cookie is set by GDPR Cookie Consent plugin. Or sell first, then buy? This is because BTOs are almost always cheaper than resales. The cookie is used to store the user consent for the cookies in the category "Analytics". You may have heard from your friends that HDB BTO can make money. Well send you financial updates, personal finance tips, and advice straight to your inbox.

Are you going to buy another BTO, Resale HDB, EC? The Total Debt Servicing Ratio (TDSR) and Mortgaging Servicing Ratio (MSR) regulations apply regardless of whether you buy or sell your flat first, but in the former case, if youre still servicing your outstanding loan on your current flat, the TDSR and MSR restrictions may effectively block you from obtaining the loan amount that you desire. If you havent sold your first flat yet, HDB will still grant you a loan for the larger amount, but will charge you a commercial interest rate rather than the lower concessionary rate. But do keep in mind that they may fluctuate, and can be better or worse than HDB loans interest. Home tours and property news straight to your device. Before you decide you hastily sell your HDB or EC, read this article to see which might be a better next step to take. Bank loan: Obtain approval in principle (AIP) from the bank, which is the equivalent of HLE. If youre lucky, theyll be amenable to entering into a lease with you youll need to apply to HDB for a Temporary Extension of Stay, which will allow the sellers to remain in the flat for up to 3 months. HDB announces upcoming BTO projects and press releases of projects on their website. If this trend continues, it might mean that any BTO purchased from 2012 onward might not experience the same astronomical growth in resale prices. The cost of the resale levy depends on the current size of their flat: Of course, if youre not looking to get another BTO, the resale levy wont apply to you. And lets not forgetthe surge of BTO projects springing up every other year. They are also already built so you can visit the site and see the apartment in person before deciding. 6 months to sell your home might be a challenge if the market sentiments are bearish or faced with cooling measures. Unless you are a lucky outlier that can sell your BTOfor a million dollars, you should do your sums carefully and observe the current resale market conditions before committing to flipping BTOs and selling your home. With construction or renovation details, this might be for quite a long duration. There are more variables here in making the right decision and there should be sufficient analysis that shows your plan is resilient. Or maybe you just like the new BTO or EC launches. These cookies ensure basic functionalities and security features of the website, anonymously. With costs mounting, second-timer HDB homebuyers might find themselves compromising on their wants and choosing a flat thats there and available, rather than a flat theyre genuinely excited about, just to stem the flood of funds streaming out the pocket. After collecting your keys, all HDB owners are subject to a 5-year Minimum Occupation Period (MOP). Remember that ABSD will apply if you are not able to sell your previous property in time. Note, however, that you will need to have plans for your accommodations before your new BTO or EC is completed and ready to move in. They will have to refund this amount, withaccrued interest, back to their CPF accounts. Lets take a look at the price of a high-floored 4-room BTO that just cleared its MOP, and wassold at $480,000 this year(according toURAsonline tool). The grant amount is assessed at the point of the BTO application. Most owners of HDBs or ECs might be tempted by the mouth-watering appreciation gains and look to make a sell decision before thinking elaborately about their next step. Disclaimer: Information provided on this website is general in nature and does not constitute financial advice. $40,000 will be subtracted, leaving them with $440,000. In essence, this is how it works: After a five-year Minimum Occupancy Period (MOP), BTO flat owners will be able to sell off their homes on the open market presumably, at a much higher market price. Simply put, you have to dispose of your property within 6 months of receiving the keys to your new Resale flat. We just sent you an email. Lets assume this: A hypothetical couple had a total household income of $4,000 when they purchased their first BTO, the Punggol Coralinus 4-room flat, 13 years ago, with its construction completed in 2010. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. Step 1: Buy BTO The main reason why I have gotten so much in grants was that we applied for the flat early in our careers when our income was still low.

