Upgrading from Your First HDB – How To Do It & What are the Options?
If you’re like most Singaporeans, your first home would probably be an HDB flat… but it may not be your “forever home”. As your life stages change and needs grow (or shrink), you might find yourself moving to a second or even third home in the course of your life.
Here’s a look at how to upgrade from your starter HDB home and what it’ll cost you.
- Why would you want to upgrade your home?
- When can you upgrade from your HDB flat?
- After MOP, what can you upgrade to?
- How do you upgrade to an HDB resale flat?
- How do you upgrade to a private condo?
- How do you upgrade to a landed house?
- Is it possible to get a BTO if you already have an HDB flat?
- What’s the procedure for selling your current HDB flat?
Why would you want to upgrade your home?
Here are some common reasons why Singaporeans upgrade from their first HDB flat.
Location: Most HDB BTOs are built in new or less popular (read: ulu) estates. This may have repercussions on your daily commute time, and this compounds when you have children.
School: We weren’t the first parents to move because of school, and we won’t be the last. Some parents move to live near the primary school of their choice, not just for the shorter commute, but for the higher odds of getting in in the first place.
Remember, if push comes to shove and you end up having to ballot for a place in the school of your choice, how near you live to the school matters.
Space: You may picked a modest starter home which was perfectly fine for a young couple. But now you have two kids, a maid, a dog and toys that stack up to the ceiling.
Or, your parents are growing older and they may need to move in with you. You’d need more space than a 4-room flat can offer. It’s time to move.
Money: You might have moved high enough up the corporate ladder to afford a nicer home – perhaps a condo with a pool and other facilities for your young family.
En bloc sale: In 2017, Singapore’s property market was gripped by en bloc fever. If your current home has been selected for en bloc sale or SERS, then you’d need to find a new place to move to.
When can you upgrade from your HDB flat?
The short answer to that question is after 5 years. Usually.
HDB has this thing called a Minimum Occupation Period (MOP). During this time, you must live in the HDB flat you bought. During the MOP, you cannot:
- Sell the flat
- Buy another HDB flat
- Buy another private property
- Buy property abroad
And yes, this applies to resale HDB flats too. Here’s a guide to the MOP for 2-room HDB flats and bigger:
|New flat bought from HDB (including those bought under SERS)||5 years|
|New DBSS flat bought from developer||5 years|
|Resale flat bought with CPF Housing Grant||5 years|
|Resale flat without grant (bought after Aug 2010)||5 years|
|Resale flat without grant (bought Mar to Aug 2010)||3 years|
|Resale flat without grant (bought before 5 Mar 2010)||2.5 years|
The only HDB flat type without MOP are 1-room HDB flats. These appear to be extinct.
After MOP, what can you upgrade to?
When the MOP is up, you have many options for your second home. Some of the more popular ones include…
Resale HDB flat: This is both the cheapest and easiest option, with some flats on the open market costing below $400,000. It’s also very easy to find and purchase an HDB resale flat, especially now that HDB has a Resale Portal.
Going from HDB to HDB may not seem like much of an upgrade, but older resale flats in more mature estates like Bishan and Queenstown tend to be larger and more spacious than newer BTOs.
If you’re eyeing a “good school” for your child, it’s likely that you’ll want to get a home in one of these neighbourhoods too. See our property guide to top primary schools in Singapore for more info.
Condominium: A very popular choice for HDB upgraders as Singaporeans’ appetite for the high life increases with their salaries as they get older.
Price-wise, private condos are much more expensive than resale HDB flats, starting at $1.5 million for a family-sized flat. You might also want to engage a property agent to aid with the paperwork and that’ll cost extra.
Landed property: Definitely a purchase that will burn a hole in most wallets. Landed houses start at $2 million, which is considered “cheap” for the property type in Singapore… go figure.
Again, you might want a property agent for this purchase. You also definitely want a home inspector. These also add to the costs.
