The cost for an upgrade: HDB to condominium

The cost for an upgrade: HDB to condominium

Interested to upgrade from a HDB to a condo? Here’s how much you should prepare before buying a private property. Maybe this info can help you to avoid from getting into trouble if you have not prepared for an extra funds in this matter .

In the current market and economy, there are people who are interested to upgrade their HDB to a condominium. The upgrade from HDB to a condominium to fulfil your dreams for a bigger and more luxurious place does not come cheap, however. You would need to do your research before deciding to commit to such a cost. 

In some situation, getting a new HDB in areas like Woodlands may be more tempting than to commit to an expensive acquisition of a condominium. This solely depends on the investor’s appetite and desire to acquire the property for their own reasoning. 

Below is the few information to consider before making the upgrade.

With Singapore’s property market in a long slump, some people now have an opportunity to upgrade from an HDB to a condo. In fact, property prices are down around 10.8% since the peak in 2013, making this a rare opportunity. But can you afford to make the leap? Here are the numbers to consider:

Cost Assumptions

For the purposes of this guide, we will assume the cost of the condo is S$1 million. We will also make the following assumptions:

• You are selling your flat for S$500,0001;
• The loan tenure for the condo does not exceed 30 years, and your age would not exceed 65 at the time the loan ends;
• You have past the Minimum Occupancy Period required by the HDB board;
• You do not have significant outstanding loans besides the mortgage you are going to take up for the new house.

1. The money from the sale of your flat will be refunded to your CPF Ordinary Account (OA), along with the accrued interest. For simplicity’s sake, we are assuming S$500,000 has been refunded to the CPF account. To obtain more accurate info, one should refer to the CPF website online for more accurate information. 

Deduct the Down Payment 

When you are buying private property in Singapore, you cannot use a HDB concessionary loan. You’ll need a seek out a bank loan instead. Most bank loan is able to finance up to 80% of the condo’s price if you are below the age of 65. As you age, the banks might offer lower margin of finance to reduce their risk. Of the remaining 20%, up to 15% can come from your CPF OA. The balance 5% must be paid in the form of cash in order for you to secure the purchase of the condominium.

According to the above information, the down payment on a S$1 million condo is thus S$200,000. Of this amount, S$150,000 can come from CPF (S$500,000 was refunded from the sale of the flat, as per above assumptions). This leaves you with having to pay S$50,000 in cash, as a minimum down payment. 

It is inadvisable to borrow this S$50,000, as doing so will affect your Total Debt Servicing Ratio (TDSR). Your monthly debt obligations cannot exceed 60% of your monthly income; if it would, you will have to take a smaller loan. Click here to check out the latest TSDR rules.

Pay the Buyer’s Stamp Duty

Most people do not consider the fact that any property acquisitions are liable to pay for the stamp duty. You have to pay the Buyer’s Stamp Duty (BSD) for the purchase of your property. This amount is a percentage of the property price or value, whichever is higher. Check here for the BSD regulations. It is as follows:

• First S$180,000 of property price or value: 1%
• Next S$180,000 of property price or value: 2%
• Remaining amount: 3%

The condo is S$1 million. 

For the first S$180,000, you will pay S$1,800. For the second S$180,000, you will pay S$3,600.

The remaining value (S$1 million – S$180,000 – S$180,000) = S$640,000. 3% of this remaining value is S$19,200.

As such, the total BSD you will pay is S$19,200 + S$1,800 + S$3,600 = S$24,600.

BSD is paid at around the same time you sign the Option to Purchase (OTP).

However, the BSD would be determined by a formal valuation by the relevant agencies. The selling price does not mean that that the amount that you would be paying. If the valuation price is higher than the seller’s price or the seller’s price is higher than the valuation price, the BSD would be charged upon the higher value instead of the lower value.

Make Sure You Have Cash for Renovations

The cost of this varies, depending on what furniture you will buy, whether you will hire an interior designer, and so forth. Whilst you can take a renovation loan, it is always best to save up instead as the interest rate for a renovation rate is not low. Be prepared to recycle some old furniture or be inspired by designed from Pinterest or IKEA to help you decorate your new home.

Pay Your Property Agent

Most property agents charge 2% of the property value. This is a common practice in today’s market. If you are hardworking, you could opt to list your HDB for sale in websites such as the enclosed link here 

If you buy from a developer, it is common for the developer to pay your agent’s commission. If you buy a resale condo, it is common for the seller to pay, and then the seller’s agent and your agent will work out the commission between themselves. 

As such, we assume you pay no commission for the purchase of your condo. However, we will assume you pay a property agent for the sale of your flat. At S$500,000, this works out to a commission of S$10,000. Do note that the sale of your property does not require the use of an agent. The agent should only be employed if you are lazy to manage your own ads listing.

Pay Monthly Maintenance Fees 

The maintenance fees for condos are much higher than the conservancy charges you’re used to. Expect to pay S$200 to S$300 per month, for your S$1 million condo doesn’t matter if your condo is in Woodlands or Orchard. For higher end condos with a concierge service can run up charges of S$800 to S$1,500 per month, but these are normally found in luxury developments, not regular condos. You should do your due diligence before committing to the purchase. You might not like the amount being charged to maintain your condominium.

Total Cost

Overall, you’ll want to have around S$99,600 in cash before making the leap. After that, you will have to make the monthly loan repayments (this depends on what loan package you get), as well as the monthly maintenance fees.