Knowing this in advance and having a marketing and staging plan would definitely help reduce the lead time to selling your property on time. This cookie is set by GDPR Cookie Consent plugin. However, you cannot switch from a bank to an HDB loan. https://www.hdb.gov.sg/residential/financing-a-flat-purchase/housing-loan-from-hdb/contra-payment-facility-for-new-flats. Next, they have to work out how they had used from their CPF to pay off their first BTO. If youre looking to upgrade to a larger flat, you might be interested in HDBs Conversion Scheme. To retain our wealth, we also have to resist the golden handcuffs. Court proceedings, however, are a lengthy and expensive process take the case of Madam Herni Fadhillah Saad for example, who had to wait 5 years before she was finally able to take possession of the resale flat shed bought. If you are currently waiting out your MOP for a sale, there are some developments in the current housing market that might put a wrench in flipping BTOs as a money-making plan. ALL RIGHTS RESERVED. If you need an expert opinion to help you out with your own situation, contact us here! Factors such as distance from MRT, schools, and other amenities would matter in helping the property act as a good store of value. Second-timers have already gotten a subsidy for their first flat. An additional $100,000 at 5% would mean an additional passive income of $5,000 per year. There is no balloting involved, and the timeline is less complicated. 2022 PROPERTYLIMBROTHERS. It does not store any personal data. Legally however, HDB has the right to force you to surrender your brand new flat and provide you with compensation they deem appropriate. This option appeals to HDB or EC upgraders who do not wish to be hit by another round of MOP. https://www.hdb.gov.sg/residential/buying-a-flat/new/eligibility/hdb-flat.

If they fully utilise the CPF refund of$139,752to offset the new mortgage, it leaves them with$169,248 in balance,$70,810 morecompared to what was remaining on their original BTO. So far, it does look like a nice profit coming out of the first BTO. The Enhanced Contra Facility (ECF) is a relatively new scheme introduced by HDB and the CPF Board to help second-time buyers. To help you to achieve the financially free lifestyle youve always wanted. The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. It allows for the sale of the current flat and purchase of the new flat to run concurrently so that the proceeds and refunded CPF monies from the sale can be immediately used for their flat purchase. Lets explore past data to see if this plan comes together. The number of projects in recent years easily trumps earlier years like 2008 and 2009. For singles, you will need to be at least 35 years old to buy a BTO. Oxley Bizhub 2, Singapore 408734, PLB Studio & Inside Sales Team Office In the end, this leaves us with$104,010in cash profit. Its only when youve sold your flat and redeemed your loan with your CPF and sales proceeds that the interest rate will be adjusted to the standard concessionary rate (presently about 2.6 percent).

If youre buying a new flat before selling your current one, youll have 6 months from the date you take possession of your new flat to dispose of your existing one. For example, the combined income may have exceeded the ceiling. The cookie is used to store the user consent for the cookies in the category "Other. Should you be thinking of selling, or would simply like an update of where your property sits in today's market, book a non-obligatory discussion with one of our TemasekClass consultants. The upside to this complicated process for second-timer HDB homebuyers, however, is that you have a home thats ready to move as soon as youve concluded your sale! While this option seems to be the least restrictive, it is also complex in the sense that it is difficult to make an optimised investment decision. One particular estate has been fairly popular over the last few years Punggol. According to HDB, 13% of BTO flats located in Punggol (and Sengkang) had been sold after their MOP ended. You can, therefore, take the seller to court, and ask that he be compelled to go through with the sale. And even then, you can only purchase a 2-room flexi-flat in non-mature estates. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. If you sell high and buy high (resale, EC, private condo etc), then all your earnings from your BTO sale would be wiped out. In some instances, however, the resale flat owner may require more time to get their affairs in order and might not be ready to move out. These BTO flats require time to be built. HDB has traditionally been quite generous to sellers in this predicament, granting them extensions of up to 12 months to sell their flat, or allowing them to push back their key-collection date. It was estimated that in 2014, about 10 percent of second-timer HDB applicants pulled out of successful applications. We havent included the myriad ofadditional miscellaneous administrative feesfor the sale and purchase of both flats, nor the moving costs. This article will try to map out what might be the next step for you. Add to that the stricter borrowing restrictions and other levies that have been put in place, and you might find that the new home you wanted might be costing you more than you budgeted for. Once the Sale and Purchase Agreement is signed, the seller is legally obligated to go through with the purchase. Or the new launch projects are not suitable for you be it location or flat-type available.

Money in the CPF can be used for retirement. Fund available for the BTO flat (CPF in ordinary account and cash) We would love to help you get the most out of your property. As it has been for a very long time. And I will explain in this article how you can go about getting your first pot of gold. After the MOP, many flat owners will receive a flyer from property agents to sell their flats. Yes both BTO and resale flats have grants from HDB. We do not recommend this as BTO down payments are typically more affordable and the short timeline might be too risky.

