Category: Home Loans

Property tax may be one of the most daunting topics for property owners. Whether you’re getting a property to stay in or for investments, as long as you own a property in Singapore, you’re automatically required to pay property tax. 

Knowing how it is calculated and how it differs from other taxes like income tax, and stamp duty is something new homeowners will have to understand. 

Let us take a look and break down what IRAS property tax in Singapore is all about. 

IRAS Property Tax in Singapore: Overview and key terms you’ll need to know

You’ll need to be familiar with two key terms: Annual Value (AV) and Property Tax Rate.

Annual Value (AV) refers to the amount of money you’ll earn by renting out your property for a year. It is determined by the Inland Revenue Authority of Singapore (IRAS). It fluctuates depending on the market rental value of the surrounding properties in your area. So if the rental value in your neighbourhood goes up, AV rates follow. 

AV is derived after you deduct the furniture rental costs and maintenance costs from your rental value. Here’s an example:

• Monthly rental income: $2,000
• Monthly furniture rental: $800
• Monthly maintenance: $500
• Total Monthly: $2,000 – ($800 + $500) = $700
• Annual AV: $700 x 12 months = $8,400

While it may seem complicated to calculate your AV, rest assured all the assumptions will be done by IRAS.

On the other hand, Property Tax Rate refers to the tax rate you’ll need to pay. This sum of money is dependent on your AV and whether you live in the property yourself. In short, the higher the AV of your home, the higher the tax rate.

What is Property Tax?	Taxes you need to pay for owning a property in Singapore
What is Annual Value?	Amount of money you’ll earn by renting out your property for a year
What is the Property Tax Rate?	Tax rate calculated based on the progressive tax rate
How to calculate property tax?	Annual Value (AV) x Property Tax Rate = Property Tax Payable

Why does tax vary?

IRAS property tax varies as it is calculated depending on the property’s AV and the property tax rate.

1. Rented properties

Properties that the owners do not occupy have a higher progressive property tax rate. Those who don’t live in their property (whether vacant or rented out) are deemed more wealthy and can pay more taxes than the average household.

If you’re able to buy a few properties in Singapore, there’s a pretty good chance that you’re well-off. 

Buying your second property in Singapore? Learn more about how you can avoid ABSD legally here.

2. Market conditions

Market conditions also play a big part in determining the AV of a particular property. 

Areas with lots of new up-and-coming amenities tend to be more highly-priced than those far away from the city and difficult to access. 

With greater convenience, demand for property prices in the area will grow as it attracts more potential home buyers and tenants.

However, if market conditions are poor and demand for properties fall, it could also lead to a decline in AV. 

Since property tax rates are dependent on AV, it’s not surprising that the taxes you’ll have to pay may change along with market conditions.

Read: Over 20,000 MOP flats are entering the resale market in 2021; how will this affect the property market? 

Find out more about how rising interest rates affecting the stock market may impact mortgage rates and home buyers in Singapore

3. Owner-occupied properties

Tax rates differ as well, even among owner-occupied properties. 

Since property tax rates depend on the AV of your property, any factor affecting it’s AV will naturally also affect the amount of taxes you’ll need to pay. 

Properties deemed to be more attractive and fetch a higher demand will see higher tax rates than those considered less valuable. 

How are property tax rates in Singapore calculated? 

Generally, the tax rates of owner-occupied properties range from 0% to 16%, and the first $8,000 in AV is not taxable.

Here’s how it works:

Annual value ($)	Effective 1 Jan 2014	Effective 1 Jan 2015
First 8,000	0%	0%
Next 47,000	4%	4%
Next 5,000	5%	6%
Next 10,000	6%	6%
Next 15,000	7%	8%
Next 15,000	9%	10%
Next 15,000	11%	12%
Next 15,000	13%	14%
AV in excess of $130,000	15%	16%

Owner-occupied tax rates are different from non-owner occupied tax rates. For the latter, here’s how the tax rates are calculated:

Annual value ($)	Effective 1 Jan 2014	Effective 1 Jan 2015
First 30,000	10%	10%
Next 15,000	11%	12%
Next 15,000	13%	14%
Next 15,000	15%	16%
Next 15,000	17%	18%
AV in excess of $90,000	19%	20%

How do you check your property tax?

If calculating your own property tax is confusing, fret not! You can easily check your property tax rate on IRAS’ e-service here. 

Property tax is compulsory for all homeowners, so be sure to pay your taxes before they’re due each year, on 31st January.

What happens if you evade taxes?

No matter how you try to avoid it, the government will find a way to deduct the tax rate from you. 

The sum could be deducted from your bank account, payroll and even your credit card.  If you’re having problems paying your property taxes due to your financial situation, you can contact IRAS and request to pay your taxes in instalments. 

A great way to ensure that you’re always ready to pay for your taxes is to set aside a budget for it each month. That way, you won’t find yourself caught off guard when IRAS notifies you to pay your taxes at the start of the year.

If you’d like to be furnished with more information, contact us for a chat. At FinanceGuru, we seek to help homeowners find the best home loan in Singapore and help them achieve their financial goals. 

Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

By this time, most of us would’ve already known that mortgage rates in Singapore are at a historic low and that it’s an opportune time for homeowners to review their mortgage loans. Those on the hunt for a new property will also have heard of mortgage terms such as SIBOR, SOR and how SORA will soon replace SIBOR. We previously discussed what these mortgage rates are in this article.

