Selling Your Flat
The Financial Breakdown
# 1 Pay Down Outstanding Home Loan
Your mortgage or HDB loan will be the first thing that gets paid down. This sum is deducted from your sales proceeds.
# 2 Refund Your CPF Ordinary Account
Next, you have to refund the money you “borrowed” from your CPF account, with an interest equal to what it would have paid you during the five-year period had you not used the money.
Monthly Loan Repayment: During the five-year period, you were also paying down your mortgage using your CPF contributions. You need to refund this amount as well. In this scenario, the amount works out to approximately $115,500. After deducting these two figures from your remaining proceeds of $207,000, you will be left with $48,000. This is the amount you will receive in cash.
# 3 Agency Fee
Selling your flat via an agent may mean paying between 1% and 2% of the sales price in commission. At a sale price of $475,000, you may be paying up to $9,500 in commission to your agent. This may leave you with $38,500.
# 4 Additional Costs And Fees
Some miscellaneous expenses including administrative and legal fees could cost you close to $500 and $1,000.
Negative HDB Sale
In recent years, HDB resale volume has been declining in the aftermath of various government cooling measures like the Mortgage Servicing Ratio (MSR) and capping of the loan term for HDB loans. Arising from these policies, there have been cases of negative HDB sales.
What is exactly ? It means that after you sold your HDB flat, the resale price is sufficient to pay off the outstanding HDB or bank loan but not enough to repay fully the CPF refund with accrued interests. In this situation, besides having no cash proceeds from the transaction, you may even require to top up the shortfall in cash to your CPF account if your property is sold below market value.
Buying Your Next Home
Once you have sold your home, you will need to buy another home for your family to live in. If you choose to buy another subsidised flat from the government, you will have to pay a resale levy for your second flat. If you choose to go private or opt to buy another resale flat, you will not have to pay any resale levy. You can use your CPF balances, with the interest paid back, to fund the purchase of your next property.
What If You Are Above Age 55 When You Sell Your Property
At age 55, your Retirement Account is created. Your combined balances from your Ordinary Account and Special Account are used to set aside the Full Retirement Sum, the amount dependent on the actual year of retirement. If you do not have this amount set aside, any refunds paid to your CPF Ordinary Account from the sale of your property will first go into your Retirement Account.
It is important to note that you can only use funds above the full retirement sum of $166,000 to purchase your next property if you want to buy another flat after 55. Alternatively, you can also opt to set aside $83,000 for the Basic Retirement Sum, which would also require you to pledge your property.
Ensure Proper Cashflow Planning
You should do your sums before selling your home. Know all the costs involved and where your sales proceeds will be going, as well as how you can utilise them going forward. These are basic yet vitally important considerations to make before deciding on any decisions.
Planning Your Home Renovation?
For most homeowners, the renovation of their property is not something that have experience with. You may be unsure of how to get started, which interior designer to choose and how much you’ll need.
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