This is based on a recent article i read on Yahoo! Finance. Well it was indeed a very true article that many Singaporeans are ignorant about. Let me summarise that article and shed some light for my fellow Singaporeans who own HDB flats or intend to purchase one soon. Get yourself aware of whats really happening and manage that expectations well.
Firstly, 2 terms you need to be familiar with. 1. Sellers Stamp duty (when you sell off your private property before 4 years from purchase) and 2. Minimum Occupancy Period a.k.a MOP ( minimum number of years you are required to live in your HDB flat before selling and please note that it is not the mop you use at home to clean up your mess with.)
Also Sellers may one to take note of an additional facility called the Enhanced Contra Facility that you can utilise consecutively to allow your CPF monies and sales proceeds to be used for your next resale flat purchase however you cannot use them to pay for expenses like your Stamp Duty and Legal Conveyancing Fees.
Let me now give you an example of what it will look like, financially, when you sell your flat:
Home type: 4-room
Purchase price: $375,000
Grant: approximately $40,000
Selling price after 5 years: $475,000
Payment: 10% from CPF Ordinary Account
Loan: 25-year HDB loan
Remaining home loan (after 5 years): $268,000
Step 1 Settle your outstanding loan
The first thing you need to pay off is your outstanding loan. It will be deducted from your sales proceeds. If for example you sell at $475,000, this amount will be used to pay up your remaining $268,000 HDB loan. You will then be left with $207,000.
Step 2 Payback CPF Ordinary Account- OA account
O$P$ time. You take out money from CPF have to back one you know?! So considering you paid the initial $37,500, or 10%, from your CPF ordinary account balance in full, you have to refund this sum back and with interest. This works out to close to $43,500.
Monthly loan repayment
Lets say for the five-year period, you paid your loan using your CPF contributions only. You need to refund this amount back as well. In this scenario, the amount works out to approximately $115,500. Comes up to quite a hefty sum ah taking into consideration that this money cannot even buy you a plate of Nasi Lemak.
Subtracting the 2 figures from $207,000, you will be left with $48,000. This is the amount you will receive in cash. Already shocked right. Well wait coz got some more bonus round for you to get whacked again.
Step 3 Agent commission
You forgot about the hardworking Sales agent who helped to market your property for months, help you clean your house, mop sweep take pictures, photoshop them still put ad on newspaper, propertyguru, go door to door put flyers for you plus attend phone calls arrange for viewing then prepare paper work then bring you for hdb appointment then ding dong with you have coffee still smile for you and be polite enough to serve you… ha. ha .ha like i run marathon need to catch my breath… Finally help you sell at your asking price (at some juncture some people need to be realistic with their asking price for their flat, its a flat not a palace). So the moral of the story here is don’t forget to pay your agent and please don’t ask for discount. As i was saying, lebih kurang or plus minus if the selling price is $475,000, you may be paying up to $9,500 in commission to your agent. This may leave you with about $38,500.
Step 4 Additional costs and fees
Keep some spare cash for your miscellaneous expenses including administrative and legal fees that could cost around $500 and $1,000, finally leaving you with a sum of $37,500.
So here is where you get your bonus Whack. When you buy your next subsidised flat from the government, be prepared to pay a hefty levy of $40,000 cash. Which means you will have to fork out $2,500. Don’t worry you wont be penalised if you buy a resale flat or a private property. However you will still ending up forking out more cash for those purchases. In addition there is stamp duty for buyers when you purchase a private property. 3% of purchase price less 5400. Dont ask me how this calculation was derived but its there and it will continue to be so. Lastly those readers who are above 55 and planning to sell, take note your proceeds will go straight into your retirement account to satisfy the Minimum sum of $166,000. There is also a consideration to pledge your property but all those nitty gritty things are just going to make you feel so stuck and breathless with no space to maneuver around. My advice just stay in one place and dont be gatal (itchy) and keep selling and buying thinking of profiting unless you really have a good financial game plan for the long run. Gentle reminder to y’all that there are people who barely make it financially every month. So be wise with your decisions.