Sunday, June 8, 2014

HDB decouple: (SPR + SC) household (Revision 03)

Revision 03 (last paragraph): updated on August 20, 2014
Revision 02: updated on June 9, 2014

You should hear "HDB decouple" term by now. I will talk about HDB decouple, not private property decouple. HDB rules are more stringent as it is a regulated market. HDB decouple is getting popular after Singapore government imposes heavy additional buyer stamp duty (ABSD). Decouple is not asking you to divorce. It is simply means to remove your spouse name from the property ownership and to become an occupier. What is the purpose by doing that?

" 2 owners = 1 owner + 1 occupier. "

There are two reasons:

(1) Get 80% housing loan instead of 50% housing loan
(2) Avoid paying 7% ABSD

After you become an occupier and not an owner of your existing HDB and when you buy a private property, that is your “first” property and you can get the housing loan up to 80%. It is because for second property, you are only able to get 50% housing loan from the bank. Of course, you can fully pay the outstanding housing loan and go ahead to buy second property with 80% housing loan from the bank without doing HDB decouple. Yes, you can do so too.

Secondly, it is to avoid paying 7% ABSD for Singaporean to buy and own the second property. This will be your first “owned” property (it is because you are an occupier for your "first" property, not the owner). Therefore, you do not pay any ABSD (0% ABSD) but just normal 3% stamp duty which apply to all. So, it makes sense to decouple Singaporean to become an occupier. If you decouple a Singapore PR to become an occupier, then when Singapore PR buys the “first” private property, you still have to pay 5% ABSD, second property for Singapore PR 10% ABSD.

So far so good?

Okay, when you want to do HDB decouple, HDB only allows ownership transfer by gift. No cash involved. But if your bank loan is with private bank, private bank will not allow ownership transfer by gift, it must be done through part sale (because the bank wants to make money!). But, HDB does not allow married couple to do part sale! You can’t just say, I want to buy my wife HDB shares by paying my wife cash and yet you two are still a happy loving couple. If you are in a truly divorce case, then HDB allows part sale. So, at the end, you can only do the HDB decouple by paying the outstanding housing loan in full.

Take note on HDB part sale, when you do that, you have to get the latest market value of the property, then, you buy 50% of the HDB from your wife with the current market price,  remember that whatever CPF OA money that your wife is paying for this HDB, you have to repay back to CPF OA account with accured interest. Then, for you as a Singapore PR to buy 50% of the HDB sale is as well subject to 5% ABSD as HDB treats this as a first property "new purchase". That is just when HDB allows you to do part sale.

Next, after Singaporean is decoupled and buy the first “owned” property, hooray, she can save 7% ABSD. But after decouple, the HDB ownership becomes Singapore PR household (1 SPR owner + 1 SC occupier). Singapore PR household cannot rent out the whole HDB unit. Then, what is the point? If you intend to stay in the HDB and rent out the private property, then it is still OK. But, our intention is to rent out the HDB unit and stay at the private property.

Also, if you insist to do HDB decouple, make sure you take note this, since your HDB becomes Singapore PR household, all the SC benefits of owning the HDB will be removed such as the utilities bill rebate, town councils rebate, all SC benefits are removed because the HDB is now a SPR household.

To make the whole matter worse, if you decided NOT to do HDB decouple and pay 7% ABSD by using one Singaporean name to buy the private property , even if you decide to sell the HDB within 6 months of the TOP, you still cannot get back the 7% ABSD, why? It is because Singapore government allows reimbursement of ABSD only if “a couple” is buying the private property for self-stay and disposes the HDB accordingly. Not one individual buyer to purchase the private property. If you buy the private property in one name, government will not refund you the 7% ABSD. The only way to get back the ABSD now is to put both name as a buyer for the private property and pay 10% ABSD instead (as they pick the SPR the highest percentage) and then when you dispose the HDB within 6 months after TOP, you will get this 10% ABSD back. Well, our primary goal is still keeping the HDB.

Who come out with all these well thought rules?!

As for SPR-SPR HDB household, you need not to waste time as you will not get any way out.

As for SC-SC HDB household, congratulations! That is why my real estate agent suggestion is to ask me to convert to Singaporean. Just for 7% ABSD? No thank you.

Updated on June 9, 2014

VL (Valuation Limit) & Minimum Sum of S$77,500.

If your first HDB housing loan is still outstanding and the 100% Valuation Limit (VL) is not reached, you can wipe off your CPF OA amount to do the partial repayment. How does this Valuation Limit (VL) calculated ?

It is simple. Take the market value of your HDB property as at time of purchase, for example, market valuation was S$350,000 when you purchase your HDB minus off the total CPF used by all owners (you and your spouse) for downpayment and monthly instalments as at today, let say, S$137,000. So, S$350,000-S$137,000 = S$213,000. It means, you can use your CPF OA money up to S$213,000 (you and your spouse combined CPF sum in the OA account)  for this HDB property.

Thereafter, if you intend to purchase the second property and would like to use CPF OA account to serve the monthly instalment, you have to set aside a minimum sum of S$77,500 at combined OA and SA account first before you can touch the money at OA account. As for July 2014, the minimum sum is rasied to S$77,500. Take note on this. Thereafter you can use the CPF OA to serve your second property housing loan. 

CPF has a pretty good comprehensive CPF Housing Withdrawal Limits Calculator.

Enjoy exploring !

Updated on August 20, 2014
At the end, we did not do HDB decoupling after considering all the disadvantages.

(1) We maintan the SC HDB status.
(2) We pay 7% ABSD for the second private residential property (Real Estate Agent reimbursed us some of his commission, 5 digits sum).
(3) We will move into the privte residential property while TOP.
(4) We will rent out the HDB 4-room flat.

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