With recent whispers that the wheels are turning and banks may soon begin converting consumers from existing SIBOR packages, now may be the best time to look at your current home loan package and plan your next step. 

First, let’s take a quick recap on why mortgage rates are at an all-time low and how SIBOR is being phased out. 

Recap on all-time low mortgage loan interest rates

Governments around the world have reduced their interest rates to deal with the economic fall-out caused by COVID-19. 

With lower interest rates, banks have fewer reasons to hold onto their reserves and are encouraged to lend more. With more capital available for borrowing, interest rates naturally fall.

Moreover, governments have also erected initiatives to help stimulate the economy, playing a direct part in interest rates falling across the world. For example, Singapore tapped into the reserves to introduce several financial support schemes for Singaporeans and businesses in 2020.  

Read: How to optimise your home loan refinance in a low-home interest rate environment. 

Recap on SIBOR being phased out

SIBOR, or Singapore Interbank Offered Rate, is based on projected interbank lending rates. However, the practice of banks borrowing from each other declined due to regulatory changes after the 2008 – 2009 financial crisis. 

Since then, transitional testing for an enhanced SIBOR was in the works as ABS sought to tie the benchmark as closely to market transactions as possible.

However, the enhanced SIBOR was more volatile and did not track as well as anticipated. It was concluded that the enhanced SIBOR could not directly replace SIBOR without extensive, complicated and resource-intensive amendments.

Singapore Overnight Rate Average (SORA) was then introduced to be used as the primary interest rate benchmark for SGD financial markets going forward.

What are the options for your home loan now?

Given SIBOR’s impending discontinuation, we would advise that you look into reviewing your existing mortgage loan.

If your current loan is on a fixed-rate mortgage package and the expiry of the lock-in period is near, you can consider to lock in to a cheaper package. Likewise, if your current loan is on a variable rates such as SIBOR, fixed deposit pegged or bank managed rates.

Now that home loan interest rates are at a record low, there’s almost no chance you’ll find a cheaper loan package to refinance into within the next few years. 

Read: What exactly are fixed deposit rate home loans in Singapore?

If you’re on an HDB loan, it might make financial sense to consider taking a bank loan over an HDB loan, given that bank loans are offering much lower interest rates now.

If you wait to switch your home loan when the time comes eventually,, the mortgage rate would have increased by then. 

What we can do for you

Choosing a mortgage rate that will fit your current budget and supporting your future financial plans can be confusing. 

But a house may be the most significant investment you’ll make in your lifetime, so you shouldn’t feel intimidated by the home loan process. While securing and understanding the terms of your home loan may sound like a daunting task, it’s an essential part of the process. 

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today.

Is this your first time getting a resale HDB property? Not sure what to expect? 

HDB house viewings are a crucial part of buying a resale flat. These sessions are generally short,  and homeowners would undoubtedly want to ensure that their home is in pristine condition. After all, no one wants to buy a home that’s in complete disarray, right?

So how should you discern whether one resale unit is better than another? What are some things you should look out for? Here, we’ll give you a rundown of the HDB resale checklist and the essential aspects to keep in mind when you’re house-viewing a resale HDB flat!

Read: 10-step guide to purchasing an HDB resale flat

HDB resale checklist: What to take note of before viewing an HDB resale flat

1. How long have the homeowners been staying there?

This might seem irrelevant to the condition of the home. However, it’s important to check with the owner how long they’ve been living there. Their length of stay can give you a few hints about whether this unit is worth buying. 

Based on the Minimum Occupation Period (MOP), homeowners can only rent or sell their property after staying for 5 years. Properties that are fresh off in the MOP market are usually still in pristine condition, as fixtures and floorings are considered rather new. The home’s interior design will also be more modern and will require less upgrades compared to an older resale HDB flat.

On the other hand, older resale HDB flats with homeowners staying for more than 20 years may be more prone to wear and tear. You’ll most likely need to do maintenance and upgrade works before settling in. .

Purchasing a second property in Singapore? Find out how you can avoid ABSD legally here.

2. How long has the property been up for sale?

It’s uncommon for a unit to be unsold for months and months. Properties are usually sold within 2-3 months in the Singapore property market.

However, if a property is taking longer than usual to be sold off, it could mean that the price is too high compared to similar units in the area. 

You can ask around and check the selling prices of other nearby units to get a good gauge.

Additionally, if a unit has been listed and unsold for a long time, it might hint at some inherent flaws that previous home viewers spotted. 

Be cautious when you’re checking out the property and paying attention to some key areas we’ll be discussing below!

Read: Guide to HDB valuation: How much is the HDB flat worth?

HDB resale checklist: Key areas to keep a lookout for when viewing an HDB resale property

1. Keep a look out for the pipes

Properties with faulty pipes can be a big headache. Pipes that aren’t fixed will cause mould, leakage, and wear down ceilings and tiles. 

When you’re house viewing, don’t be shy to look under the sink and be as thorough as possible. 

Besides looking at the pipes, you should also inspect the ceiling and see whether there’s any discolouration or a line of fresh paint. 

This could be a sign of a potential leak, and you’ll want to keep that in mind.

2. Where are the windows facing?

If it’s your first time getting a resale HDB home, you might have heard from your parents or family countless times to get a unit that faces the East and never get one that faces the West. 