In the next sections we’ll outline the basic step-by-step procedures for upgrading to each property type.
How do you upgrade to an HDB resale flat?
So, you’ve decided to go for an HDB resale flat. If this is your first time buying resale flat, here’s a step-by-step guide to the whole HDB resale procedure. Otherwise, here’s a quick recap of what you need to do.
Step 1: Find your dream resale flat
First decide whether you want to engage a property agent or go DIY. An agent will do the legwork and paperwork for you, but it comes at a price. This is usually 1% to 2% of the transaction price for buyers (2% to 4% for sellers).
Step 2: Check the flat before you commit
Apart from checking on the condition of the flat, there are also some peculiarities associated with HDB resale flats that you definitely want to check:
- Ethnic and PR quotas – this changes from month to month, and you can check the HDB quota portal here
- Flat ownership – make sure that the flat is legally owned by the seller and they have met their MOP
- Upgrading works – your new flat might be due for upgrading works; check whether it’s you or the seller who has to pay for these
- HDB resale prices – make sure you’re being quote a fair price by checking against HDB’s published resale HDB flat prices
- Lease period – check how many years are left on the lease, because this will affect your home loans and how much of your CPF you can use. The new CPF rules mandate that flats that have at least 20 years left on the lease and the remaining lease can last the youngest buyer until age 95 can be paid using CPF, with effect from 10 May 2019.
If it’s a go, then proceed to exercise your Option to Purchase and pay a deposit to the seller.
Step 3: Start hanging out on the HDB Resale Portal
To effect the transaction, both buyer and seller need to go through the HDB Resale Portal. It’s actually really easy. Simply register at the portal and it will tell you what to do.
Step 4: Find out if you’re eligible for the Proximity Housing Grant
A 5-room HDB resale flat can cost anything from $400,000 (Sembawang) to $850,000 (Toa Payoh). Few of us have that much money lying around, so any grant helps.
Unfortunately, HDB schemes are mainly for first-time buyers. If you’re a second-time buyer, you can only make use of the Proximity Housing Grant.
This is $20,000 grant if you buy a resale flat within 4 km of your parents or in-laws, or $30,000 if you get them to live with you in your new place. Importantly, these living arrangements must remain the same throughout the MOP.
Step 5: Finance your HDB resale flat
For upgraders, the most useful scheme is HDB’s Enhanced Contra Facility. This lets you sell your current HDB flat and buy a resale at the same time.
You can channel your sale proceeds and refunded CPF to finance your new resale flat, which greatly reduces how much cash you need upfront and how much of a loan you need to take.
In any case, there’s actually a fixed order when it comes to financing your upgrade to an HDB resale flat.
|Cash proceeds from selling first HDB flat||Must use at least 50% for resale HDB (or all proceeds except $25,000, whichever is more)|
|CPF (OA)||Can use only when you’ve run out of cash, but Withdrawal Limits apply|
|HDB loan||Can use to top up after maxing out cash & CPF, but only if you’re eligible|
|Bank loan||An option if you’re not eligible for HDB loan. Note the new loan limits of 75% (first mortgage) / 45% (second)|
Step 6: Dispose of your current HDB flat in 6 months
You’re not allowed to own 2 HDB flats at once, so you will need to get rid of your old flat within 6 months (if you haven’t done so already). See below on instructions on how to sell off your existing flat.
How do you upgrade to a private condo?
If, like countless Singaporeans, you want to upgrade because you’re finally earning enough to live in your aspirational home, then this section is for you.
Step 1: Decide whether you want a new launch or resale condo
Most condos on the market are new launches – meaning you’re buying an apartment that will only TOP 3 years later or so. You won’t be able to move straight to your swanky new place right after completing MOP.
So you’ll need to plan ahead and work out your finances really carefully. In those 3 years, you’ll have to pay for your current home as well as your new condo.
If you limit yourself to resale condos, your options are fewer but you can move out the moment you find a unit you like.
