Flat homeowners sit up for their MOP like NS males sit up for their ORD. As soon as it occurs, you’re free to…stick with it 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.
Through the MOP, you can’t promote your flat on the open market, and you can’t hire out the whole flat (though you’ll be able to nonetheless hire out particular person rooms, supplied you continue to dwell there). As well as, you can’t purchase a non-public property through the MOP.
One exception to the rule is when 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 while you gather the keys to your new dwelling). If there’s a niche by which you’re not dwelling within the flat (e.g. you fly abroad to work for 2 years), these years don’t rely towards your MOP.
So, that being mentioned, what are you able to do after your MOP? Effectively, you’ll be able to…
- Purchase a non-public property along with your flat (when you’re a Singapore Citizen)
- Improve to a non-public property
- Transfer in elsewhere and hire out your entire flat (when you’re a Singapore Citizen)
- Promote and transfer to a unique flat
1. Purchase a non-public property along with your flat (when you’re a Singapore Citizen)
When you’re a Singapore Everlasting Resident (PR), skip to level 2, or preserve studying to rage on the unfairness.
A Singapore Citizen can purchase a non-public property along with their HDB flat, as soon as the five-year MOP is up. Additionally, do you’ve some huge cash? Since you’ll want a ton of it. Like, enough-to-take-a-year-off-work ranges of cash.
First, you might want to pay all the same old taxes, such because the Extra Purchaser’s Stamp Responsibility (ABSD) of 17% on the second property. Then, you might want to be prepared for both an enormous down fee or to repay the excellent dwelling mortgage of your present HDB flat.
That’s as a result of, when you nonetheless have an excellent dwelling mortgage while you purchase the second property, the utmost you’ll be able to borrow is 45% of the property’s worth or worth (whichever is decrease).
Assuming you agree all that in money with out triggering a Central Narcotics Bureau investigation, congratulations! You’re a proud proprietor of a flat and a rental. You’ll be able to generate rental revenue by dwelling in a single and renting out the opposite.
As an vital apart, be aware that you simply can’t do that the opposite approach round. When you personal a non-public property after which purchase an HDB resale flat, you’ll must sell the personal property inside six months.
(Though the present momentary regulation is that, following the September 2022 cooling measures, you’ll must promote the personal property 15 months earlier than you should buy a resale flat. That’s, until 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 non-public property is to be a citizen, purchase a flat, look ahead to 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’ll be able to promote your flat and improve. There are two methods to do that:
First, you should buy a non-public property first, after which promote your flat. That is often extra handy, as it may possibly get rid of the necessity for momentary lodging. Nevertheless it’s additionally a a lot larger problem.
When you select to purchase a second property earlier than promoting your flat, you might want to pay the ABSD as ordinary. Then, when you’re a married couple and no less than certainly one of you is a Singapore Citizen, you will get ABSD remission when you sell the flat within six months of shopping for a second property. When you can’t promote the flat inside six months, then thanks on 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 current flat mortgage has been paid off, you might get a decrease financing on your personal 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 strategy of promoting your flat, and can achieve this in six months. These embrace:
- A replica 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, so to get a better financing.
The choice to all this problem 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’ve neither an HDB flat nor personal property to remain in. You could have to seek out momentary lodging for some time.
Properties for hire which are out there now
3. Transfer in elsewhere and hire out your entire flat (when you’re a Singapore Citizen)
Once more, skip this when you’re a PR. Sorry, however solely residents get to hire out their complete HDB flat. PRs can solely ever hire out rooms, however not the entire unit.
For you fortunate residents, this will flip your flat right into a cash-generating asset. For instance, in case your mother and father have an enormous flat or rental already, you’ll be able to transfer in with them and hire out your entire flat. It’s widespread for some {couples} to do that for a number of years after their MOP has completed, as they will save up the rental revenue as down fee on a rental.
For instance, say you need a S$1.5 million rental. The minimal money element is 5%, or S$75,000 (the remainder of the down fee can usually come out of your CPF). When you transfer in with mum and pa, and hire out your complete flat for S$2,800 a month, you’ll be able to greater than cowl this price after two and a half years.
Condos on the market at S$1.5m and beneath
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 possibilities 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, when you’re going to purchase a second subsidised flat, you might want to be ready to pay the resale levy.
That is the quantity you might want 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
- 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 an alternative of S$15,000.
When you’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 must be paid in money. Be aware that you need to sell your previous flat within six months of shopping for a brand new one.
When you’re going to promote your current flat first, you’ll must pay the resale levy upon shopping for your second flat (this needs to be in money).
Second, you might want to refund any CPF monies you used again to your CPF account.
This consists of any CPF grants used, in addition to the two.5% annual curiosity that you’d have earned when 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 you can nonetheless use your CPF monies to pay on your subsequent flat.
(When you managed to pay on your flat with out utilizing CPF financial savings in any respect, then congratulations, you’ll be able to preserve the money.)
Third, when 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 an alternative of ready for the gross sales proceeds out of your earlier flat.
However when you do that, the rate of interest isn’t the same old concessionary charge of two.6%. As an alternative, it’s pegged to the rates of interest supplied 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 same old HDB mortgage on the concessionary 2.6% each year.
If you wish to promote your current flat and purchase a second one on the similar time, you should utilize the Enhanced Contra Facility (ECF).
Merely put, ECF helps you to faucet on the sale proceeds and returned CPF monies to straight pay on your second flat. However be aware that stamp duties and authorized charges must be paid in money, as an alternative of with CPF, when you use this technique.
For extra info, try 99.co’s information on what you must 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 when you’ll use momentary lodging
- Test on 99.co to be sure to’re getting the most effective costs on your subsequent dwelling (psst, we’ve listings which are completely on 99.co)
- Begin the sale course of early, particularly when you’ll must promote your flat inside six months. Don’t find yourself paying ABSD while you’re probably not shopping for a second home; that’s simply ridiculous. Work together with your actual property agent on a advertising technique, nicely earlier than the six month timer begins.
[Additional reporting by Virginia Tanggono]
Have to promote your flat inside six months? Contemplate engaging a property agent when you haven’t accomplished so.
When you discovered this text useful, 99.co recommends Promoting your flat quickly after MOP: Sensible transfer or dumb transfer? and Full checklist of HDB BTO tasks hitting MOP in 2023 (and do you have to promote proper after MOP?).