You might be wondering, “what’s the big deal? Does it make that much of a difference?”

It does.

West-facing windows tend to heat up the room more quickly than East-facing windows as more heat is being trapped inside. 

The scorching heat from the sun can very well turn your home into a warm sauna and wear down your furniture much quicker. 

3. Check the floorings

When it comes to renovations, floorings are the most expensive. 

That’s why it’s so important to get a home with well-maintained floors and tiles before you commit and move in. 

Unevenness, chipped tiles, and missing tiles are tell-tale signs of a poorly maintained home. 

To ensure that your move into your new home is as smooth as possible, keep a lookout on the condition of the floor when you’re going for your house-viewing.

4. Built-in appliances and carpentry

Built-in features in resale flats can’t be removed easily, so you’ll need to have a keen eye and ensure that they’re in good condition. 

Built-in ovens, in particular, are costly to fix. If you happen to move into a home with a faulty built-in oven, you’ll need to fork up a sum to get it up and running. 

Other features you should keep an eye out for include cabinets, counters and sinks. 

The great thing about getting a resale home is that these features are already in place — so it’s wise to take the extra step and ensure they’re in working order when you’re house viewing!

5. What are the nearby amenities?

Are there schools nearby? How about eateries, hawkers and shopping malls? 

These are some crucial aspects to consider when getting a resale HDB flat. Flats accessible to the MRT are also a huge plus, especially if you’re living with family members who don’t drive — like your elderly parents or children.

That being said, an area surrounded by a wide range of amenities could also indicate congestion and high traffic levels. Depending on your preferences, you’ll want to keep that in mind. 

Most homeowners prefer to strike a balance and get a house with some nearby eateries, schools, and perhaps located at the fringes of the town hub.

Location, surroundings, and how well the home is being maintained — these may seem like obvious points to consider when you’re getting a resale flat. 

However, when you’re house-viewing, it’s easy to get distracted and forget about the important points we’ve raised. 

Before you go for your house viewing, ensure that you note down everything you want to keep an eye on and refer to your list from time to time. That’ll ensure that you won’t miss out on anything important and get a home that best suits you and your family!

Property Market: Over 20,000+ flats MOP in 2021; how will this affect the resale market?

Are you a soon-to-be HDB homeowner? Find out about the Home Protection Scheme here.

Read more about property tax in Singapore in our ultimate explainer guide here.

About FinanceGuru

At FinanceGuru, we seek to help homeowners find the best bank loan in Singapore for their mortgage and help them achieve their financial goals. 

Learn more about how you can optimise your home loan in Singapore and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

Are you thinking of getting a resale flat? If you are, you’ll need to be familiar with the HDB valuation. 

Getting a resale flat isn’t just as simple as negotiating the right price with the seller. There are still other procedures you’ll need to look into, and the HDB Valuation is crucial.

Here, we’ll give you a breakdown of what the HDB Valuation is about and how you should go about applying for it.

An Overview: What is the HDB Valuation?

What is it?	An estimation of how much the resale flat is worth.
What does it affect?	The amount of CPF savings you can use, loan amount you may take, and Cash-Over-Valuation (COV) to pay.
How to get an HDB valuation report?	After the Seller grants an Option to Purchase to the Buyer, a Request-for-Value may be submitted by the Buyer the next working day by logging into HDB e-Service.

To put it simply, HDB Valuation is the estimate of how much the resale flat is worth. Before you can apply for the HDB Valuation, you’ll first need to come to an agreement with the seller. The seller will then have to grant you an Option to Purchase. 

Requesting for an HDB Valuation price on the resale flat

To submit an HDB Valuation request, you must submit the Request-for-Value with an attached scanned copy of page 1 of the Option to Purchase.

Here’s a step-by-step guide to walk you through the application process:

Step 1: Submit your Request-for-Value on the next working day stated on your Option Date in the Option to Purchase granted by your seller.

Step 2: Log in to HDB e-Service with your NRIC no. and SingPass to proceed with the submission.

Step 3: Follow the step-by-step guide on HDB e-Service.

Step 4: You can check the status of your Request-for-Value via HDB Resale Portal. The HDB letter informing the buyer of the value will remain available for viewing and downloading up until 1 month after the resale completion.

What happens next?

HDB will then decide whether a valuation of the flat is required to determine the value of the flat. If yes, they will assign any private valuation firms on their Panel of Valuers to conduct the flat valuation.

Upon submitting the Request-for-Value, you agree to accept HDB’s decision and the valuation conducted by HDB’s assigned valuer. 

How much is the processing fees for each Request-for-Value?

The processing fee for each Request for Value is $120 (GST inclusive), paid for by the buyer. After the Request-for-Value is submitted, the processing fee paid is non-refundable.

What is the validity period of the HDB Valuation?

Do note that the HDB Valuation is separate from HDB’s approval for a resale flat to be sold. Getting a flat valued by HDB does not guarantee that the transaction would be successful. Once you’ve received the valuation figure, you should submit your resale application as soon as possible.

The valuation figure will remain valid for 3 months from the day it’s published on the HDB Resale Portal. If you, the buyer, do not submit a resale application within the 3-month validity period, you’ll have to submit a new Request-for-Value. 

In this event, the housing loan amount granted by HDB or any bank/financial institution and the use of CPF savings for the purchase of the flat will be based on the new value determined via the new request.

