Last Updated on February 2, 2025 by Editorial Team
Are you feeling a nudge to cash out on your condo and downgrade to an HDB flat?
There are a few things you need to know before diving head in because the cooling measures by the Singapore government in September 2022 and August 2024 to tame the HDB resale market might require you to make more meticulous planning.
Source: HDB
To help you navigate your downgrading process with ease, here’s a comprehensive guide which covers everything from eligibility checks to financial planning.
Eligibility To Own a HDB Flat After Selling Your Condo
The cooling measure implemented in September 2022 to promote a more sustainable property market has made it tougher for homeowners to purchase an HDB flat right after selling a private residential property.
The effect of this restriction inevitably points to delays in transitioning to an HDB flat and higher costs for temporary housing arrangements.
Note that you must meet the following criteria before you are eligible to acquire a new or resale HDB flat.
| Buy BTO HDB Flat | Buy Resale HDB Flat |
Eligibility* | 30-month wait-out-period applies | 15-month wait-out-period applies
(no waiting period required if you (and your spouse) are 55 and moving to a 4-room or smaller resale flat) |
Citizenship | To as a family unit, you must be a Singapore Citizen (SC) and at least one other SC or Singapore Permanent Resident (SPR) | To buy HDB as a family unit you must be a SC and at least one other SC or SPR
|
Monthly household income ceiling | To buy as a family unit:
To buy as a single (at least 35 years old):
| No income ceiling |
*Refer to HDB website for more details on other eligibility criteria.
Tightening of HDB Loan Limits
If you meet the eligibility criteria, the next consideration is to determine if you want to fork out more cash to purchase a flat. In August 2024, HDB and MND announced the reduction of Loan-To-Value (LTV) limit for HDB loans to be lowered from 80% to 75%, the same LTV limit for borrowing from private financial institutions.
This means, HDB home buyers must now prepare for a higher cash outlay or CPF funds to cover the shortfall. Assuming a resale flat costs S$600,000, the maximum sum of mortgage loan you can take out now will be reduced from S$480,000 (80%) to S$450,000 (75%).
Planning Your Finances
This is a crucial step because any misguided decision would heavily impact your finances. Especially when these cooling measures impact home buyers’ ability to sustain additional rental costs and higher down payment, the meticulous calculation to assess your suitability to downgrade from a condo to an HDB flat is more important than before.
6 key factors to consider when mapping out your HDB homeownership finances include:
- How much cash and CPF do you have after selling the condo
- How much loan can you get to buy an HDB flat
- How much is the Buyer’s Stamp Duty (BSD)
- Do you need to pay Resale Levy
- What is the cost of temporary housing
- Can you apply for a CPF grant
1. How Much Cash and CPF Do You Have After Selling the Condo
To determine the proceed generated from the sale of your condo, you must offset the selling price with the costs incurred for the transaction:
- Seller Stamp Duty (if you own the condo for less than 3 years)
- Outstanding mortgage loan
- Conveyancing fee
- Property agent fee
- Property tax
- Maintenance fee
- Accrued interest on CPF used for purchasing the condo
Note that the amount of CPF you used to purchase the condo will be reimbursed back to your CPF Ordinary Account (OA) with 2.5% accrued interest. The net proceeds (after offsetting the CPF reimbursement and transaction costs) would be wired to your bank account as cash profit.
2. How Much Loan Can You Get to Buy a HDB Flat
If you need a home loan from banking institutions to purchase an HDB flat, you must take into consideration your:
- Total Debt Servicing Ratio (TDSR), which is the percentage of gross monthly allocated to repaying the monthly debt obligations, is capped at 55%.
Assuming you have a gross monthly income of S$6,000, the maximum amount you can utilise to service monthly debts like car loans and study loans is limited to S$3,300 (S$6,000 x 55%). - Mortgage Servicing Ratio (MSR), which is the percentage of your gross monthly income allocated to repaying housing loans for the purchase of an HDB flat, or an Executive Condominium (EC), is capped at 30%.Using the same example, with S$6,000 gross monthly income, only S$1,800 (S$6,000 x 30%) can go towards repaying your monthly mortgage loan.
