Buy Property under Child’s Name | No ABSD
Do you know you can buy property under your child’s name. This can be your family’s second investment property without paying ABSD.
There are two scenarios:
📌 Buy property under adult child (above 21yrs old) and
📌 Buy property under child’s name (below 21yrs i.e. buying in trust)
📌 Buy Property under Child’s Name | 4 Key Benefits
(1) Help you child own the first home now. You can pay less now vs future In Singapore getting more expensive. If there’s a chance that you can buy now, this future, you likely can save a lot of money.
(2) The property can be leased out and the rent can help cover the mortgage. If there are any left-overs from the rental income after paying off the money instalment, these can be channelled toward the savings for your child’s future
(3) There is no Additional Buyer Stamp Duties (ABSD) if your child does not own any property before this. The ABSD will be 12% based on property price if you were to purchase a second property under your name instead of your child’s name
(4) Your child will enjoy a higher loan to value (LTV) ratio. This is because your child is taking a property loan, for the first time ever, he/she can loan up to the maximum 75% LTV ratio. For second home loan, the loan to value ratio will drop to maximum 45%.
📌 Buy Property under Child’s Name | Key Challenges
As with everything in life, there are challenges. Below are three worries or obstacles to the above strategy
(1) The Child do not want commitments (or debts)
(2) Parents and/or child worry about future BTO eligibility
(3) Not Enough Cash for down payment or TSDR issues
📌 Buying Under Young Child’s Name (Below 21yrs)
When your child is below 21 years old and you can only buy the property in trust. There will be 2 parties in a trust: Trustee and Beneficiary. The beneficiary is the child and trustee is usually one of the parents.
The trustee will manage the property for the beneficiary until they turn 21 years old. The wonderful part about this instrument is that there’s no ABSD payable, if this is the child’s first property. This is a form of a family legacy planning and is beyond “not paying ABSD”
📌 Buying Under Young Child’s Name – Top 4 Questions
Is it a good idea to buy property under child’s name? Check out our answers to the top 4 most frequently asked questions.
📌Q1 Must the trustee and beneficiary be related?
YES (Preferred) In Singapore, not many law firms handled by other trustee cases. And for those who handle trust cases, they will prefer trustee and beneficiary to be related.
📌Q2. Can we rent out the property or not?
YES! This property can be rented out like a normal investment property.
📌Q3. Can you use CPF a bank loan or not?
NO! The property has to be fully financed by cash only. So in a way this trust instrument is for people who are with deep pockets
📌Q4. What are the fees involved?
Estimated fee= $6,000 (one off). There’s no monthly or annual servicing fee
📌 What are the risks involved when buying in Trust?
lThe biggest risk is that the child is the legal owner and he/she has the right to sell the property when they turn 21years old. There are also other questions like “can I sell the property before my child turns 21?”
These are complex issues, so feel free to give us a call and we will give you a one to one chat and advise you. Find this article useful?
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