Why do you need to request an HDB valuation?

The HDB Valuation will influence several things. 

Firstly, it’ll determine how much buyers can use from their CPF funds to pay for the resale flat. The determined value of the flat will also be used as a reference point for housing loan applications from HDB and the bank. This way, loans are not given out to pay for overpriced or over-valued flats.

Another aspect the HDB Valuation would determine is the Cash-Over-Valuation (COV) you’ll need to pay. COV is the difference between the HDB flat’s assessed value and the agreed price that the buyer is willing to pay. 

How is the HDB housing loan amount calculated based on HDB valuation?

The loan amount will be based on the HDB Valuation figures. 

Different institutions have different regulations. For HDB housing loans, you can loan up to 90% of the purchase price/property value and have to pay 10% in downpayment. On the other hand, bank housing loans are only allowed to lend up to 75% of the home’s value.

Suppose your resale HDB flat is valued at $700,000, your HDB loan would be 90% of the loan-to-value figure:

90% x $700,000 = $630,000

If you’re getting a bank loan or 75% for the same flat, it would also be based on the same loan-to-value amount.

75% x $700,000 = $525,000

Deciding between a bank loan vs an HDB loan? Find out more about the differences here.

What if the agreed price is higher than HDB valuation?

When the agreed price between the seller and buyer is higher than the HDB valuation figures, buyers will need to pay the difference to the seller in cash. 

Take, for instance, the seller and buyer’s agreed price is $750,000. After HDB valuation, the HDB flat is valued at $700,000. This would mean that the COV is $50,000, and the buyer would have to settle this amount with the seller in cash.

CPF usage and home loans are only based on HDB Valuation figures or agreed price (whichever is lower), and they don’t apply to the COV figures. 

Hence, although the buyer agreed to buy the resale flat at $750,000, his loans would be based on the $700,000 figure instead. 

You won’t be able to use CPF or home loans to cover this amount, and you’ll need to pay the balance to the seller.

What is the seller’s role in the HDB valuation process?

After granting the Option to Purchase, sellers will need to agree to undergo HDB Valuation procedures. Just like buyers, sellers have to accept any valuer assigned to them. They must also allow the assigned valuer to access their flat any time in the day for this process.

How HDB Valuation has affected the property market

In the past, processes were different as the selling price of the HDB was decided only after the HDB Valuation. 

The valuation process was then brought online and accessible to all, and buyers and sellers would focus their negotiations on the COV. As a result, this caused prices to shoot up drastically and made HDB flats more expensive than they should be. Instead of negotiating prices based on the perceived value of the flat, buyers and sellers were negotiating based on the COV.

Following this, HDB ceased publishing COV figures online. The changes in procedures ensured that buyers and sellers were genuine with their agreed price, and prevented unnecessarily price hikes for resale flats and made HDB housing more affordable. 

Want to find out more about buying resale flats? Browse our 10-step guide to purchase an HDB resale flat here.

Read about property stamp duty in our ultimate explainer guide here.

Are you a soon-to-be HDB homeowner? Find out about the Home Protection Scheme here.

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

These days, speculative investments — especially in crypto trading and innovative technologies — have been rising. In a recent article reported by The Straits Times, Tharman made a statement to warn home buyers about rising interest rates and the risks that come with speculative investments.

Why are speculative investments affecting properties? And what has that got anything to do with home buyers? 

In this article, we’ll discuss how the current economic situation could impact properties and what home buyers should be prepared for.

Rising interest rates affect all assets

Interest rate returns are factors most of us tend to ignore because it’s simply way too low. 

In fact, figures of interest rate returns aren’t even enough to beat inflation rates. That’s why many are finding alternative avenues to park their funds to earn higher returns, or at least to beat inflation.

However, the trend in low-interest rates seems to have taken a turn recently. Due to policy changes in the US, interest rates have been rising. 

As Singapore’s economy is closely tied with the US, any movements in US interest rates will bound to affect our economy. 

One point to keep in mind is that although our economy will be impacted as a whole, different assets will be affected to a different extent.

What does this mean for the property market?

So what does the US’ rising interest rate have anything to do with Singapore’s property market? More than you might expect!

As interest rates rise and our economy responds to these changes, it could lead to rising debt servicing costs. This means that the cost of repaying your debts is expected to go up. 

According to The Straits Times, most buyers should have the financial capacity to service their mortgage loans. 

However, some households may face cash flow strains as their debt servicing becomes more expensive.

Unexpected rising home prices in Singapore

Despite poor economic performance and the COVID-19 pandemic, property prices have been steadily rising since last year. 

In fact, private property values have risen 2.9% in the first quarter of 2021. In response to increasing prices, the Singapore government is looking to further tweak and implement other property cooling measures to prevent further price hikes.

In view of rising property prices in Singapore, coupled with rising interest rates, home buyers will need to practice caution when making their purchase. 

Since properties require long term financial commitment, buyers need to ensure that they have the ability to service their loans. 

Instead of only considering their current financial circumstances, buyers need to remember that interest rates are set to rise, and servicing their loans will be increasingly expensive.

Added caution on speculative investments

As more and more people are interested in higher-risk investments, Tharman also cautioned against investments related to cryptocurrencies. 

At the moment, bonds and shares remain a large portion of our investments. 

