Flat house owners stay up for their MOP like NS males stay up for their ORD. As soon as it occurs, you’re free to…keep it up with 20 extra years of debt? Obsess over the influence of a close-by columbarium on property worth? Eh, listed here are some higher concepts.
However first, what’s the MOP?
The Minimal Occupation Interval (MOP) is a five-year stretch that applies to most HDB properties (sure, together with Government Condominiums that haven’t but been privatised).
*The MOP is prolonged to 10 years for Prime Location Public Housing (PLH) flats.
Throughout the MOP, you can’t promote your flat on the open market, and you can’t hire out the whole flat (though you may nonetheless hire out particular person rooms, supplied you continue to stay there). As well as, you can’t purchase a personal property throughout the MOP.
One exception to the rule is if you happen to personal a one-room resale HDB flat, which you bought with none HDB grants. There’s no MOP on these models. (Though this exception doesn’t appear to use anymore; as of this replace, HDB’s web site states that resale flats purchased with none grants are topic to the five-year MOP).
The MOP begins from the day you full the sale transaction (aka once you acquire the keys to your new residence). If there’s a niche during which you’re not residing within the flat (e.g. you fly abroad to work for 2 years), these years don’t depend towards your MOP.
So, that being stated, what are you able to do after your MOP? Properly, you may…
- Purchase a personal property along with your flat (if you happen to’re a Singapore Citizen)
- Improve to a personal property
- Transfer in elsewhere and hire out your entire flat (if you happen to’re a Singapore Citizen)
- Promote and transfer to a unique flat
1. Purchase a personal property along with your flat (if you happen to’re a Singapore Citizen)
In case you’re a Singapore Everlasting Resident (PR), skip to level 2, or maintain studying to rage on the unfairness.
A Singapore Citizen should buy a personal property along with their HDB flat, as soon as the five-year MOP is up. Additionally, do you have got some huge cash? Since you’ll want a ton of it. Like, enough-to-take-a-year-off-work ranges of cash.
First, you should pay all the standard taxes, such because the Extra Purchaser’s Stamp Obligation (ABSD) of 17% on the second property. Then, you should be prepared for both an enormous down fee or to repay the excellent residence mortgage of your present HDB flat.
That’s as a result of, if you happen to nonetheless have an excellent residence mortgage once you purchase the second property, the most you may borrow is 45% of the property’s worth or worth (whichever is decrease).
Assuming you compromise all that in money with out triggering a Central Narcotics Bureau investigation, congratulations! You’re a proud proprietor of a flat and a condominium. You may generate rental earnings by residing in a single and renting out the opposite.
As an necessary apart, word that you just can’t do that the opposite method round. In case you personal a personal property after which purchase an HDB resale flat, you’ll must promote the personal property inside six months.
(Though the present non permanent regulation is that, following the September 2022 cooling measures, you’ll need to promote the personal property 15 months earlier than you should buy a resale flat. That’s, except you’re 55 years outdated and above and shopping for a 4-room flat or smaller.)
The one strategy to have each an HDB flat and a personal property is to be a citizen, purchase a flat, look forward to the MOP to be over, after which purchase a personal property.
2. Improve to a personal property
After the MOP is up, you may promote your flat and improve. There are two methods to do that:
First, you should buy a personal property first, after which promote your flat. That is normally extra handy, as it will possibly get rid of the necessity for non permanent lodging. But it surely’s additionally a a lot greater problem.
In case you select to purchase a second property earlier than promoting your flat, you should pay the ABSD as traditional. Then, if you happen to’re a married couple and not less than considered one of you is a Singapore Citizen, you will get ABSD remission if you happen to promote the flat inside six months of shopping for a second property. In case you can’t promote the flat inside six months, then thanks on your contribution to nation constructing.
Additionally, you’ll in all probability desire a mortgage dealer to kind out the paperwork with the financial institution. Until your current flat mortgage has been paid off, you could get a decrease financing on your personal property as a result of Whole Debt Servicing Ratio (TDSR), which limits your month-to-month debt obligations.
You’ll want documentation to show to the financial institution that you just’re within the strategy of promoting your flat, and can accomplish that in six months. These embody:
- A duplicate of a signed endeavor to the HDB committing to finish the sale of your present property inside the interval stipulated within the endeavor
- A written declaration that you’ll take steps, in accordance with the signed endeavor, to promote your present property.
The financial institution will then think about excluding the month-to-month instalments of your present flat within the TDSR calculation, as a way to get the next financing.
The choice to all this problem is simply to promote your flat first, acquire the proceeds and repay the flat mortgage, and then purchase a personal property. The draw back is that there could also be a delay, throughout which you have got neither an HDB flat nor personal property to remain in. You’ll have to seek out non permanent lodging for some time.
