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 1st 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 1st 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)”  
HDB to condo

      📌 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
HDB to condo

     📌 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.
HDB to condo

   📌 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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This is a big decision that will likely require additional financial commitments. Sit down and discuss with our Property Den experts to assess if this course of action is suitable for you.

Dennis Lim

Dennis has more than a decade of experience investing in real estate. Like many fellow Singaporeans, he grew up in a HDB flat with dreams to live in a condominium. Through careful financial planning & hardwork, this became a reality when he was 30. He now owns 3 private properties in Singapore and has helped hundreds of Singaporeans to achieve their goal of upgrading their homes in land-scarce Singapore.

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