Crypto-trading is still not a major asset that most investors are investing in, but it accounts for 2% of the average daily trading volume in 2020.

Globally, the market value of cryptocurrencies has surpassed the US$2 trillion mark as investors are using crypto investments to boost returns. 

This trend will likely continue to rise, with many prominent billionaires like Elon Musk and Mark Cuban endorsing cryptocurrencies.

There are still many uncertainties in how the crypto space will evolve, and Tharman mentioned that “MAS has been closely monitoring developments… to ensure that regulation remains effective”. 

Any form of movement and changes in the economy will cause a ripple effect on other markets in Singapore. 

Crypto and the property market may not seem to share any common ground on the surface, but changes in one could very well affect the other.

Just this year, 100 police reports were lodged regarding Torque, an online crypto trading platform run by Singaporean businessman Bernard Ong. About 14,000 accounts were suspended without warning on the platform, many of which were Singaporeans who lost significant portions of their life savings.

While the government puts in place necessary measures to prevent fraud and tighten security in the crypto trading space, investors should also practice caution on their part.

Read: Over 20,000+ flats MOP in 2021; how will this affect the resale market?

Find out more about property news, resources and home loan guides in our blog.

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

With condo-like facilities and great architectural designs, Executive Condos (EC) is one of Singapore’s most popular homes. Some of us would call them “condos but built by HDB” — undoubtedly an over-simplified explanation of ECs. ECs are much more than that, and if you’re thinking of buying an upcoming EC in Singapore, you’ll want to really weigh out the pros and cons. 

Here, we’ll discuss what ECs are and why they’re an excellent option for homeowners, especially in the long term.

What is an EC?

Unlike your usual HDB flats, ECs are developed and sold by private developers, but are subsidised by the government. This is why they have the look and features so similar to condos. 

Since ECs have more facilities and more privacy than the regular HDB, they would be priced higher. These estates are targeted at middle-income Singaporeans whose household incomes exceed the ceiling cap for HDB flats. 

EC properties are perfect for those who have an above-average income but still find condos and private housing too costly to maintain.

Unsure if you can afford an EC? Let a mortgage broker help you break down your finances and help you find the best home loan in Singapore. 

Let’s take a look at the key advantages of ECs in Singapore.

1. Executive condo eligibility for CPF housing grants

One aspect which distinctively sets ECs aside from condos is that they’re eligible for CPF housing grants. 

Private properties such as condos and landed homes are not eligible for these grants; thus, they’re relatively more costly. 

Since you can use your CPF and apply for housing grants, you can offset the cost of ECs significantly. Some housing grants you can look into include the family grant and half housing grant.

Here’s a table to provide more information on the housing grants you’re eligible for when getting an upcoming EC.

Family Grant

Average gross monthly household income of all persons in the application, i.e. applicants and occupiers	Singapore Citizen (SC/SC) Household	SC/ Singapore Permanent Resident (SC/SPR) Household
$10,000 or lower	$30,000	$20,000
$10,001 to $11,000	$20,000	$10,000
$11,001 to $12,000	$10,000	–
$12,001 to $14,000	–	–

Half Housing Grant

The half housing grant is only eligible if one of you is a first-timer (FT) SC and your co-applicant is a second-timer (ST) who has previously taken one housing subsidy, i.e. FT/ ST couple.

Average gross monthly household income of all persons in the application, i.e. applicants and occupiers	Housing grant
$10,000 or lower	$15,000
$10,001 to $11,000	$10,000
$11,001 to $12,000	$5,000
$12,001 to $14,000	–

Do note that there are some requirements you’ll need to meet to apply for these grants, though. 

Firstly, you’ll need to meet income requirements. Those interested in applying for an EC must not have a household income exceeding $16,000. 

Next, you must be a Singapore Citizen. If you’re a Singapore PR, you can only buy upcoming EC units if your spouse is a Singapore Citizen. Singles applying for an EC will need to use the Joint Singles Scheme.

Additionally, you must not own other properties overseas and locally. For more information, check out the HDB website.

2. Privatised from 11th year onwards

This is an aspect that sets ECs apart from condos and HDBs. 

As an EC homeowner, you’ll have to fulfill the MOP of 5 years before the property can be sold in the open market to Singaporeans and PRs.

Once your EC has reached its 11th year, it is privatised and considered a private condo. And since you don’t need to meet income and citizenship criteria to purchase private properties, you’ll have a larger pool of buyers if you intend to sell off your EC. 

You’ll attract higher-earning local and foreign homebuyers 11 years down the road, which would allow you to sell your home at a much higher price. Since you’ve bought your EC at a subsidised rate, you’ll get to earn more profits when your EC becomes a private home.

Find out how having over 20,000+ flats MOP in 2021 will affect the resale market here. 

3. Condo-like facilities

ECs are developed by private developers and feature condo-like facilities such as swimming pools and gyms. 

Besides being eligible for CPF housing grants, prices of ECs are on the whole 20% lower than condos. This means that by the time your EC is privatised, you essentially bought a condo that’s way below the market rate for private homes!

There’s quite a list of ECs being developed in 2021. An upcoming EC to look out for is the Fernvale Lane EC located just a 10-minute walk from Seletar Mall. 

ECs are relatively accessible compared to private properties, which is a huge plus for families who have kids or dependents who don’t drive around.

Learn how you can upgrade from an HDB flat to an HDB Executive Condo (EC) here.