Properties for hire which are accessible now
3. Transfer in elsewhere and hire out your entire flat (if you happen to’re a Singapore Citizen)
Once more, skip this if you happen to’re a PR. Sorry, however solely residents get to hire out their whole HDB flat. PRs can solely ever hire out rooms, however not the entire unit.
For you fortunate residents, this may flip your flat right into a cash-generating asset. For instance, in case your mother and father have an enormous flat or condominium already, you may transfer in with them and hire out your entire flat. It’s widespread for some {couples} to do that for just a few years after their MOP has completed, as they’ll save up the rental earnings as down fee on a condominium.
For instance, say you desire a S$1.5 million condominium. The minimal money part is 5%, or S$75,000 (the remainder of the down fee can usually come out of your CPF). In case you transfer in with mum and pop, and hire out your whole flat for S$2,800 a month, you may greater than cowl this price after two and a half years.
Condos on the market at S$1.5m and under
4. Promote and transfer to a unique flat
The tip of the MOP is a chance to maneuver someplace extra acceptable. Both to be nearer to your office, to right-size for monetary advantages, or to minimise the probabilities of showing on Crime Watch, since you’re one argument away from throwing that annoying neighbour down the steps.
There’s three issues to notice, if you wish to do that.
First, if you happen to’re going to purchase a second subsidised flat, you should be ready to pay the resale levy.
That is the quantity you should pay again to the federal government, as a result of they subsidised your first flat, bear in mind? The quantity is at the moment as follows:
- 2-room flats – S$15,000
- 3-room flats – S$30,000
- 4-room flats – S$40,000
- 5-room flats – S$45,000
- Government flats – S$50,000
For Singles Grant recipients, the quantity can be halved. For instance, the resale levy for 2-room flat, for a Singles Grant recipient, is S$7,500 as a substitute of S$15,000.
In case you’re going to purchase the second flat earlier than promoting your present flat, the levy will be deducted from the gross sales proceeds — any shortfall must be paid in money. Be aware that it’s essential to promote your earlier flat inside six months of shopping for a brand new one.
In case you’re going to promote your current flat first, you’ll need to pay the resale levy upon shopping for your second flat (this needs to be in money).
Second, you should refund any CPF monies you used again to your CPF account.
This contains any CPF grants used, in addition to the 2.5% annual curiosity that you’d have earned if you happen to hadn’t used your CPF monies for the home. You may log in to your CPF account to confirm the quantity. The excellent news is that you would be able to nonetheless use your CPF monies to pay on your subsequent flat.
(In case you managed to pay on your flat with out utilizing CPF financial savings in any respect, then congratulations, you may maintain the money.)
Third, if you happen to’re shopping for a resale flat, there are some variations to the mortgage.
You may take a second HDB mortgage and purchase one other flat instantly, as a substitute of ready for the gross sales proceeds out of your earlier flat.
However if you happen to do that, the rate of interest shouldn’t be the standard concessionary fee of two.6%. As a substitute, it’s pegged to the rates of interest provided by the three native banks (DBS, OCBC and UOB).
After you’ve offered your earlier flat and gotten the gross sales proceeds, you should pay again as much as 50% of the money proceeds into this mortgage. On prime of that, you’ll have to make use of the CPF monies refunded to pay for the following home. After that, the mortgage is transformed to the standard HDB mortgage on the concessionary 2.6% every year.
If you wish to promote your current flat and purchase a second one on the similar time, you should use the Enhanced Contra Facility (ECF).
Merely put, ECF helps you to faucet on the sale proceeds and returned CPF monies to instantly pay on your second flat. However word that stamp duties and authorized charges need to be paid in money, as a substitute of with CPF, if you happen to use this technique.
For extra data, take a look at 99.co’s information on what it is best to know earlier than shopping for your second HDB flat.
And people are your choices! Earlier than you choose any of them, simply bear in mind…
- Make preparations for cumbersome furnishings, particularly if you happen to’ll use non permanent lodging
- Test on 99.co to ensure you’re getting the most effective costs on your subsequent residence (psst, we now have listings which are completely on 99.co)
- Begin the sale course of early, particularly if you happen to’ll must promote your flat inside six months. Don’t find yourself paying ABSD once you’re probably not shopping for a second home; that’s simply ridiculous. Work together with your actual property agent on a advertising and marketing technique, nicely earlier than the six month timer begins.
[Additional reporting by Virginia Tanggono]
Have to promote your flat inside six months? Think about participating a property agent if you happen to haven’t executed so.
In case you discovered this text useful, 99.co recommends Promoting your flat quickly after MOP: Good transfer or dumb transfer? and Full record of HDB BTO initiatives hitting MOP in 2023 (and must you promote proper after MOP?).
