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6 Top Things to Consider Before Buying Your Second HDB Flat in Singapore
“Can I own 2 HDB flats”, “How many HDB flats can I own” and “Can I buy an HDB flat before selling my HDB flat” are questions many ask when looking to move from one HDB flat to another in Singapore. While most Singaporeans would upgrade to a private property once their HDB BTO flats hit the Minimum Occupation Period (MOP), some would prefer to buy another HDB flat for various reasons.
Being closer to family, their workplace, MRT/LRT stations, green lungs, or other amenities could be some of the reasons. Another rationale is to upgrade to a more spacious flat, especially for large and multi-generational families. Fewer HDB upgraders are buying private property in recent times.
But buying another HDB flat is not without rules. To help you out, we have compiled several important things you need to take note of before committing to buying your second HDB flat in Singapore. If you’re ready to sell your current HDB flat for the next, let us help you.
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Video on Financing an HDB Resale Flat in Singapore
Knowing how to finance your HDB flat purchase is an important part of your home-buying journey. Watch a short video explaining how to budget for your home purchase.
6 Considerations to Have When Purchasing Your Second HDB Flat
First, let’s be clear: Singaporean Citizens cannot concurrently own two HDB flats. So the answer to “Can I own 2 HDB flats at the same time” is no; likewise, the answer to “How many HDB flats can I own” is one.
What this article refers to is buying a flat as a second-time applicant. If you want to know more about holding multiple properties, then you might want to read our guide on how to own an HDB flat and condo simultaneously.
If you want to learn more about selling your property, you can read our useful guides.
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1. Committing to Another Five-year Minimum Occupation Period
When you buy a Build-to-Order (BTO) unit, resale HDB flat or a new executive condominium (EC), remember to consider the five-year MOP. During this period, you can’t sell or rent the entire flat out.
A lot can happen within five years. For instance, your family may grow, and you need more space, or a job loss results in the inability to repay the monthly mortgage instalments.
Should any of this occur during the MOP, HDB may either compel you to return the unit or exempt you from the MOP, depending on your circumstances. So, before committing to a new HDB flat, remember to consider this rule and the risks associated.
2. Buy First and Sell Later, or Sell First and Then Buy Afterwards?
The answers to “Can I own 2 HDB flats” and “How many HDB flats can I own” are “no” and “one”, respectively. But what about “Can I buy an HDB flat before selling my existing HDB flat”?
You can buy an HDB flat before selling your existing HDB flat, but there are pros and cons. There’s no right or wrong answer, but you must weigh both choices.
Scenario 1: Buying Second HDB Flat Before Selling Existing Flat
Selling Your Existing HDB Flat within 6 Months
The answer to “Can I buy an HDB flat before selling my existing HDB flat” is yes, but with certain conditions. Under HDB rules, you must sell your existing flat within six months of receiving the keys to your new flat.
Typically, you can appeal for an extension to HDB if you fail to meet the deadline. Usually, HDB will be lenient enough to provide you more time to sell your flat by deferring your key collection date or providing you with a maximum grace period of one year.
Opting for this route means you do not have to fret over rushing to secure a new home before relocating from your former HDB unit. But this choice is fraught with dangers.
For instance, HDB still has the legal authority to ask you to give up your home in exchange for compensation. So although the authorities will likely give you an extension, it is not advisable to place yourself in such a risky situation, in which you could end up losing your home plus a significant amount of money. To help you sell your HDB flat quickly, you could engage the expertise of a property agent.
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Bearing the Financial Burden of Having Two HDB Flats: When Transitioning Between Homes
Paying the mortgage for one flat is already costly enough, let alone two! Before you buy a new flat and sell your current one, remember to factor in the monthly instalments of both properties simultaneously.
Aside from miscellaneous expenses such as Buyer’s Stamp Duty (BSD) and legal fees, you also need to consider costs for possible repairs and renovation for both properties.
Having a Lower Loan-to-Value (LTV) Ratio
And if you choose to buy a new HDB flat before selling your current one, remember also that this will significantly reduce the amount you can borrow to fund the purchase of your new flat, should you decide to take on a bank loan.
Under existing rules, your existing financial obligations will reduce your Loan-to-Value (LTV) ratio. For instance, according to the Monetary of Singapore (MAS), if you have one outstanding housing loan, you can only borrow between 25% or 45% of the new property’s value, based on your age and the loan’s tenure.
Consider Your TDSR and MSR
Under the existing Total Debt Servicing Ratio (TDSR) threshold, you’re only allowed to use 55% of your gross monthly income to pay for your loans, which includes property mortgages and other financial obligations.
Assuming you earn $10,000 per month, your outstanding debt repayments (student loan, personal debt, car loan, etc.) should not surpass $5,500 per month. So if you’re servicing an existing housing loan and you intend to purchase another HDB flat, it’s possible that you may not get the loan amount you want. This is among the top disadvantages of buying another HDB unit before disposing of your current one.
Apart from TDSR, you’ll also need to consider your Mortgage Servicing Ratio (MSR) when seeking funding for HDB flats or ECs, which is capped at 30%.
This means that you can only use up to 30% of your gross monthly income to service your home loan, in addition to the TDSR restriction. This is tricky to overcome if you’re servicing two mortgages simultaneously.