- Bank Loan-to-Value (LTV) ratio, which is the maximum amount you can borrow from HDB or private banks to finance a property, is capped at 75% of the HDB flat price. Based on the earlier example, to purchase a flat of S$600,000, the maximum mortgage loan a buyer can afford is S$450,000 (75%). The additional S$30,000 must be paid off with cash or buyer’s CPF-OA.
3. How Much Is the Buyer’s Stamp Duty (BSD)
Buyer’s Stamp Duty (BSD) is a tax levied on the purchase of both private and HDB properties in Singapore. The latest BSD rate is up to 6% and it’s computed like this:
Property Price or Market Value | BSD rates |
First S$180,000 | 1% |
Next S$180,000 | 2% |
Next S$640,000 | 3% |
Next S$500,000 | 4% |
Next S$1,500,000 | 5% |
Remaining amount | 6% |
Let’s say you’re buying a million-dollar HDB flat, your BSD calculation would look something like this:
First S$180,000 x 1% = S$1,800
Next S$180,000 x 2% = S$3,600
Next S$640,000 x 3% = S$19,200
The total BSD payable is S$24,600.
Selling Your Condo in Singapore?
Get your Free Property Analysis Report and Seller packages.
4. Do You Need To Pay Resale Levy
If you’ve purchased a subsidised flat in the past, you’ll be liable to pay a resale levy if you decide to buy a second subsidised flat from HDB. Note that subsidised flat could be new BTO flat from HDB, a resale flat bought with a CPF housing grant, a Design Build and Sell Scheme (DBSS) flat or an EC from a developer.
- For first subsidised flats sold on or after 3 March 2006, the Resale Levy amount ranges between S$7,500 and S$55,000.
- For first subsidised flats sold before 3 March 2006, levy is based on 5% to 25% of the resale price of the sold flat. The resale levy payable is also subject to a minimum amount of:
- S$15,000 for 2-room flat
- S$30,000 for 3-room flat
- S$40,000 for 4-room flat
- S$45,000 for 5-room flat
- S$50,000 for Executive flat
5. What Is the Cost for Temporary Housing
Having a 30- or 15-month wait-out period before you are eligible to purchase an HDB flat means you might be stranded with no place to call home for a while. It is well and good if you have friends or family offering you a place to stay rent-free, if not, be prepared to fork out quite a large sum in rental costs just to tide through the period.
Here are the HDB flat monthly rental in the second quarter of 2024 to help you estimate the cost of your temporary housing in Singapore:
HDB Flat Type | Monthly Rent |
2-room flat | S$2,300 to S$2,480 |
3-room flat | S$2,400 to S$3,100 |
4-room flat | S$3,000 to S$4,400 |
5-room flat | S$3,150 to S$4,300 |
Source: HDB
6. Can You Apply for CPF Grant
First-time HDB applicants can apply for a generous range of HDB housing grants between S$5,000 and S$80,000. Whether purchasing a BTO HDB flat or a resale HDB unit, these lump sum grants are useful for reducing your home loan and easing monthly mortgage repayment.
These are the different types of grants available to couples/ families and singles you may consider:
Buyer’s Profile | Grants Available to New Flat Applicants | Grants Available to Resale Flat Applicants |
Singles
Two or More Singles |
|
|
Singles Buying with Parents
|
|
|
Couples and Families
Multi-generation Families
Fiancé and Fiancée |
|
|
Source: Housing Development Board (HDB)
Summary
Don’t rush to sell your condo until you are clear about your eligibility to buy an HDB flat and the factors that may shake up your finances in the long run. Some homeowners made the mistake of overestimating their sales proceeds, overlooking hefty downgrading costs and ending up in a less financially secure position.
Downgrading from a condo to an HDB can be a complex process. Unless you are confident about developing a financial plan and following through with regulations, getting professional help from experienced agents may be your ticket to faster and more efficient success.
Selling Your Condo in Singapore?
Get your Free Property Analysis Report and Seller packages.