So you’ve got met your MOP. Now what are you able to do together with your flat?
Flat house owners sit up for their MOP like NS males sit 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 impression of a close-by columbarium on property worth? Eh, listed below 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 Govt Condominiums that haven’t but been privatised).
*The MOP is prolonged to 10 years for Prime Location Public Housing (PLH) flats.
In the course of the MOP, you can’t promote your flat on the open market, and you can’t hire out your complete flat (though you may nonetheless hire out particular person rooms, offered you continue to reside there). As well as, you can’t purchase a non-public property in the course of the MOP.
One exception to the rule is in case you personal a one-room resale HDB flat, which you bought with none HDB grants. There’s no MOP on these units. (Though this exception doesn’t appear to use anymore; as of this replace, HDB’s website 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 whenever you gather the keys to your new residence). If there’s a spot through 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? Nicely, you may…
- Purchase a non-public property along with your flat (in case you’re a Singapore Citizen)
- Improve to a non-public property
- Transfer in elsewhere and hire out your entire flat (in case you’re a Singapore Citizen)
- Promote and transfer to a unique flat
1. Purchase a non-public property along with your flat (in case you’re a Singapore Citizen)
For those who’re a Singapore Everlasting Resident (PR), skip to level 2, or maintain studying to rage on the unfairness.
A Singapore Citizen should buy a non-public property along with their HDB flat, as soon as the five-year MOP is up. Additionally, do you could have some huge cash? Since you’ll want a ton of it. Like, enough-to-take-a-year-off-work ranges of cash.
First, it’s good to pay all the standard taxes, such because the Extra Purchaser’s Stamp Obligation (ABSD) of 17% on the second property. Then, it’s good to be prepared for both an enormous down cost or to repay the excellent residence mortgage of your present HDB flat.
That’s as a result of, in case you nonetheless have an impressive residence mortgage whenever you purchase the second property, the utmost 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’ll be able to generate rental earnings by residing in a single and renting out the opposite.
As an vital apart, observe that you simply can’t do that the opposite manner round. For those who personal a non-public property after which purchase an HDB resale flat, you’ll must sell the non-public property inside six months.
(Though the present momentary regulation is that, following the September 2022 cooling measures, you’ll must promote the non-public property 15 months earlier than you should purchase a resale flat. That’s, except you’re 55 years outdated and above and shopping for a 4-room flat or smaller.)
The one technique to have each an HDB flat and a non-public property is to be a citizen, purchase a flat, watch for the MOP to be over, after which purchase a non-public property.
2. Improve to a non-public property
After the MOP is up, you may promote your flat and improve. There are two methods to do that:
First, you should purchase a non-public property first, after which promote your flat. That is often extra handy, as it might eradicate the necessity for momentary lodging. But it surely’s additionally a a lot larger trouble.
For those who select to purchase a second property earlier than promoting your flat, it’s good to pay the ABSD as regular. Then, in case you’re a married couple and not less than certainly one of you is a Singapore Citizen, you will get ABSD remission in case you sell the flat within six months of shopping for a second property. For those who can’t promote the flat inside six months, then thanks to your contribution to nation constructing.
Additionally, you’ll most likely need a mortgage dealer to kind out the paperwork with the financial institution. Except your present flat mortgage has been paid off, chances are you’ll get a decrease financing to your non-public property because of the Complete Debt Servicing Ratio (TDSR), which limits your month-to-month debt obligations.
You’ll want documentation to show to the financial institution that you simply’re within the means of promoting your flat, and can accomplish that in six months. These embrace:
- A duplicate of a signed endeavor to the HDB committing to finish the sale of your present property throughout 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 contemplate excluding the month-to-month instalments of your present flat within the TDSR calculation, in an effort to get the next financing.
The choice to all this trouble is simply to promote your flat first, gather the proceeds and repay the flat mortgage, and then purchase a non-public property. The draw back is that there could also be a delay, throughout which you could have neither an HDB flat nor non-public property to remain in. You will have to search out momentary lodging for some time.
Properties for hire which can be accessible now
3. Transfer in elsewhere and hire out your entire flat (in case you’re a Singapore Citizen)
Once more, skip this in case you’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 cost on a condominium.
For instance, say you need a S$1.5 million condominium. The minimal money part is 5%, or S$75,000 (the remainder of the down cost can usually come out of your CPF). For those who transfer in with mum and pa, 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, in case you’re going to purchase a second subsidised flat, it’s good to be ready to pay the resale levy.
That is the quantity it’s good to pay again to the federal government, as a result of they subsidised your first flat, keep in mind? The quantity is presently 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
- Govt flats – S$50,000
For Singles Grant recipients, the quantity will likely 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.
For those who’re going to purchase the second flat earlier than promoting your present flat, the levy could be deducted from the gross sales proceeds — any shortfall should be paid in money. Word that you could sell your previous flat within six months of shopping for a brand new one.
For those who’re going to promote your present flat first, you’ll must pay the resale levy upon shopping for your second flat (this needs to be in money).
Second, it’s good to refund any CPF monies you used again to your CPF account.
This contains any CPF grants used, in addition to the two.5% annual curiosity that you’d have earned in case you hadn’t used your CPF monies for the home. You’ll be able to log in to your CPF account to confirm the quantity. The excellent news is which you could nonetheless use your CPF monies to pay to your subsequent flat.
(For those who managed to pay to your flat with out utilizing CPF financial savings in any respect, then congratulations, you may maintain the money.)
Third, in case you’re shopping for a resale flat, there are some variations to the mortgage.
You’ll be able to 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 in case you do that, the rate of interest isn’t the standard concessionary charge of two.6%. As a substitute, it’s pegged to the rates of interest supplied by the three native banks (DBS, OCBC and UOB).
After you’ve bought 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 high of that, you’ll have to make use of the CPF monies refunded to pay for the subsequent home. After that, the mortgage is transformed to the standard HDB mortgage on the concessionary 2.6% each year.
If you wish to promote your present flat and purchase a second one on the identical time, you should utilize the Enhanced Contra Facility (ECF).
Merely put, ECF allows you to faucet on the sale proceeds and returned CPF monies to straight pay to your second flat. However observe that stamp duties and authorized charges must be paid in money, as a substitute of with CPF, in case you use this methodology.
For extra data, try 99.co’s information on what it’s best to know earlier than shopping for your second HDB flat.
And people are your choices! Earlier than you decide any of them, simply keep in mind…
- Make preparations for cumbersome furnishings, particularly in case you’ll use momentary lodging
- Verify on 99.co to be sure to’re getting one of the best costs to your subsequent residence (psst, we’ve got listings which can be completely on 99.co)
- Begin the sale course of early, particularly in case you’ll must promote your flat inside six months. Don’t find yourself paying ABSD whenever 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, properly earlier than the six month timer begins.
[Additional reporting by Virginia Tanggono]
Have to promote your flat inside six months? Think about engaging a property agent in case you haven’t accomplished so.
For those who discovered this text useful, 99.co recommends Promoting your flat quickly after MOP: Good transfer or dumb transfer? and Full record of HDB BTO tasks hitting MOP in 2023 (and do you have to promote proper after MOP?).
