What are you able to do along with your flat after MOP?

Flat house owners look ahead to their MOP like NS males look ahead to their ORD.

As soon as it occurs, you’re free to… stick with it 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 Government 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 all the flat (though you may nonetheless hire out particular person rooms, offered you continue to stay there).

As well as, you can’t purchase a personal property through the MOP.

One exception to the rule is should you personal a one-room resale HDB flat, which you bought with none HDB grants.

There isn’t any MOP on these models. (Though this exception would not 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 if you gather the keys to your new residence).

If there’s a spot by which you’re not residing within the flat (e.g. you fly abroad to work for 2 years), these years don’t rely towards your MOP.

So, that being stated, what are you able to do after your MOP? Nicely, you may…

• Purchase a personal property along with your flat (should you’re a Singapore citizen)
• Improve to a personal property
• Transfer in elsewhere and hire out your complete flat (should you’re a Singapore citizen)
• Promote and transfer to a unique flat

1. Purchase a personal property along with your flat (should you’re a Singapore citizen)

For those who’re a Singapore Everlasting Resident (PR), skip to level two, or preserve 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’ve some huge cash? Since you’ll want a ton of it. Like, enough-to-take-a-year-off-work ranges of cash.

First, that you must pay all the standard taxes, such because the Extra Purchaser’s Stamp Responsibility (ABSD) of 17 per cent on the second property.

Then, that you must 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, should you nonetheless have an excellent residence mortgage if you purchase the second property, the utmost you may borrow is 45 per cent of the property’s value 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 condominium. You possibly can generate rental revenue by residing in a single and renting out the opposite.

As an vital apart, notice that you could’t do that the opposite approach round.

For those who personal a personal property after which purchase an HDB resale flat, you’ll must promote the personal property inside six months.

(Though the present short-term 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, until you’re 55 years previous 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, await 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 will possibly remove the necessity for short-term lodging. However it’s additionally a a lot larger problem.

For those who select to purchase a second property earlier than promoting your flat, that you must pay the ABSD as common.

Then, should you’re a married couple and no less than certainly one of you is a Singapore citizen, you may get ABSD remission should you promote the flat inside six months of shopping for a second property.

For those who can’t promote the flat inside six months, then thanks in your contribution to nation constructing.

Additionally, you’ll most likely desire a mortgage dealer to type out the paperwork with the financial institution.

Until your current flat mortgage has been paid off, chances are you’ll get a decrease financing in 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 simply’re within the technique of promoting your flat, and can achieve this in six months. 

These embody:

1. 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.
2. 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, so as 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, after which 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 short-term lodging for some time.

3. Transfer in elsewhere and hire out your complete flat (should you’re a Singapore citizen)

Once more, skip this should 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 could 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 complete flat.

It’s frequent for some {couples} to do that for a number of years after their MOP has completed, as they’ll save up the rental revenue as down fee on a condominium.

For instance, say you desire a $1.5 million condominium. The minimal money element is 5 per cent, or $75,000 (the remainder of the down fee can usually come out of your CPF).

For those who transfer in with mum and pa, and hire out your whole flat for $2,800 a month, you may greater than cowl this price after two and a half years.

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, should you’re going to purchase a second subsidised flat, that you must be ready to pay the resale levy.

That is the quantity that you must pay again to the federal government, as a result of they subsidised your first flat, bear in mind?

The quantity is at present as follows:

• 2-room flats – $15,000
• 3-room flats – $30,000
• 4-room flats – $40,000
• 5-room flats – $45,000
• Government flats – $50,000

For Singles Grant recipients, the quantity might be halved.

For instance, the resale levy for two-room flat, for a Singles Grant recipient, is $7,500 as an alternative of $15,000.

For those who’re going to purchase the second flat earlier than promoting your present flat, the levy might be deducted from the gross sales proceeds — any shortfall must be paid in money.

Word that you need to promote your earlier flat inside six months of shopping for a brand new one.

For those who’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, that you must refund any CPF monies you used again to your CPF account.

This consists of any CPF grants used, in addition to the two.5 per cent annual curiosity that you’d have earned should you 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 that you could nonetheless use your CPF monies to pay in your subsequent flat.

(For those who managed to pay in your flat with out utilizing CPF financial savings in any respect, then congratulations, you may preserve the money.)

Third, should you’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 an alternative of ready for the gross sales proceeds out of your earlier flat.

However should you do that, the rate of interest isn’t the standard concessionary charge of two.6 per cent.

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As a substitute, it’s pegged to the rates of interest provided by the three native banks (DBS, OCBC and UOB).

After you’ve bought your earlier flat and gotten the gross sales proceeds, you need to pay again as much as 50 per cent 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 following home.

After that, the mortgage is transformed to the standard HDB mortgage on the concessionary 2.6 per cent each year.

If you wish to promote your current flat and purchase a second one on the identical 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 immediately pay in your second flat.

However notice that stamp duties and authorized charges need to be paid in money, as an alternative of with CPF, should you use this methodology.

And people are your choices! Earlier than you decide any of them, simply bear in mind…

• Make preparations for cumbersome furnishings, particularly should you’ll use short-term lodging
• Begin the sale course of early, particularly should you’ll must promote your flat inside six months. Don’t find yourself paying ABSD if you’re not likely 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.

This text was first printed in 99.co.