So you have met your MOP. Now what are you able to do along with your flat?

Flat homeowners look ahead to their MOP like NS males look ahead to 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 value? 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 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 not promote your flat on the open market, and you can not lease out all the flat (though you may nonetheless lease out particular person rooms, supplied you continue to reside there). As well as, you can not purchase a personal property in the course of the MOP.

One exception to the rule is for those who 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 acquire the keys to your new dwelling). If there’s a niche 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 mentioned, what are you able to do after your MOP? Effectively, you may…

• Purchase a personal property along with your flat (for those who’re a Singapore Citizen)
• Improve to a personal property
• Transfer in elsewhere and lease out your complete flat (for those who’re a Singapore Citizen)
• Promote and transfer to a distinct flat

1. Purchase a personal property along with your flat (for those who’re a Singapore Citizen)

In case you’re a Singapore Everlasting Resident (PR), skip to level 2, or hold studying to rage on the unfairness.

A Singapore Citizen can purchase a personal 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, it’s worthwhile to pay all the same old taxes, such because the Further Purchaser’s Stamp Responsibility (ABSD) of 17% on the second property. Then, it’s worthwhile to be prepared for both an enormous down cost or to repay the excellent dwelling mortgage of your present HDB flat.

That’s as a result of, for those who nonetheless have an impressive dwelling mortgage while you purchase the second property, the utmost you may borrow is 45% of the property’s value 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 rental. You possibly can generate rental earnings by residing in a single and renting out the opposite.

As an vital apart, be aware that you simply can’t do that the opposite method round. In case you personal a personal property after which purchase an HDB resale flat, you’ll have to sell the personal property inside six months.

(Though the present momentary 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 approach to have each an HDB flat and a personal property is to be a citizen, purchase a flat, watch for 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 often extra handy, as it may possibly get rid of the necessity for momentary lodging. But it surely’s additionally a a lot larger trouble.

In case you select to purchase a second property earlier than promoting your flat, it’s worthwhile to pay the ABSD as typical. Then, for those who’re a married couple and at the very least certainly one of you is a Singapore Citizen, you will get ABSD remission for those who sell the flat within six months of shopping for a second property. In case you can’t promote the flat inside six months, then thanks in your contribution to nation constructing.

Additionally, you’ll in all probability need a mortgage dealer to type out the paperwork with the financial institution. Except your present flat mortgage has been paid off, it’s possible you’ll get a decrease financing in your personal property as a result of 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 accomplish that in six months. These embody:

1. A duplicate of a signed enterprise to the HDB committing to finish the sale of your present property throughout the interval stipulated within the enterprise
2. A written declaration that you’ll take steps, in accordance with the signed enterprise, 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, so as to get a better financing.

The choice to all this trouble 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’ve neither an HDB flat nor personal property to remain in. You will have to search out momentary lodging for some time.

Properties for lease which might be accessible now

 

3. Transfer in elsewhere and lease out your complete flat (for those who’re a Singapore Citizen)

Once more, skip this for those who’re a PR. Sorry, however solely residents get to lease out their total HDB flat. PRs can solely ever lease 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 may transfer in with them and lease out your complete flat. It’s frequent for some {couples} to do that for just a few years after their MOP has completed, as they will save up the rental earnings as down cost on a rental.

For instance, say you need a S$1.5 million rental. The minimal money part is 5%, or S$75,000 (the remainder of the down cost can usually come out of your CPF). In case you transfer in with mum and pa, and lease out your total 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 distinct flat

The tip of the MOP is a chance to maneuver someplace extra applicable. 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, for those who’re going to purchase a second subsidised flat, it’s worthwhile to be ready to pay the resale levy.

That is the quantity it’s worthwhile to pay again to the federal government, as a result of they subsidised your first flat, bear 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.

In case 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 should be paid in money. Notice that it’s essential to sell your previous flat within six months of shopping for a brand new one.

In case you’re going to promote your present flat first, you’ll need to pay the resale levy upon shopping for your second flat (this needs to be in money).

Second, it’s worthwhile 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 for those who hadn’t used your CPF monies for the home. You possibly can log in to your CPF account to confirm the quantity. The excellent news is you can nonetheless use your CPF monies to pay in your subsequent flat.

(In case you managed to pay in your flat with out utilizing CPF financial savings in any respect, then congratulations, you may hold the money.)

Third, for those who’re shopping for a resale flat, there are some variations to the mortgage.

You possibly can 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 for those who do that, the rate of interest just isn’t the same old concessionary fee of two.6%. As an alternative, 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 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 same old HDB mortgage on the concessionary 2.6% each year.

If you wish to promote your present flat and purchase a second one on the similar time, you should utilize the Enhanced Contra Facility (ECF).

Merely put, ECF permits you to faucet on the sale proceeds and returned CPF monies to instantly pay in your second flat. However be aware that stamp duties and authorized charges need to be paid in money, as a substitute of with CPF, for those who use this methodology.

For extra info, take a look at 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 choose any of them, simply bear in mind…

• Make preparations for cumbersome furnishings, particularly for those who’ll use momentary lodging
• Verify on 99.co to be sure to’re getting the most effective costs in your subsequent dwelling (psst, we’ve listings which might be completely on 99.co)
• Begin the sale course of early, particularly for those who’ll have to 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 along with your actual property agent on a advertising 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 for those who haven’t performed 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 tasks hitting MOP in 2023 (and do you have to promote proper after MOP?).