Step 2: Decide whether you want to keep your current HDB flat
Singapore citizens are allowed to own both an HDB flat and a condo (as long as the HDB flat’s MOP is up).
If you’re buying a condo, you can choose to wait for a right time or price before selling your HDB. You don’t have to dispose of your flat right away. In the meantime, you can rent out your HDB flat if you’re eligible.
However, owning 2 properties at the same time has financial repercussions.
If you’re taking a bank loan, you have to pay off your outstanding loan for your first home. Otherwise, the amount you can borrow will drop from 75% to 45% of the purchase price.
This means you have to pay 25% of your condo cost in cash. That’s $375,000 for a $1.5 million condo!
Then there’s TDSR (Total Debt Servicing Ratio). This limits you to using just 60% of your gross income to service all your debts – including car loans and credit cards. This will also limit how much you can borrow.
Step 3: Get AIP (approval-in-principle) from a bank
The AIP states how much the bank is willing to loan you for the purchase. Once you have AIP, you can go ahead and look for your condo (with or without an agent).
Some sellers won’t go ahead with the sale if you don’t have an AIP because there’s no guarantee you can afford to pay them.
Step 4: Lock down your dream condo
Once you’ve found your condo – make sure the seller is the owner! – you can proceed with your purchase.
Similar to the resale HDB flats, you chope the unit by exercising the Option to Purchase. It’ll cost you 5% of the purchase price and you have to pay in cash. That’s $75,000 for a $1.5mil condo which isn’t exactly small change.
Here’s what to do afterwards:
- Go back to the bank to finalise the loan and get your Letter of Offer
- Hire a lawyer to settle the conveyance (you can get a recommendation from the bank)
- Sign the Sale & Purchase Agreement (S&P)
Step 5: Pay (and pay and pay) for your condo
Once you sign the S&P, you’ll have 2 weeks to pay BSD (Buyer’s Stamp Duty) + ABSD (Additional Buyer’s Stamp Duty).
Don’t worry if you haven’t found a buyer for your HDB flat yet. You pay ABSD first then get a refund if your flat is sold within 6 months.
If you’ve sold your HDB flat by then, you don’t have to pay ABSD since this is not your second property.
You’ll have 8 weeks from signing S&P to pay the rest of the downpayment. This is after deducting the 5% that you paid in cash for the OTP.
If you’re buying a resale condo, you (or your bank) must pay for it in full within 2 months of exercising the OTP.
If it’s a new condo, you’ll get a bill each time the developer reaches a construction milestone. Expect to pay 5% to 10% of the purchase price every 6 months or so until TOP (Temporary Occupation Permit) is issued. When that happens, you pay the last 40%.
Don’t forget you can’t use your CPF so freely this time…
Since this isn’t your first home and you’re obviously well-off enough to buy “status” housing, CPF isn’t going to make it easy to use your retirement funds to pay for your condo.
First, you need to pay in cash whatever you can before you’re even allowed to dip into your CPF.
Since you’d probably have used your CPF OA to pay for your first home, there are limits now to how much you can use to pay for your upgrade to a condo. You cannot touch the Basic Retirement Sum, currently $85,500 but goes up every year.
There are also Withdrawal Limits to using your CPF for a condo, whether new or resale. If the remaining lease on your condo is less than 60 years, it gets even tighter. Use CPF’s calculator to work out your limits.
How do you upgrade to a landed house?
If you have the means to upgrade from an HDB flat to a landed home, you’ve pretty much made it in life, by Singaporean standards. Prepare for tons of backslapping and fistbumping.
The procedure for buying a landed home is largely similar to that of buying a condo. After all, they fall under the big umbrella of private property.
