It’s the perfect love story. You’ve finally met the person of your dreams. You both fall hopelessly in love, butterflies abound in your stomach, you can’t stop thinking about them, and you want to be with them forever.
The day comes when you decide to pop the long-anticipated question.
“Do you want to BTO together?”
They squeal in joy and say, “Yes, but….”
“I’ve already bought a HDB flat with my family.”
Common problem couples face
This is a scenario that’s pretty not uncommon in Singapore. An individual buys a HDB flat with someone other than their spouse, becoming co-owners with either one of their parents or siblings under the Public Scheme of HDB’s Eligibility Schemes.
This is usually due to reasons such as providing financial support by helping their family pay for the mortgage using their CPF.
Rules for buying a HDB flat
In order to purchase a new or resale HDB flat, you need to be either a couple or a family unit. This refers to your spouse and kids, or parents and siblings. Either way, it boils down to having two names as co-owners of a flat.
The only exception to this rule is if you’re single and over 35 years of age . Then, you’re eligible to purchase any resale HDB flat of your choice or a 2-room flexi BTO flat in a non-mature estate.
However, by choosing to co-own a flat with your parents or siblings, it means you’ll probably have to make some hard decisions further down the road.
Here are two potential issues you may face:
Getting married? Should you decide to get married and want a flat of your own with your spouse, you will need to remove your name from your current HDB. You cannot co-own two HDB flats at the same time.
Potential financial strain. If you decide to remove your name as co-owner, your parents or siblings will need to buy over your share, which may result in financial strain. If they’re unable to service the loan, the financial burden will fall on you to do so.
What’s the best solution?
Removing your name from the HDB flat is by far the best and most recommended option, short of changing your partner. (We’re joking, of course.)
This can be done in two ways.
1. Change in flat owners
The first way is a conveyancing procedure that doesn’t involve any monetary consideration. In order to change your ownership status as a co-owner in the case of family circumstances such as marriage, divorce or demise of an owner, you can apply for a change in flat ownership.
To change your ownership status, everyone involved must meet the eligibility requirements (current and proposed owners) and give their full consent. This process typically takes four months from start to finish.
There are four main types of ownership changes.
- Addition of co-owner, such as when a parent includes their child as an owner.
- Removal of co-owner. This is when a child removes themselves as an owner.
- Replacement of co-owner, for example, replacing the son with the daughter as the owner.
- Total change of owners, where a parent passes on and a child takes over the flat.
The caveat to this that most people baulk at is that the new owners taking over will have to refund the full CPF amount plus accrued interest to the person withdrawing their ownership from the flat. On top of that, they will need to be financially stable enough to discharge any existing mortgage loan.
During this transaction, additional fees will be incurred, such as
- Administrative fees
- Stamp & registration fees
- Conveyancing fees
- Valuation fee
But wait, that’s not all! Keep your wallets open, because there are other payments or liabilities that may need to be settled before you can even file the application.
This includes fire insurance premium, late payment charges, or bill charges. Also, if you’ve purchased an EC from a developer or a HDB flat (either BTO or resale using housing grants) before withdrawing your name as a co-owner, you may need to cough up a resale levy.
2. Resale of part-share
The second solution involves selling your share of the flat to another family member at a mutually agreed price. To do so, the flat must be eligible to be listed for sale on the open property market, which means that the Minimum Occupancy Period (MOP) of 5 years needs to have been met.
New buyers taking over the flat should keep in mind that they need to fulfil a fresh MOP before they’re able to sell or rent out the flat, or invest in property.
Picking this option means having fewer hoops to jump through than the previous one, and the process is similar to buying a resale HDB flat.
Other solutions to consider
1. Rent till you’re 35
One option is to rent a flat with your spouse until you’re 35 before tying the knot and buying a resale flat under the Singles Scheme.
However, you cannot be renting indefinitely and should have an exit strategy in mind. Sitting down with your spouse and asking questions such as, “How long do we need to rent for?” and “What’s our budget for rental?” is important so you can figure out the steps you need to take in the future, should you wish to still buy a HDB with them.
2. Move in with either family
Either you move in with your spouse, or your spouse moves in with you. This would be great if both of you are able to get along famously with each other’s families and live happily together under one roof. Otherwise, this scenario is far from ideal as living with each other’s in laws can be stressful.
3. Sell off the flat and downsize
If you co-own the HDB flat with your parents, you might want to discuss selling it, assuming it has reached MOP. Your parents can then downsize to a cheaper property where the mortgage will be more affordable and easy to manage financially. In this scenario, everyone involved in the transaction must agree to sell.
4. Buy a private property
If you have the means to do so, you can look at purchasing a private property such as a resale condo. Although you may be able to find older private condos that fall within your budget, they are still more expensive than buying a HDB flat. You also need to factor in your potential future expenditures, such as having children, buying a car, saving for retirement etc.
Unless you’re absolutely sure you’re going to stay with your siblings or parents for life, it would be ill-advised to co-own a HDB flat with anyone other than your spouse. It is better to use cash to help your parents out with the monthly HDB instalment instead of using your CPF.
This article was first published in 99.co.