4. Upcoming EC: More spacious than condos

ECs generally tend to be more spacious than condos. EC units start from 2 bedroom units while condos start at 1 bedroom units.

Despite their apparent similarities, ECs target a pretty different market than condos. ECs target middle income local families starting their own families, while condos may target couples or families with no intention of having kids any time soon.

Seeing that most of us are working from home, it’d be a great idea to get a larger unit that can house your home office comfortably!

With amazing in-house facilities and great design, it’s not difficult to see why ECs are so popular among soon-to-be homeowners. 

Not only do you get to enjoy condo-like facilities, but you also get to purchase your EC with CPF housing grants which are easy for Singaporeans to qualify for. If you’re a Singapore PR and want to buy an upcoming EC, do note that your spouse must be a Singapore Citizen. Otherwise, you’ll have to wait for the EC to be up on the resale market. 

With so many upcoming ECs underway, be sure to keep a look out if you’re looking for a home for yourself and your family!

Learn how you can purchase a resale private property in Singapore with our 10-step guide.

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

If you’re a new homeowner, you might be overwhelmed by all the nitty-gritty details you’ll need to learn about getting your HDB flat. Besides choosing the right home, researching its location and close by amenities, you’ll also need to be aware of insurance policies to keep your home covered.

There are many private insurance plans in the market. But before you read into those, you’ll first need to start from the basics: the HDB Home Protection Scheme.

We cover more home loan terms you need to know in our guide here. 

What is the Home Protection Scheme (HPS)?

In a nutshell, the HPS is an insurance protection scheme that ensures that you or your family maintain ownership of your house in the event of unfortunate circumstances. 

HPS is a mortgage reducing scheme that prevents homeowners from losing their HDB flat due to death, terminal illness, and permanent disability. In case you pass away while still owing a sum on your home loan, the balance will be paid in full by HPS, and your partner or family would not have to worry about losing the flat or take over the mortgage repayments. 

The HPS covers homeowners up to the age of 65 years, or until the loan is paid — whichever is earlier.

Who is eligible for the Home Protection Scheme (HPS)?

As HPS is a public home insurance policy, only HDB homeowners get to apply for this plan. 

Those who own private housing won’t be able to opt for this public home insurance scheme, including Executive Condo (EC) and privatised HUDC homeowners. If you do own a private property, you can instead buy private mortgage insurance.

How can you apply for the Home Protection Scheme (HPS)?

You’ll be able to apply for the Home Protection Scheme as long as you’re an HDB homeowner. 

Your mode of payment wouldn’t affect your eligibility. In fact, it’s pretty easy to apply for the Home Protection Scheme as the application is available through various channels — you may apply for the scheme at the HDB Hub, any HDB branch, or online. 

Is the Home Protection Scheme (HPS) compulsory? 

HPS is compulsory for any HDB owner using CPF to pay for their monthly home loan instalment

As an HDB homeowner, your share of the HPS cover should at least match the proportion of the monthly housing instalment payable with your CPF and/or cash. This is because HPS pays off the outstanding housing loan, up to the sum assured, based on the percentage share of cover of the insured in the event of death, terminal illness or total permanent disability.  

For instance, if you’re paying 80% of the monthly housing instalment and your co-owner pays the remaining 20%, you should be insured for 80% of the loan. The total share of cover per household should add up to at least 100%. 

You may also choose to insure for a higher or lower share based on your needs and circumstances. For example, both you and your co-owner can opt to be insured for 100% of the outstanding loan amount. This means that in the event something untoward happens to one of you, the CPF Board would settle 100% of the outstanding housing loan.

We suggest covering 100% for each homeowner to ensure that you are protected. Contact us to find out more about how you can optimise your home loan and coverage. 

Exemptions under special circumstances

However, there are a few circumstances where you’re not required to apply for HPS. 

1. You’re not using your CPF savings to pay for your HDB flat

If you didn’t pay for your HDB flat with your CPF funds, you can opt-out of HPS. Not using your CPF shows that you’re financially healthy and capable of repaying your home loan, giving you the option and freedom to opt-in or opt-out of HPS.

Even so, it would help if you still considered applying for HPS, or other mortgage or HDB housing loan insurance to cover your needs in case of serious mishaps. 

2. You’re already sufficiently covered through your own insurance plans

You can be exempted from HPS if you have an insurance policy to replace it. This could be any one of the following policies:

• Whole life insurance
• Term life insurance
• Endowment plan
• Life riders (attached to a basic policy)
• Mortgage Reducing Term Assurance (MRTA) / Decreasing Term Rider

Your policy or rider must cover you from death, terminal illness and total and permanent disability for any unpaid sums on your home loan up to the full term of the loan or until you hit the age of 65, whichever is earlier.

Before you conclude that you’re sufficiently covered, make sure you check that your insurance policies are applicable first. Not all insurance plans will allow you to be exempted from HPS, and you don’t want to jump to conclusions too quickly. 

Do note that you’ll have to apply online via the CPF website to get exempted from HPS. 

Looking to review and refinance your home loan? Find why you should do a financial health check for your home loan here. 

3. You’re not automatically enrolled into the HPS

While the HPS is greatly encouraged, that doesn’t mean you’re automatically enrolled if you meet all the requirements.