There is one thing though. Before you ask for the OTP, you might want to hire an inspector to check the house for things like:
- Condition of the foundation
- Soil condition
- Leaks in the roof
- Leaks anywhere or moisture issues especially if the house has a basement
- Termite infestation
- Water pressure
- Number of floors allowed (in case you plan to build more)
If you’re fretting about how much extra the house inspector would cost, then perhaps a landed home is not for you.
Expect to pay upward of $2 million for a landed property in Singapore. And that’s on the low, low end – we’re talking about the “reduced to clear” bargain bin kind of house.
The 25% downpayment alone would cost a cool $500,000 at least. (That’s enough to buy you a good sized HDB flat, by the way.) For financing the rest of the home, the same options and limitations as that of condos apply.
Is it possible to get a BTO if you already have an HDB flat?
Just to be thorough, it is totally possible to ballot for an HDB BTO flat even if you already own an HDB flat, although most materialistic Singaporeans would hardly see that as an “upgrade”.
However, you might find it a bit different than the first time round.
HDB sets aside much of the new BTO flat supply to first-time applicants, so second-timers like you have a slimmer chance of getting a flat you want.
You’re also disqualified from most HDB grants which first-timers enjoy. The only grant for second-timers is the Step-Up Housing Grant, which is strictly for 2-room flat owners to upgrade to a 3-room flat in a non-mature estate.
Not only that, you also have to pay extra, in the form of HDB resale levy:
|HDB flat type||Resale levy|
If you need a refresher or got a resale for your first home, read our step-by-step guide to applying for an HDB BTO flat.
What’s the procedure for selling your current HDB flat?
Buy a new flat first before selling the old one or sell the old one first then buy a new one? Decisions, decisions, decisions…
The kiasu Singaporean in all of us likes to think that it’s better to buy first, sell later. This way, we’ll always have a roof over our heads.
If that’s what you think as well, let us remind you that HDB says you have to sell off your old flat within 6 months of the date you take possession of your new flat one. If you can’t find a buyer by then, you have to appeal for an extension. Otherwise, HDB can force you to give up your brand new flat and compensate you however they see fit.
Owning two properties in the meantime will also mean double the home loans to pay off, plus it will affect your loans for your new home. You’ll be able to borrow less money from banks.
On the other hand, selling first before you buy requires good timing. You should factor at least 6 to 9 months for the sale to go through.
In any case, here’s a guide to selling your HDB flat.
Step 1: Put your HDB flat on the market
Just like when you’re finding a new place, you can hire an agent and sit back and relax but pay for the privilege.
Or, you could DIY and keep the cash. It’s easy enough these days – you can list it on property websites, the classifieds, and even social media.
Important things to shout about:
- Flat type
- Floor area
- Amenities around (especially if there’s an MRT nearby or a popular school)
- Floor level (low, mid or high)
- Special features e.g. recently renovated, north-facing
- Contact information
- Instagram-worthy photos
While you’re at it, decide how much you want to sell your flat for. You can check the HDB resale flat prices in your area so you don’t sell over or under market rates.
Don’t forget to factor in outstanding service and conservancy charges, and property tax. HDB has a handy Sale Proceed Calculator to help you work out an estimated sale price.
Step 2: Wait for the right buyer to come along
Now the tedious bit – entertaining viewing after viewing (or worse, no viewings at all).
Also, just because you state your price doesn’t mean they’ll pay it. Lowballers exist everywhere so it’s important to negotiate well. When you’re negotiating the price with your buyers, remember to talk about:
- The deposit you want
- Whether you want to leave any furniture or fittings behind
- Any deadlines you’re expected to meet
- When they need you to move out
Step 3: Complete the HDB resale process
Once you’ve found a buyer, selling your current flat is really quite easy and can be done in about 2 months.
Just log on to the HDB Resale Portal and follow the instructions. Your buyer will need to exercise the OTP and pay a deposit.
Thereafter, it’s a pretty straightforward matter of completing forms, submitting documents and waiting for HDB to complete the transaction so you can officially hand over ownership of your current flat and move on in life. Woohoo!