Not key collection.

During this period, you will have to stay in your flat. The PropertyLimBrothers Inside Sales Team Is A Brand Platform That Has Fully Licensed Real Estate If you dont manage to sell your old flat within those 6 months, you can usually appeal to HDB for more time. At PropertyLimBrothers, we do an elaborate study using our MOAT analysis to give a rating on the property in question. Please click the link in the email to confirm your subscription! Application Rate = Number of applications Received / Flat Supply. With some digging, we found that the flat was in Punggol Coralinus BTO phase 2, where the upper range of its 4-room flats was originally priced at$220,000upon BTO launch back in 2007. Do you have a proper exit plan? No one is expecting you to pay off the whole flat with a suitcase full of cash. The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".

If youre taking a second HDB loan for this purchase, you can also expect to be charged a higher interest rate than the standard concessionary rate (we go into more detail on this below. Or should you focus on buying a bigger and more comfortable home (which will inevitably be more expensive)? One of the main criteria is that you must have one mandatory resource time. The resale levy is not applicable for resales, and private properties such as condominiums. Some owners of HDBs and ECs might want to go for a second round. So while it might be somewhat reassuring to have the option of an extension, its still not a good idea to put yourself in such a vulnerable position when theres such a substantial investment on the line. This applies to borrowers looking to finance their HDB flat or EC purchase, in addition to the existing TDSR restriction. This means that the BTO that you are buying is already at a discount from market rates! If you previously purchased a resale HDB or EC on the open market without grants, this will not apply. A popular strategy that you would have heard of is decoupling: have 1 condo under each spouses name, one for ownstay and the other for rental income. You may only ballot for a new BTO or EC after the MOP is over. Im the Personal Finance Blogger who started a family at 24. If you have made it this far into this post, do consider subscribing! With Property Guru, refinancing is easy, effortless, and transparent. Im the Personal Finance Blogger who started a family at 24. ABSD will not apply since the government knows that your previous property will eventually have to be sold. Also, your average monthly income cannot exceed $7,000 for a 2-room Flexi with a 99-year lease. The issue here is that if you choose to only sell your existing home after the collection of keys, you still have a tight timeline to work with. The upper range of 4-room flats there would cost $309,000. For owners of HDB flats and Executive Condominiums (EC), the Minimum Occupancy Period (MOP) is one of the big dates to be excited about. Regardless of whether you are going for a new launch or resale, we strongly recommend a detailed study into your familys personal financial situation. The key thing to look out for when you are doing this is the timeline. So if we subtract the increase of the mortgage from their cash profits (hey, CPF is money too), in total, the couples total net profits are:$33,200. PropertyLimBrothers will endeavour to update the website as needed. And they are usually built in better spots, surrounded by more amenities. At the current low-interest-rate environment, the bank loan interest rates of 1.2 to 1.5% may look a lot more attractive. One way we recommend dealing with this issue is to make sure the private properties you pick have strong intrinsic value with good prospects to appreciate. https://www.home123.sg/contra-payment-facility. For myself, I would choose the latter anytime. So far, the cash portion of the transaction looks great, but what about the CPF side of the equation? Step 3: ??? If you want to buy another BTO (read: subsidized) from HDB again, then you will be subject to a HDB resale levy. Not only that, youll be required to put a down payment of at least 25 percent of the purchase price in cold, hard cash! 2. But from 2013 till today, it seems that resale flat appreciation has flatlined. Buying a new home is, however, a serious financial endeavour, so be sure youre mindful of the above before you start the process to avoid any unnecessary mishaps. So the resale levy will reduce the subsidy enjoyed for the second HDB BTO flat. How to Make Money from your First HDB BTO, Checking for Upcoming Sales Launches and Balloting for Flat, How much Grant or Subsidy will I get from HDB, Save Money by Refinancing your Mortgage with Property Guru, Additional costs for selling ones first BTO, Save Money by Refinancing your Mortgage with, Side Income in 2022: How to Earn More with a Full-time Job in Singapore, How to Save $1 Million for Retirement, Broken Down by Age, Should I Use Choose an HDB Housing Loan or Bank Loan, https://www.hdb.gov.sg/residential/buying-a-flat/new/eligibility/hdb-flat, Tools for referral links and exclusive offers, How to Adjust your Spending to Stay Ahead of Inflation.

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