As with most insurance plans, you’ll first need to make a health declaration before your application can be approved. This means that there’s a chance your application could be denied. In those circumstances, you’ll need to look for private mortgage insurance for coverage.

Here are some reasons why your HPS could be denied, or why you might not be able to claim under HPS: 

Specific exemptions under which HPS is denied	Specific exemptions under which HPS claims will be rejected
You are not in good health before the commencement of the HPS policy	You attempted/committed self-inflicted injury or suicide
You provided false or misleading information	You committed a criminal offence punishable by death
	The claim arose out of your own intentional criminal act

How much is the Home Protection Scheme (HPS)? How is it calculated?

There are a few factors that affect the amount you need to pay for your HPS. 

• Outstanding home loan amount
• Remaining loan repayment period
• Age and gender
• Type of loan (HDB loan or bank loan)

In general, those with a higher outstanding loan amount or a shorter repayment period will need to pay higher fees for their HPS.

Another factor that could influence the amount you pay for the scheme is age and gender. The older you are, the higher your premium. Females and those who are younger tend to get lower premiums.

Since there are many factors affecting your scheme’s payment, it’s advisable to check online with the HDB Home Protection Scheme calculator to get a rough estimate of your HPS premiums.

It’s also important to note that those who qualify for HPS only need to pay 90% of the scheme’s period. This means that if your scheme’s coverage period is 30 years, you’ll only be required to pay premiums for 27 years.

Here’s how the figures would look like:

Suppose you take out a $500,000 loan from HDB for your flat, and the tenure period is 30 years. 

You’ll only need to pay for the first 27 years, while you get to be covered for the maximum period of 30 years. 

Let’s say the premium costs about $600 a year — that means you’ll only need to set aside $50 a month to get full coverage under the scheme.

Home Insurance: Getting the right coverage

Getting the right coverage you need for your home is important, especially in unexpected situations. 

The Home Protection Scheme is designed to be affordable for Singaporeans and PRs, ensuring that you can still afford to live in your home even if your ability to work has been affected. 

Unless you’re confident that your mortgage insurance plans or insurance policies are sufficient, you should consider signing up for the Home Protection Scheme even if you meet the requirements to opt-out of it.

Read: How to optimise your home loan refinance in a low-home interest rate environment. 

Find out how the surplus of HDB MOP flats will affect the resale market here. 

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

Thinking of selling your HDB flat? Perhaps you’re thinking of putting up your flat for sale in the resale market, but you don’t know if now is a good time. That’s a reasonable concern, seeing that there are more than 20,000+ flats that will reach their Minimum Occupation Period (MOP) this year. 

In this article, we’ll be discussing how HDB flats that fulfil mop in 2021 will affect the resale market and whether it’s truly a cause for concern.

What is MOP for resale HDB?

Under HDB guidelines, homes will need to be occupied by their owners for a minimum period of time before they can be sold and put back on the market. It’s a policy meant to prevent price hikes of properties, as owners will not be able to buy and sell properties within a short period of time.

Different HDB homes have different MOP periods, but it’s safe to say that most HDB homes have a MOP of 5 years. 

Here’s a breakdown of the different MOPs for different HDB flats.

Flat purchased from HDB	5 years
Design, build and Sell Scheme (DBSS) flat bought from developer	5 years
Flat bought under SERS with portable SERS rehousing benefits	5 years
Flats bought under SERS	7 years from the date of selection of the replacement flat or 5 years from the date of occupation, whichever is earlier
Resale flat bought from the open market with CPF Housing Grant	5 years
Resale flat bought from the open market 1 room flat	No MOP
Flats bought under fresh start housing scheme	20 years

Why resell your flat after the 5 year MOP?

Many homeowners rush to sell their flats right after they’ve met the 5-year MOP requirement set out by HDB as there’s a general consensus that selling off your HDB flat right after it reaches its MOP can garner the highest, if not, attractive resale prices.

At just 5 years old, the flats are still in pretty good condition and are relatively new. All home features like windows, plumbing, or kitchen appliances are in place, and there’s no need for any major renovations.

Moreover, these flats have the longest possible remaining lease. With still many years left on the lease, resale flats that have just MOP-ed are attractive for homebuyers looking to stay for the long-term or even a legacy value for future generations. 

New owners can also enjoy a relatively new home rather than an older home in a mature estate.

With so many plus points, 5-year-old flats tend to command a healthy demand on the resale market. That’s why it’s strategic to sell your HDB flat after it meets its MOP requirement. 

Those looking to upgrade or make a considerable profit from selling their homes should consider selling their flats at this time.

What will the rise in MOP flats mean to the resale market?

As more flats reach their MOP, it could indicate that more flats would be put on sale in the resale market. With higher supply, by the basic laws of economics, prices of flats in the resale market could go down. 

For homeowners who have been anticipating selling off their flats once they’ve met the MOP requirement, this might not be the best of news. With a higher surplus of flats, there’s a chance that their profits would be lower than expected.

On the other hand, this might be good news to homebuyers looking for a resale flat. Those who don’t want to wait for a BTO might be able to get a resale HDB flat for a lower than expected price.

What does past data show?

The surplus in resale flats in the market might cause concern for sellers, but last year’s data suggests otherwise. 

In 2020, despite higher amounts of resale flats in the market, prices did not dip. In contrast, the high number of MOP HDB flats in 2020 helped stimulate demand, and HDB resale prices rose by 1.5% in the third quarter of the year – the highest growth rate in resale flat prices since 2012.

