Most of us are HDB flat owners. HDB flats are relatively affordable as compared to ECs and private housing. But would it be a good idea to hold on to it long term? Lets discover the pros and cons today!
Alot of clients i met have this mentality
- I’m holding onto a piece of singapore property that i bought at such an affordable price
- I’m going to finish paying the loans and be debt free!
- One day when we pass on, this asset would be willed to our loved ones and benefit their lives. (of course right, by giving you a fully paid up HDB flat would definitely be beneficial to you… right?)
Sounds like you?
Lets have a case study to explore further.
- Mr and Mrs Lim are in their thirties, say 33 yrs of age. They bought their matrimonial home, a resale flat that has good location, good sized, that’s 10 years old. (remaining lease of 89 years).
- Congratulations, they gave birth to a baby boy, Andy a year into their marriage.
- Mr and Mrs Lim age : 34, Andy : 1
Fast forward 30 years later
- Mr and Mrs Lim age : 64, Andy’s age : 31
- At this point Andy decides to get married and buys a HDB flat as a matrimonial home. (just like what his parents did.)
Something unfortunate happens, and parents passed away.
- The will kicks in and the old HDB flat is under the ownership of Andy now. (old flat age: 42, remaining lease 99-42=57 years)
- HDB rules states that a person cannot own more than 1 HDB flat. So at this point, Andy has to make a decision to sell his own HDB or parents’ HDB flat.
Option 1 – Son keeps his own matrimonial home and sells away the old flat.
For HDB flats / private properties with leases of less than 60 years, the following rules apply:
because his parents’ HDB flat has a remaining lease lower than 60 years, this means that buyers CANNOT fully use their CPF due to certain restrictions. This made it less attractive to potential buyers and Andy might find it challenging to sell off.
Option 2 – Andy sells his matrimonial home and keeps the old flat.
Well, the old flat is fully paid up, which means it’s good news right? Andy probably will not make any money from the sale of his own flat within the MOP period, and he’s stuck with an old flat that’s depreciating in value as time goes by. So is leaving a fully paid up old hdb flat a good or bad thing?
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