Do You Get All Your Money From Your HDB Sales Proceeds For Your Retirement?
 
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Do You Get All Your Money From Your HDB Sales Proceeds For Your Retirement?

Cherie Tan
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Planning To Sell Your Flat As Your Retirement Plan?

Common conversations heard over dinner,

“When you all grow up and all married liao, I will downgrade my house for my retirement.”

Honestly, I really thought it was a feasible retirement plan. It doesn’t sound all too bad when I first heard it back when I was young, in fact, it sounds like a terrific retirement plan! I believe this was what most of our parents had planned to do.

But, is it really as simple it seems? Like this equation below?

A Myth:
3-Step Process to Get Money (in Cash) for My Retirement
1Sales Proceed from my current house
2Minus: Cost of New House (A Downgrade)
3Equals: My Retirement Savings (In Cash)

  • Yes, if you paid for your house using cash.
  • No, if you have used your CPF, HDB or bank loan to finance your home.

Sadly, the equation is more complication than it seems. Allow me to illustrate for you:

Do You Get All Your Money From Your HDB Sales Proceeds For Your Retirement?


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Register Your Intend to Sell

In order to sell your HDB, you have to let them know you are letting your unit go. (Right? Thanks, Sherlock.)

Meanwhile, additional fees are applicable to register your intentions to sell your HDB using the HDB Resale Portal.

The portal will guide you through your process:

  1. Register Intent to Sell
  2. Submit Resale Application
  3. Acknowledge Resale Documents
  4. Payment of Fees Online
  5. Approval of Resale
  6. Completion of Resale

More Details can be found on the HDB website.

1. Sales Proceed from Your Current Home

Here is an equation on how final sale proceeds that you can keep for your retirement would be:

Fact: Actual Sales Proceeds for Your Retirement
1

Sales Proceed from my current house

2Less: Remaining Mortgage Loan (if not fully paid up)
3Less: CPF Monies Used (including Accrued Interest of 2.5%)
Part A:
CPF Used for Downpayment
Part B:
CPF Used for Monthly Loan Repayment
4Less: Agent Commissions
5Less: Misc Costs & Fees
6

Less: Purchase of Next Home

7Less: Resale Levy, if applicable
8Less: Upgrading Costs, if applicable
9Less: Upgrading Levy, if applicable
10Equals: Your Retirement Savings, FINALLY

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Your retirement dream

2. Less: Repaying Your Remaining Mortgage Loan

You would be required to clear your home loan first.

If your sales proceeds are insufficient to cover your remaining home loan, you will be required to pay it with cash – maybe from the cash deposit from the buyer.

Read Also: Bank Loan vs HDB Loan, Which Should You Get?

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3. Less: Returning to Your CPF with Accrued Interest

Any amount used to purchase your existing home, be it for downpayment or for your monthly loan payment or both, you are required to return them to your CPF account with accrued interest.

So is it better to leave your CPF monies solely for your retirement? This question is still up for debate.

There are three parts to this:

  1. Repaying your downpayment
  2. Repaying your monthly loan repayment
  3. Accrued Interest, what exactly is it?

Part 1: Repayment of Your Downpayment

Yes, the downpayment that you’ve made when you were signing an agreement for lease.

If you are unsure, do refer to this guide we’ve made for every Singaporean/PR applying for HDB BTO.

Part 2: Repayment of Your Monthly Loan Repayment

If you have used your CPF to pay for your monthly mortgage loan, you would have to repay that amount back into your CPF as well.

Part 3: Accrued Interest Owed

And it does not stop right there. What does it mean by accrued interest owed?

By using your CPF savings for your existing home, you have been forgoing the 2.5% that you could’ve earned if you left it in your CPF OA each year. This is your opportunity cost.

In order to keep your CPF account on track for your retirement, we have to return the 2.5% p.a. that your CPF monies could have earned if you had left it untouched.

Recommended Read: CPF LIFE: Your Retirement Payouts May Reduce Despite Accumulating More

If you are above 55 years old,

Your retirement account (RA) would have been created. With that, your sales proceeds will help you hit your Full Retirement Sum (FRS) of $176,000 (2019) in your RA.

In other words, you will not be able to use that amount to purchase your next home.

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4. Less: Paying Your Agent commissions

According to PropertyGuru, selling your HDB would incur you 1% to 2% in commissions.

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5. Less: Miscellaneous Costs & Fees

Some other miscellaneous costs and fees that would incur when you sell your home, such as:

  • Legal fees
  • Seller’s Stamp Duty
  • Property tax
  • Service & Conservancy Charges

More details can be found on HDB’s website.

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6. Less: Purchase of Second Home

Buying your next home to live in. There are plenty of platforms you can shop for your next home like EdgeProp, PropertyGuru and 99.co.

If one of the owners is at least 55 years old, you might want to look into your eligibility of Silver Housing Bonus (SHB).

SHB gives you up to S$20,000 when you right-size your HDB to a smaller HDB flat (up to 3-room).

More details on Right-sizing with Silver Housing Bonus on HDB’s website.

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7. Less: Resale Levy, if applicable

If you previously bought a subsidised flat or received a CPF Housing Grant, you will have to pay a resale levy for your next flat. 

Depending on your first subsidised housing, the Resale Levy can go up to S$55,000.

This is to ensure a fair allocation of public housing subsidies between first and second-timers.

More details on Resale Levy on HDB’s website.

Recommended Read: A Complete Guide to CPF Housing Grants for BTO and Resale Flats

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8. Less: Upgrading Costs, if applicable

If you are named flat owner on the date the bill was issued, you have to pay for the upgrading costs. Upgrading such as lift upgrading programme, and or home improvement programme.

The outstanding amount can be deducted from the sales proceeds. If insufficient, it can be paid in cash or with CPF savings.

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9. Less: Upgrading Levy, if applicable

Also, if your home has benefitted previously from Main Upgrading Programme, you may have to pay an upgrading levy.

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10. Equals: Your Retirement Savings

Ah, those precious retirement savings. And that S$20,000 if you are eligible for the Silver Housing Bonus.

Would that be enough for all your retirement dreams? Or would you have none left? It depends on all of your circumstances above. With that, we wish you all the best.

Plan your retirement early, best to not rely on your home.

Love, me.

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About Cherie Tan
Turning finance into boba-sized pieces. One iced milk boba tea, please!
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