Heftier Interest Expense
HDB will impose a greater interest rate versus its standard concessionary rate if you plan to apply for a second HDB loan to finance the acquisition.
Scenario 2: Sell the Current HDB Flat First, then Buy Another Afterwards
So now that you know the downsides of buying first and selling later, you might think that selling first would be a better route. However, this choice also comes with its risks – the chief concern is failing to secure a replacement accommodation on time.
Renting Interim Lodging and Storage Space
If you fail to purchase a replacement HDB flat on time, you will likely seek temporary housing. While some might have relatives who have spare rooms to offer, most will likely lease a unit for the time being until they can buy another property from HDB.
However, your rental expenses could reduce the proceeds from your sale, and leasing could get pricey if prolonged. If the temporary flat is small, you might even need to subscribe for a storage unit. In Singapore, where land is precious, renting a flat and storage space can put a significant dent in your wallet.
Settling for Second Best
Amidst such spiralling expenses, second-timers might settle for an HDB unit that doesn’t meet their requirements. In a bid to control costs, they may forego their ideal home.
Dealing with the Inconvenience of Moving Several Times
Moving your furniture and stuff entails a huge amount of work and expenses, much so for those who have bought a second HDB flat. That’s a hassle not only if you live alone but also for those who have to look after their elderly parents or young children.
Lower Loan Quantum
If you’re applying for a second housing loan from the HDB, you must meet certain HDB eligibility criteria. Essentially, you have to use up to 50% of the sales proceeds from your last flat. HDB will permit you to keep $20,000 in your OA and use the remaining balance to buy the flat.
The objective of this rule is to reduce the amount you need to borrow, keep your finances healthy, and prevent your home from getting foreclosed.
The loan amount you qualify for will also depend on how many years of remaining lease the new flat you are buying has. For instance, if the remaining lease of the flat is more than 20 years and covers the youngest buyer to less than 95 years, a lower loan limit will be pro-rated from 80% of the resale price (or value, whichever is lower).
3. HDB Resale Levy
First Subsidised Housing Type | Resale Levy Amount for Households | Resale Levy Amount for Singles Grant recipients |
2-room flat | $15,000 | $7,500 |
3-room flat | $30,000 | $15,000 |
4-room flat | $40,000 | $20,000 |
5-room flat | $45,000 | $22,500 |
Executive flat | $50,000 | $25,000 |
Executive condo | $55,000 | Not applicable |
Those who have previously acquired government-subsidised housing – new HDB flats bought from HDB and DBSS units or ECs purchased from a private developer – must pay a resale levy if they buy a second subsidised home from HDB. The objective of this rule is to ensure an equitable sharing of government subsidies between first-time buyers and second-timers.
The amount of resale levy that needs to be paid depends on the type of unit sold and the housing grant category that was obtained before.
4. Enhanced Contra Facility (ECF)
The Enhanced Contra Facility (ECF) was jointly introduced by the HDB and CPF Board to reduce the inconveniences second-timers face. This is done by ensuring you have a new home to move into once you complete the sale.
Under this scheme, the sale of your current flat will simultaneously occur with the purchase of another unit. As a result, proceeds from the sale and refunded CPF monies can be utilised immediately to buy another HDB flat.
Although CPF monies cannot be spent on conveyancing fees and stamp duty, the scheme can reduce the cash outlay needed for the acquisition. In turn, the buyer only needs to borrow a lower amount, and the monthly instalments will be less expensive.
However, ECF is an intricate process requiring the coordination of three parties – you, your unit’s buyer and the seller of the flat you plan to acquire. Hence, it’s advised to engage a real estate agent familiar with such a set-up.
5. Applying for the HDB Conversion Scheme
Some may ask, “Can I own 2 HDB flats that are side by side?” This is because they may want to have two homes for more space. Since the answer to “How many HDB flats can I own at a time” is still one, the answer to “Can I own 2 HDB flats side by side” is still no.
If you aspire to upgrade to a bigger HDB flat, consider HDB’s Conversion Scheme. Through this initiative, those who reside in a three-roomer or smaller unit can buy an adjacent three-room or smaller unit and then combine both into a single property.
But if you need a bigger flat (and have the budget), you can also consider buying a jumbo HDB flat from the open market.
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6. Sellers Might Not Move out Immediately
When buying an HDB BTO flat, the buyer will get vacant possession of the unit when it is completed, but this is not the case when purchasing an HDB resale unit.
While the former owners of the resale flat need to move out once the sale is officially concluded, there are cases when they ask for an extension before relocating to set their affairs in order.
There’s no problem if they want to sign a rental agreement with you to prolong their stay in the flat you bought. You also need to apply for a Temporary Extension of Stay permit from HDB so they can lawfully reside in the unit for a maximum of three months. Moreover, the particulars of the extension and the rent can be determined through a private contract between the concerned parties.
But there’s also a chance the seller might change his mind and no longer proceed with the transaction; they may even refuse to move out. Nevertheless, if the seller inked the Sale and Purchase Agreement (SPA), he must follow the contract. Otherwise, you can take him to court.
However, court proceedings are expensive and protracted. To avoid waiting a long time and paying hefty legal fees, please talk with the seller first and try to solve the problem before resorting to legal means.
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