What occurs to your mortgage if you promote your home?
In case you’re promoting your home for the primary time, there are some issues that you just could be unaware of. One widespread query you would possibly ask your self is, “what occurs to my mortgage after I promote my home?” For these upgrading from a flat to a apartment or Govt Condominium (EC), you may also surprise how a lot of your HDB sale proceeds you can get.
Don’t fret, we’re right here that can assist you determine it out!
Are you able to promote your home earlier than paying off your mortgage?
Sure, you possibly can. Nevertheless, you may nonetheless must repay your excellent mortgage earlier than the property is transferred to the customer.
Your sale proceeds shall be used to repay your mortgage
When promoting your home, you’ll obtain lower than its sale worth as you have to issue within the remaining mortgage, CPF refund and grants, commissions and different admin funds. Right here are some things to pay attention to.
Pay your excellent residence mortgage
The primary order of enterprise is to repay your excellent residence mortgage, whether or not it is an HDB housing mortgage or a financial institution mortgage. The excellent quantity shall be deducted out of your sale proceeds.
Refund your CPF monies
In case you had used funds out of your CPF Abnormal Account (OA) to pay for your home, you’d must refund the principal quantity, together with accrued curiosity again to your CPF account. This might have been used to finance your downpayments, month-to-month loans and purchaser’s stamp obligation. For individuals who had obtained any housing grant, you’d additionally must return it to your CPF OA.
You’d must take note of the accrued curiosity for all the above. That is the curiosity that the principal quantity would have earned if it was sitting in your CPF OA as an alternative of getting used to pay for your home. At present, the CPF OA rate of interest is 2.5 per cent each year.
We have executed a step-by-step breakdown of calculations on this article. Alternatively, you possibly can log in to your CPF account or use HDB’s sale proceeds calculator.
It’d really feel like loads shall be taken out of your sale proceeds, however to not fear, the quantity you refund to your CPF account can be utilized to finance your subsequent residence.
Miscellaneous charges – agent fee, resale levy and so on
Your sale proceeds may also be used for different miscellaneous charges, together with agent fee, authorized charges and resale levy (if relevant).
Agent commissions are negotiable, however the widespread follow is about two per cent of your private home’s promoting worth. You may even be subjected to a resale levy when you’ve got purchased a subsidised flat and are planning to purchase your subsequent flat with subsidies.
Do you have to pay your current mortgage upfront when you’re ready for the completion of your new EC?
In case you’re upgrading from an HDB to an EC, what’s nice is that you just will not must promote your present residence till six months after the gathering of keys to your new EC. You additionally will not be topic to Extra Purchaser’s Stamp Obligation.
Some sellers could be contemplating if it is higher to repay their mortgage mortgage upfront or proceed with month-to-month mortgage funds till they ultimately promote their home.
This can rely in your present money movement and the financing choices accessible to you. You may must ask your self when you’ve got sufficient cash for residing bills when you end paying your mortgage. You may additionally want sufficient funds to pay the downpayment on your EC, authorized charges, BSD and resale levy (if wanted).
Nevertheless, there is no urgency so that you can repay your mortgage upfront as a result of if you promote your property, the sale proceeds can be utilized on your remaining mortgage. Plus, it is at all times higher to have more cash within the financial institution for emergency funds or put your cash in investments with larger returns.
Finally, you may must weigh the professionals and cons of every possibility.
Exemption of current property mortgage from TDSR
The excellent news is you could get a second property mortgage even when you’ve got an current one.
As an example, when you intend to promote your HDB flat to improve to a brand new property, your present month-to-month mortgage will not be factored into the Whole Debt Servicing Ratio (TDSR). So, it will not have an effect on the utmost mortgage quantity you will get on your new property.
However you may want to offer paperwork comparable to a replica of the approval letter from HDB and a replica of a letter of enterprise to finish the sale of your HDB flat.
For these promoting an EC (after Minimal Occupation Interval) or non-public property, you possibly can exclude your month-to-month mortgage repayments from TDSR. That is executed by offering a sale and buy settlement (signed by each you and the customer) and a certificates from IRAS to indicate that the stamp obligation has been paid on the settlement.
ALSO READ: What are you able to do along with your flat after MOP?
This text was first revealed in 99.co.