Regardless of whether your goal is wealth development or the right size, moving house is a small minefield. Every now and then, someone shies away from moving house in the face of a five-digit stamp tax that they didn’t see coming (ABSD, even if I don’t own two houses?) Or the sudden need to rent another six months.
In this article, we’ll look at some of the most common culprits and ways to minimize these costs:
What costs should homeowners minimize through upgrades / downgrades?
- Don’t negotiate to stay longer if you have to
- Prepayment penalties on the existing home loan
- Jump directly to the resale apartments when downgrading
- Renovation delays
- Within the Sellers Stamp Duty (SSD) Period
- Check the device again even after the OTP has been signed
- Pending fees from previous owners
1. Don’t negotiate to stay longer if you have to
Sometimes moving out immediately will force you to find temporary accommodation. Before doing this, however, don’t forget that your buyer may be open to negotiation.
For HDB apartments, sellers can stay in apartments for up to three months if buyers agree (this was not previously allowed, but the law was amended in 2014).
The arrangements for private real estate are quite flexible. For example, some sellers agree to pay rent to buyers so they can stay longer; This can be cheaper than having to rent elsewhere.
Conversely, when buying a resale device, keep in mind that you can negotiate with your sellers as well. You can make some cash by allowing your sellers to stay longer if it isn’t an inconvenience for you.
2. Prepayment penalties for the existing home loan
This is only important for private property owners. HDB loans never include prepayment penalties.
When you sell your existing property, you almost always use the sales proceeds to repay the existing home construction loan. However, some banks charge early repayment penalties, usually 1.5 percent of the amount redeemed.
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Prepayment penalties usually do not last the entire loan term and are often incurred in the first three to five years of a loan. Therefore, if you intend to sell and pay off the loan shortly, upgrading / refinancing to a new loan package is not always the best idea.
If you intend to upgrade or downgrade in the near future, but still want to refinance, drop us a line. We’ll help you find loan packages with no prepayment penalty in the event of a sale.
(In general, we would suggest that if you intend to sell within the year that you intend to sell, we would suggest that you do not refinance. The cost of refinancing is around $ 2,500-3,000; and you are unlikely to recoup the cost, even with lower monthly savings Repayments.).
3. Jump directly to the resale apartments when downgrading
If you’re downgrading from a private property, chances are you’re jumping straight to a resale apartment. That’s because after selling a home, you have to wait 30 months before you can apply for a BTO apartment.
However, if you want to stay somewhere else during this time, we recommend calculating the numbers first.
At the time of writing, the average price of a 3 bedroom resale apartment across the island is $ 340,618.
How much can a 3-room BTO apartment cost in comparison? In May 2021, they were just $ 184,000 in Woodlands before grants.
We’re sure you’ll see the point – if you can easily wait for the 30 months, a BTO apartment can mean a significant top-up in retirement savings, paying off existing debts, etc.
This is especially true in 2021 when resale prices have been rising for 11 consecutive months.
How much you save will of course vary depending on your location; This assumes that you don’t have to rent in the meantime. However, it is worth working out the numbers before making a decision. You can also consult one of our experts to find the optimal solution for your situation.
4. Renovation delays
Renovation delays have become the norm during this pandemic. This causes additional costs in the form of longer temporary accommodation or higher costs for the on-time completion (e.g. because your contractor receives more expensive supplies or labor in the current scarcity).
If a delay is inevitable, talk to your contractor about making the next home as livable as possible for the time being; and finish other work later.
For example, you can only renovate the toilets and bedrooms first so you can move into a functional home. You can take care of other areas later, such as the living room.
It might not be the prettiest or most convenient situation, but it is likely cheaper than renting for another six months.
5. Be within the seller’s stamp duty (SSD)
This only applies to private property (an HDB apartment cannot be sold within the five-year minimum occupancy period anyway).
If you sell a property within the first three years of buying it, you are subject to SSD. That is 12 percent of the purchase price in the first year, eight percent in the second year and four percent in the third year.
Therefore, only buy a property if you are sure that you will not have to sell during the SSD period. We should stress that this is not a purely financial issue. For example, if you move in with your parents with your spouse and later find that you cannot all live together, you may not be able to bear it for three years.
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Another common complaint is that the SSD also applies to en bloc sales. In these cases, you shouldn’t rush to swallow the costs.
If you should suffer financial loss at the end of the transaction, the authorities can order that a higher proportion of the sales proceeds be allocated to you.
Should the amount paid out by the other owners exceed 0.25 percent of the sales of each unit (or $ 2,000, whichever is greater), the en bloc sale could be blocked.
So in cases where selling SSDs and blocks would cause you financial loss, speak to a transfer law attorney.
That being said, upgraders and downgraders alike should be careful when buying units in a project that comes close to a block. The worst-case scenario is that development is en bloc in the same year that you bought it.
6. Check the device again even after the OTP has been signed
Many buyers become careless after securing the OTP and won’t even look at the unit until it’s time to move in. Note, however, that the condition of the property can change between the time of the transaction and your move in.
A typical example would be damaged walls or floors when the previous owners move out. Most OTPs state that the seller must deliver the property to you in the same condition and condition as it was when you signed it. This means that your seller may have an obligation to repair this damage, and not you.
But if you don’t realize it in time, it will be difficult to make your claims later.
You may also have signed the OTP with the assumption that the seller is performing maintenance (e.g. repairing defective sockets, sagging doors, etc.). You should check that the work was actually done.
7. Pending Fees from Previous Owners
If you’re moving to a resale unit, make sure the previous owners have paid any outstanding maintenance fees, fines, and utility bills.
At the very least, you’ll waste weeks sorting out the situation; often with creditors who have little understanding.
We have encountered cases where the sellers left Singapore immediately after the transaction, leaving behind several months of unpaid maintenance fees (they quickly became unavailable, as expected).
With no time to clean up the mess, some buyers give in and just pay the previous owners’ bills.
If you have a qualified broker this shouldn’t be happening as it is routine for them. But buyers doing DIY stores often overlook this.
This article was first published in Stackedhomes.
