Avoid these 4 Common Mistakes when upgrading from HDB to Condo

Many HDB owners share the common aspirations to upgrade from HDB to condo after completing their Minimum Occupation Period (MOP). Below are 4 common mistakes to avoid when upgrading

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Table of Content

• Wavering Between Sell-First or Buy-First
• Unaware OTP (Completion) Dates are Negotiable
• Misunderstood ABSD Remission Rules
• Delays caused by Bridging loan and CPF Refund

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      📌 1. Wavering Between Sell-First or Buy-First

• When you are upgrading from a HDB to condo, it is very important to decide whether you want to Sell-Your-HDB-First or Buy-Condo first.
• Both options have pros and cons and it is not an easy decision.
• When you buy first, there is the assurance that your family will have a roof over their heads regardless of how the events of your real estate transactions pan out.
• However, do note that if you take a second home loan without first discharging the 1^st loan, your maximum loan amount will be less than 50% of the condo price.
• You will also need to pay additional buyer’s stamp duties (ABSD) because that will be considered your second property.
• You can apply for ABSD remission later after you sell your 1^st property within 6 months after your second property is complete
• However, note that ABSD remission applies only to couples with at least one Singaporean spouse
• In short, this Buy-First option may only be suitable with someone with a lot of cash or CPF
• When sell your first, you will not have to worry about loan limits and ABSD.
• However, as you have initiated the Sell process first, there will likely be a time gap between your HDB move-out date and condo-move in date, which may range from 1 to 6 months.
• Having to find short term accommodation (renting) and moving twice are the two biggest challenges for this Sell-HDB-First option.
• Most landlords in Singapore will prefer one to two years lease, hence, many will end up moving to their parents’ place.
• There is also a high chance that your renovations time may take longer than you expect given the current supply chain conditions.
• There is also a risk that you may miss out on the unit of your choice if you wait to sell first.
• My personal preference will be the hybrid solution- i.e., Buying and selling concurrently.
• This topic is covered in another article, “How to Upgrade from HDB to Condo without ABSD (Hybrid Method)”  

      📌 2. Unaware OTP (Completion) Dates are Negotiable

• It is imperative to know that Option to Purchase (OTP) dates (and completion dates) are negotiable for private properties.
• For private properties, the option period (14 days) and completion dates (10 -12 weeks) are only a guide
• There is a certain amount of flexibility, as long as both buying and selling parties are in agreement
• Unlike HDB flats, the OTP period is fixed at 3 weeks and completion dates are set by HDB.
• Personally, I have issued an OTP with a 3 months Option period in exchange for a 3% fee
• If you need a longer option period, it is only fair that you pay a higher option fee

     📌 3. Misunderstood ABSD Remission Rules

• ABSD remission for married couples was introduced to help couples with at least one Singaporean spouse to buy their first property.
• The common mistakes that many couples made are: (1) Mistaken that ABSD is waived (2) Did not include both spouses’ names in the new property (3) Assume the 6-month timeline to sell their HDB flat can be extended.
• Refer to Iras’s Website for ABSD remission details
• Note that ABSD remission is a special concession and IRAS are very strict in granting extensions.
• It would be best to seek professional help so that mistakes like these do not happen as they can be quite costly.

   📌 4. Delays caused by Bridging loan, CPF Refund

• These are 2 commonly overlooked matters that will cause a delay to your move-in date.
• CPF Refund: For buyers who need to re-use their CPF after selling their HDB flats, you will need wait a minimum of 3 weeks before these CPF funds can be utilised for your new property.
• Any mistake in the timeline will result in a delay.
• Bridging Loan is a short-term bank loan, used to cover part of your new property payment while you wait for the sale proceeds of your old home.
• A bridging loan is commonly used when your new property completion date is earlier than the move-out date for your first home.
• A bridging loan is only valid for 6 months and there are strict requirements with regards to this.
• For example, you need to prove that you have found a buyer for your HDB before the bank will approve of the bridging loan.
• Some banks need buyers to take both the bridging loan and the normal house loan together.
• I can clearly recall that this created a problem for one of my clients who only needed a bridging loan because they wanted to pay full cash for their new property when the funds from the property that they were selling came in.
• Fortunately, we planned early and managed to resolve this without a bridging loan. Therefore, work with a trustworthy realtor so that your real estate journey would be educational, enjoyable and profitable.

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