Can I Afford To Sell My HDB Flat and Upgrade To a Condo?
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Can I Afford To Sell My HDB Flat and Upgrade To a Condo?

profileKenneth Fong
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Thinking of upgrading from your HDB flat to a condo?

Wondering if it is possible?

SpongeBob SquarePants and Patrick Star Thinking Hard
Source: SpongeBob SquarePants | Giphy

Actually, it’s not as hard as you think…

I’m talking about the math part tho.

(Aside: the money part is highly subjective.)

You just need to figure out what are the estimated sale proceeds from selling your HDB flat.

And then do a little math to find out if you can afford the condo.

Don’t know where to start?

That’s why I’m here for you, bruv.

FYI: I’m aware that there is the possibility of keeping your HDB flat AND buying a condo, but that’s another article for another time…


TL;DR: Can I Afford To Sell My HDB Flat and Upgrade To a Condo?

Seedly Sell HDB Flat Upgrade to Condo

To calculate Estimated Sale Proceeds:

Sales price of HDB flat – Outstanding mortgage loan – Mortgage loan prepayment penalty – Legal fees – Property agent commission

To calculate Estimated Cash Proceeds:

Estimated Sale Proceeds – CPF monies used (which you need to return to your CPF)

To calculate whether you can afford it:

Estimated Cash Proceeds = 5% of Downpayment

 

CPF monies available = 20% of Downpayment + Buyer’s stamp duty + Legal fees + Property agent commission


How To Calculate Estimated Sales Proceeds From Selling My HDB Flat?

To find out what are the estimated sales proceeds, you’ll need the following:

  • Estimated sales price of your HDB flat
  • Outstanding mortgage loan (bank or HDB)
  • Mortgage loan prepayment penalty (if any)
  • CPF utilised plus accrued interest
  • Legal fees
  • Property agent commission (if you’re using a property agent)

1) Estimated Sales Price of Your HDB Flat

Seedly HDB Valuation Resale Flat Price

To figure out the estimated sales price of your HDB, you can reference the HDB Resale Median Prices.

This way, you can get a sense of what the prices of past resale transactions are like for similar units in your town area or flat.

2) Outstanding Mortgage Loan

If you took a bank loan, just give your bank a call to find out what is your outstanding mortgage loan.

If you took an HDB housing loan, you can check your outstanding mortgage loan by logging in to My HDBPage using your SingPass.

STEP 1: Navigate to “My Flat” and select “Purchased Flat” from the dropdown menu

HDB Outstanding Mortgage Loan Step 1

STEP 2: Select “Financial Info”

HDB Outstanding Mortgage Loan Step 2

STEP 3: Check your “Outstanding Balance” in “My Account Balance(s)”

You’ll see your outstanding mortgage loan under “Outstanding Balance”.

3) Mortgage Loan Prepayment Penalty

If you took a bank loan, you’ll probably need to pay a prepayment penalty of about 1.5 per cent of the amount which you borrowed.

4) CPF Utilised Plus Accrued Interest

Any CPF monies used for the purchase of your flat, either as downpayment or for monthly installments.

Will have to be returned with accrued interest to your CPF account when you sell your flat.

You can log in to the CPF website to find out how much you have to return.

STEP 1: Select “My Statement”

Check CPF Monies Used Step 1

STEP 2: Scroll down and select “Property” under Section C

Check CPF Monies Used Step 2

STEP 3: Check your “Net Amount Used” and “Accrued Interest”

Check CPF Monies Used Step 3

5) Legal Fees

If you engage HDB’s solicitor to act for you in the sale, you can get an estimate of the cost using their Legal Fees Enquiry service.

Type of Legal FeePurposeAmount
Conveyancing feeFor transferBased on selling price and subject to min fee of $20

First $30k: 6.75 cents per $100 or part thereof

Next $30k: 5.40 cents per $100 or part thereof

Remainder: 4.50 cents per $100 or part thereof
For total discharge of mortgage1-Room flat: $22

2-Room flat: $33

3-Room flat: $44

4-Room flat: $55

5-Room flat: $66

Executive flat or maisonette: $77
Registration and microfilmingFor title search fee$10.40
For total discharge of mortgage$38.30
Miscellaneous feesTo HDB$5.00

Depending on how much you sell your flat for as well as your flat type.

You can expect to pay about $500 (this is only a guess-timate) in legal fees.

6) Property Agent Commission

If you used a property agent to sell your HDB flat.

You’ll usually need to pay between 1 to 2 per cent of the sales price including prevailing GST.

Note: it is possible to sell and buy a flat without a property agent

So… How Do I Calculate the Estimated Sales Proceeds From Selling My HDB Flat?

Once you’ve gathered all of the abovementioned information.

Here’s how to calculate the Estimated Sales Proceeds:

Estimated sale proceeds = Sales price of HDB flat – Outstanding mortgage loan – Mortgage loan prepayment penalty – Legal fees – Property agent commission

If you’re doing the math for your HDB flat right now, you’re probably thinking:

huat ah man with iron holding to his ear SAYS
Source: SAYS

But wait… there’s more.

If you used any CPF monies to fund the purchase of your HDB flat, you’ll need to return that to your CPF Ordinary Account.

So… to find out how much money you can actually pocket from the sale of your HDB flat, you’ll need to find out what your Estimated Cash Proceeds are like:

Estimated cash proceeds = Estimated sale proceeds – CPF monies used (which you need to return to your CPF)

FYI: alternatively, you can also use HDB’s Sale Proceeds Calculator to do the math for you.

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.

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Here’s a simple illustration to show you what I mean.

