HDB Flat to Private Property: How Much Must You Save To Upgrade Right After MOP?

Time flies! You’ve been living in your very first HDB flat for almost 5 years now. And with that MOP (Minimum Occupation Period) milestone fast approaching, you might be considering the options for your next housing move.

Should you sell your flat? How much will you make from it? Is the profit enough for you to buy an executive condo (EC), private condo, or even a landed property?

In this article, we’ll do the math for a typical Singaporean family looking to sell their first home and “upgrade” to a different property type. We’ll show you how much money you need to save for your future downpayment and mortgage.

…But first, let’s talk about your current HDB flat.


Selling your HDB flat after MOP: How much can you “profit”?

When it comes to first homes, many Singaporean couples opt for BTO (Built-to-Order) flats, and for good reason: There’s a high chance that you will make a decent profit when you sell it after the MOP (read more about the minimum occupation period (MOP) here). 

That’s because BTO flats are sold directly by HDB at a government-subsidised, “wholesale” price. After the MOP, you can sell it at market rate, which is generally significantly higher.

Let’s take the example of Mr and Mrs Wong, who bought a 4-room BTO flat in Punggol for $300,000 in 2010, and moved in in 2015. They qualified for a $5,000 housing grant, and took a 25-year HDB loan with a monthly instalment of $1,203.

After meeting the MOP requirement, they sold it this year for $480,000. (This is an estimate based on similar properties on the HDB Resale Flat Prices portal, which you can also apply to your own flat.)

Of the sale proceeds, the Wongs will need to return the following to their CPF accounts, with interest (2.5% per year, compounded over 5 years):

  • Housing grant: $5,000 + accrued interest = $5,657
  • CPF used to pay for the BTO downpayment: $30,000 + accrued interest = $33,942
  • CPF used to pay for mortgage so far: $72,180 + accrued interest = $94,110

That’s basically an injection of $133,709 into their CPF OA, which can, of course, be used for housing. As for cash, the Wongs can pocket $57,571 — that’s what’s left after settling their remaining mortgage of $288,720.

In total, that’s about $191,280 of funds that can go into their next home purchase. Huat ah!


Is this enough to upgrade from their HDB flat to private property?

So we’ve seen an average Singaporean couple “profit” quite substantially from their BTO. But is it enough for the upgrade of their dreams? 

Well, it depends on whether they want to buy an Executive Condominium (EC), private condominium, or a landed house.


Upgrading from HDB flat to EC

The most affordable of the three upgrades is an EC, which is a public-private condo hybrid sold by HDB. Not everyone can qualify for it, but luckily, the Wongs still meet the income ceiling of $16,000 and are eligible to apply for an EC.

Based on the recent The Ola EC in Sengkang, we can now expect a 3-bedroom unit to cost close to $1m.

Although ECs fall under HDB, buyers cannot take an HDB loan — the Wongs will need to get a bank loan instead. And going to a bank also means they’ll have to fork out 25% ($250,000) for the downpayment, of which 5% ($50,000) must be in cash. 

With the $191,280 they made from their BTO sale, the Wongs fall a little short of that downpayment. They need to top up at least $58,720 in cash or CPF to afford it.

The remaining $750,000 will be the mortgage. With a 25-year loan at 2% interest, the Wongs can expect their monthly instalments to cost about $3,179.

For ECs, the housing loan repayment must adhere to not only TDSR (Total Debt Servicing Ratio) but also the stricter MSR (Mortgage Servicing Ratio), which caps your home loan repayments at 30% of your income. 

Working backwards with the $3,179/month payment, that means the Wongs’ combined income must be at least $10,597 a month. If they are not earning enough, then they will have to increase the downpayment and borrow less.


Upgrading from HDB flat to private condo

Look and feel-wise, private condominiums are pretty similar to ECs. The main difference is that because it’s 100% private, there’s none of that income ceiling or minimum occupation period nonsense. There are also more options when it comes to location and lease.

Oh, and they’re a lot more expensive. Let’s take Sengkang Grand Residences as an example. While 3-bedders at the nearby The Ola EC start at $1m, a similar-sized apartment here costs $1.5m.

With a bank loan, that means a downpayment of $375,000 — of which 5% ($75,000) must be in cash. Since the $191,280 from their BTO sale is not enough, the Wongs will need to top up at least $183,720 in total

Of this, they need to top up at least $17,429 for the cash component (since the $57,571 from the BTO sale is not enough). The rest of the money can be in their CPF OA.

With a home loan of $1,125,000, the estimated monthly instalments will be $4,768. 

For private property, only TDSR (but not MSR) apply to your monthly loan repayments. As long as your total debt obligations don’t exceed 60% of your income, you’re within limits. 

Assuming the Wongs have no other loans, buying a private condo would be acceptable with a combined income of at least $7,947. Paradoxically, that’s lower than the income required for an EC.


Upgrading from HDB flat to landed house 

Not many Singaporeans are willing to take such a huge leap, but for the sake of completion, let’s look at the numbers for upgrading from BTO to a landed house.

An “entry-level” terrace house in Singapore would cost at least $3m. With a bank loan, a 25% downpayment is $750,000, of which $150,000 must be in cash. Yikes! We sure hope the Wongs have a spare $558,720 lying around, of which $92,429 must be in cash.

After making the downpayment, the Wongs will be saddled with a home loan of $2.25m, which works out to $9,537 in monthly instalments.

The couple needs to collectively earn at least $15,895 a month to fall within the 60% TDSR requirement. Even so, we’re talking about almost ten grand a month in mortgage instalments, which is definitely not for the faint of heart.


Conclusion: Upgrade within your means

Once you crunch the numbers, upgrading from an HDB flat to a swanky condo is not as easy as it sounds. Even the cheapest upgrade — from HDB to EC — requires a top up out of your own savings.

Upgrading your HDB flat is certainly possible, but it does require planning. Homeowners should work out a savings plan for their dream home upgrade, and not just count on capital appreciation alone.

To help you work out the sums, use the PropertyGuru mortgage affordability calculator. 

Also, do consider the increased home loan obligations that come with an upgrade. Upgrading can double, triple or even quadruple your monthly repayments! Unless you earn so much that your current HDB mortgage is practically child’s play, think carefully before committing to an upgrade.

For more advice on home affordability and working out your loan, head to PropertyGuru Finance to speak to our mortgage experts.


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