王天财
5
tips
HDB Homeowners Should Know Before Upgrading
MAGAZINE TITLE
CONTENTS
1
Understand the Difference Between HDB Loans & Bank Loans
2
Be Financially
Prudent
3
Do Not Take
ABSD Remission
For Granted
4
Take Note That the Property You Are Upgrading to Will Affect the Future Asset Progression
5
Keep In Mind That Upgrading Now Is Always Better Than Later
Tip # 1
Understand The Difference Between HDB Loan & Bank Loan
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HDB Homeowners
may be unfamiliar
with Bank
Loans if they
financed
their flat
with a
HDB Loan
Which Loans can
you apply for when buying property?
HDB
Loan
HDB
Loan
HDB
Flats
Executive
Condos
Private Homes
Source: Housing development boards, monetary authority of Singapore
The interest
rate for a
HDB loan is
typically at
2.6%* while
bank loan
interest rates
fluctuate**.
"HDB loan rates is 0.19% above CPF OA rate of 2.5%
Flood ratos are only valid for 2-3 years for a bank loan.
Source: Housing Development Board, Singapore Banks
A quick Summary
Assumptions based on 3-mth Compoounded SORA + 1% as of the 1 September 2022 source. Monetary authority of Singapore, Housing development board, ERA.
You may
not need
to fork out
any cash for
HDB loans
but bank
loans require
compulsory
5% cash.
Note: Based on best LTV an tenure terms.
Your monthly
installments
may not be
the same due
to variable
interest rates
for bank
loans
Tip #2
Be
Financially
Prudent
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Remember
to exercise
financial
prudency
when
upgrading.
Always have
enough cash
and CPPF
OA funds to
COver down
payments
and monthly
repayments.
Do l have enough
money to upgrade?
Case Study
Note: The purchase price of BTO based on Real BTO BTO project launched in 2012.
* Include CPF OA not returned yet, excluding all expenses.
Is $440,000
enough
for me tO
upgrade to a
$1,200,000
condo?
Using sales
proceeds to upgrade.
NOTE: excluding miscellaneous expences
SOURCE: Inland revenue Authority of Singapore
$440,000
>
$333,000
PROCEEDS MORE THAN DOWNPAYMENT!
If your HBD sale proceeds exceed your condo upfront payment, you can definitely afford a $1,200,000 condo!
NOTE: you must fill TDSR requirements
If you have extra savings it can even go towards funding your home renovations
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Tip # 3
Do not Take ABSD Rermission For Granted
ABSD
remission
is only
applicable
for a joint
purchase
by married
couples
At least one Singapore
CItlzen Spouse
More information can be
found at Inland Revenue
Authority of Singapore.
Remember
to sell your
existing HDB
flat within 6
months.
Otherwise
your ABSD
will not be
refunded.
Are you willing to
take the risks?
Scenario 1: Seller is flexible In his selling price
Low Risk
Scenario 2: Seller is fixated On waiting for the "right" buyer and Is
Inflexible about his selling price.
High Risk
NOTE: OTP stands for Options to Purchase
Tip #4
Take Note
That the
Property
You Are
Upgrading to
Will Affect
Future Asset
Progression
Every
property has
a 'waiting
time' before
it can be sold
in the open
market.
How long is the
'waiting time'?
Shorter
Waiting Time
Longer
Waiting Time
Tip #5
Keep In
Mind That
Upgrading
Now Is
Always
Better
Than Later
Private home prices
are becoming more
and more expensive...
New launch condo prices have grown 106.8%
since 10 years ago.
Resale condo prices have grown 39.6% since
10 years ago.
Source: Urban redevelopment authority
This is happening
right now...
FDI stands for foreigh direct investment
New launch
prices are
trending
upwards
because
of cost
pressures.
The longer
you delay,
the higher
new launch
prices will
become.
The benefits of
upgrading early.
1
Lock-in a lower entry
price for higher
potential profits.
2
The younger you are,
the longer the loan
tenure which implies
lower mortgage
repayments.
Conclusion
There are many
differences
between private
property
ownership &
HDB ownership,
ranging from
loans types
to financial
responsibilities.
It is possible
to upgrade
from a HDB
to condo
so long as
the sales
proceeds can
cover most of
your condo's
down
payment.
Tax reliefs
such as
ABSD
remission
are subject
to certain
criteria
set by the
government.
Don't take
too long to
find the best
offer before
you sell your
HDB flat.
Need
help with
planning
your asset
progression?