Zoe and Boon Keng (both are younger than 55 years old) currently own a 4-Room HDB flat and they wish to upgrade to a condo.

They bought their flat 10 years ago (so they’ve fulfilled their MOP).

And have been using their CPF to pay for everything — including downpayment and monthly installments.

To keep their costs low, they also decided to sell their flat without the help of a property agent.

Estimated Sale Proceeds

Amount
Sale price of HDB flat$500,000
Outstanding HDB loan$250,000
Mortgage loan prepayment penalty$0
Legal fees$290
Property agent commission (1%)$0
CPF utilised plus accrued interest$300,000
Estimated Cash Proceeds$50,290

Their estimated sale proceeds: $349,710.

But because they used their CPF, they need to return $300,000 (accrued interest included).

So their estimated cash proceeds: $50,290.

Makes you wonder if you should be using cash or CPF to pay for your home huh?

Cash-vs-CPF-Home-Loan

Let’s see if this is enough for them to afford a condo…


How Do I Know If I Can Afford a Condo?

To find out if you can afford a condo, you’ll need the following:

  • Price of the condominium
  • Downpayment
  • Buyer’s stamp duty
  • Additional buyer’s stamp duty (if applicable)
  • Legal fees
  • Property agent commission (if you’re using a property agent)

1) Price of the Condominium

This part is pretty straightforward.

2) Downpayment

If you have NO existing home loans

Minimum cash downpayment is 5 per cent, only if…

  • Loan tenure does not exceed 30 years, AND
  • Borrower’s age does not extend past 65 years during the loan

Minimum cash downpayment is 10 per cent, only if…

  • Loan tenure exceeds 30 years, OR
  • Borrower’s age extends past 65 years during the loan

If you have existing home loans

Minimum cash downpayment is 25 per cent.

When Do I Make The Downpayment For My Condo?

The first 5 per cent is paid (fully in cash only) when you book your unit (aka exercise your option to purchase).

The other 20 per cent is paid within 8 weeks from exercising your option to purchase.

And can be funded using your a mix of CPF and cash.

3) Buyer’s Stamp Duty

The Buyer’s Stamp Duty (BSD) applies to all property purchases in Singapore.

And is calculated based on the purchase price of the property or the market value of the property (whichever is higher).

Purchase Price or Market Value of the PropertyBSD Rates for Residential PropertiesBSD Rates for Non-Residential Properties
First $180,0001% 1%
Next $180,0002% 2%
Next $640,0003% 3%
Remaining Amount4%

You can use IRAS’s Stamp Duty Calculator to figure this out.

4) Additional Buyer’s Stamp Duty

If you’re a Singapore Citizen with no other residential properties, then you can ignore this.

But if you do own other residential properties, then you’re looking at a 12 per cent ABSD rate.

Profile of BuyerABSD Rates on/ after 6 Jul 2018
Singapore Citizens (SC) buying first residential propertyNot applicable
SC buying second residential property12%
SC buying third and subsequent residential property15%
Singapore Permanent Residents (SPR) buying first residential property5%
SPR buying second and subsequent residential property15%
Foreigners (FR) buying any residential property20%
Entities buying any residential property 25%
[Plus Additional 5% for Housing Developers (Non Remittable)]

5) Legal Fees

Unlike HDB flats, when it comes to private property… the legal fees jump up to between $2,000 to $4,000.

This is highly dependent on the lawyer you hire and what kind of deal you get.

6) Property Agent Commission

When buying a private property like a condo, there aren’t any fixed rules (read: industry mandated laws) when it comes to property agent commission.

The usual rate when engaging an agent to buy a property is usually 1 per cent of the property purchase price.

Some buyer’s agents might split the commission with the seller’s agent or even collect it from the seller.

So it really depends.

So… How Do I Know If I Can Afford a Condo?

Basically, you’ll want to see how much cash and CPF do you need upfront.

Here’s how to calculate if you can afford the condo:

Cash and CPF needed upfront = Downpayment + Buyer’s stamp duty + Legal fees + Property agent commission

Now, let’s look at Zoe and Boon Keng’s situation again.

The couple wants to buy a condo that is worth $1,000,000.

So here’s how much they need upfront:

Cash and CPF Needed Upfront for Condo

AmountSource
Downpayment
(5% to exercise option to purchase)
$50,000Cash
Downpayment
(20% 8 weeks after exercise option to purchase)
$200,000Cash or CPF
Legal fees$2,000
Property agent commission (1%)$10,000

Even though they need to pay the first 5 per cent in cash ($50,000).

Their estimated cash proceeds from selling their 4-Room HDB flat ($50,290) more than covers this.

The remaining $212,000 can technically be paid for using their CPF monies.

And since they returned almost $300,000 to their CPF-OA.

It means that they can technically afford the $1,000,000 condo.


Should I Sell My HDB Flat and Buy That Condo?

If you have dreams of living in a condo.

Then this simple exercise should help you figure out how much you can get from selling your HDB flat.

And whether you can manage the initial downpayment for the condo.

HOWEVER.

My calculations do not take into account the monthly mortgage that you will be servicing for the rest of your life.

Taking Zoe and Boon Keng’s $1,000,000 condo as an example.

You’d be looking at servicing a mortgage of $750,000.

Unless you can derive some form of rental income from this new condo which you’re buying.

You’re going to be in a situation where you’re asset rich but cash poor.

Which may or may not agree with your financial goals.

So before you sell your HDB flat and buy that condo.

Think further than just the initial downpayment that you have to make…

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About Kenneth Fong
Owner of a 4-room HDB BTO and married to a financial clutz. Probably the closest to an adult you can find on the Seedly team.
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