Although the economy was hit and recession was accelerated due to COVID-19 in 2020, property prices seemed to have maintained. 

Demand for properties matched the supply of both private properties and resale flats in the market. In theory, a surplus in resale flats would drive prices down, but it seems like this may not be the case as the market trends in 2020 could continue into 2021.

Why wasn’t the resale market hit severely?

There are various factors that maintain the prices of resale HDB flats. 

While more HDB flat owners have put up their flats for sale, many of them could have also contributed to other resale HDB homes’ demand as they look for a new place to stay. 

Together with the transition to working from home, there’s a greater demand for more spacious units. This might have encouraged singles to move out and purchase a flat on the resale market, thereby raising the demand for HDB resale flats. 

Another factor could also be due to the slow down in BTO construction due to COVID-19. 

Delays in building BTO flats could have driven many homebuyers to turn to the resale market instead so that they can move into their own home earlier. 

How will this translate for the property market in 2021? 

While it’s difficult to predict whether demand for resale HDB flats can match supply in 2021, sellers can remain hopeful that the prices of their resale HDB flats will maintain or even continue to grow.

The private property market is also likely to benefit from the high demand for housing in the coming year as aspiring homeowners look to upgrade their HDB flats to private homes. With over 20,000 flats expected to return to the resale market, demand for affordable private properties may increase. 

Are you thinking of upgrading to an Executive Condo (EC) from your HDB flat? Read about it in our guide here.

Want to learn more about HDB resale flats? Browse our guide to purchasing an HDB resale flat here.

With Singapore banks interest rates at their lowest in recent years, learn how you can optimise your home loan refinance in the current low-home interest rate environment.  

At FinanceGuru, we seek to help homeowners find the best Singapore home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

ABSD is probably one of the most unpopular types of stamp duty in Singapore. Short for Additional Buyer’s Stamp Duty, it’s an extra cost for those who own more than one property in Singapore. 

What is the Additional Buyer’s Stamp Duty (ABSD)? 

The ABSD was first introduced in 2011 as a form of property cooling measure to ensure housing remains affordable. 

For Singaporeans, they’ll have to pay the ABSD on top of the Buyer’s Stamp Duty (BSD) when they buy a second residential property in Singapore. 

We explain BSD and other common property stamp duty terms here. 

For PRs and foreigners, the ABSD is almost unavoidable. Regardless of how many properties they have, they’ll need to pay the ABSD on top of the BSD. 

Here are the current ABSD rates as of 6 July 2018. 

Buyer profile	ABSD rates from 6 July 2018 onwards
	First residential property	Second residential property	Third and subsequent property
Singapore citizens	–	12%	15%
Singapore PR	5%	15%	15%
Foreigners	20%	20%
Entities	25% (plus an additional 5% for housing developers)	25% (plus an additional 5% for housing developers)	25% (plus an additional 5% for housing developers)

If you’re a Singaporean buying a second residential property that costs $750,000, this means you’ll need to fork out $90,000 more for the ABSD. 

And if you’re a foreigner, the ABSD will be even higher at $150,000. 

You may also use IRAS’ stamp duty calculator to find out how much is your ABSD here. 

Given the substantial amount, it can be a stumbling block for those who wish to own more than one property for investment purposes. 

On the flip side, the good news is that there are a few legal ways to avoid ABSD. 

How to avoid ABSD stamp duty in Singapore legally

While it’s a must to pay the stamp duty when you buy a property in Singapore, you can get exemptions from paying the ABSD. 

1. Buy the first home under one spouse’s name

In Singapore, it’s more common to buy a home as a married couple, especially since you can only buy an HDB flat as a single after you turn 35. 

But if you and your spouse can afford a private property, and one of you can pay the mortgage alone, consider getting your first home under either one of your names. 

Let’s say you own the first home and it’s under your name solely. This frees up your spouse to get another property as a first-time buyer without paying for the ABSD. 

If you can afford to get a private property, this can be the most hassle-free way to work around the ABSD when buying a second property. 

2. Buy the first home together with your Singaporean spouse

If you’re a PR or foreigner and married to a Singaporean, you can avoid paying the ABSD. 

As long as you and your spouse jointly buy your first home, you can apply for the ABSD remission. 

Do note that both of you must not have owned any other residential properties to qualify for the remission. 

3. Enter a contract to sell your first property before buying a second one

Planning to buy a second property but don’t want to pay the ABSD? One of the most common ways to do so is to enter an agreement to sell your first property before signing the Option to Purchase (OTP) for your second property.

The idea here is that you sell your existing property and buy another one using the sales proceeds while your spouse buys a smaller property. 

For instance, you and your spouse can sell your 4-room HDB flat for $500,000 and use the $300,000 as a down payment for a $1 million condo under your name. Your spouse can put down $200,000 for a smaller condo under their name. As both of you have no property at the time of purchase (as your previous property is sold), neither of you will incur ABSD. 

But do note that for this to work, both of you must qualify for the respective mortgages. 

Speak to a mortgage broker to help you understand more about your mortgage requirements here.

4. Sell your first property within 6 months after buying a second one

While the previous method is feasible, selling a property isn’t always easy. If you haven’t managed to sell off your first property, you can still avoid the ABSD when you buy your second property. 

How this works is that you pay the ABSD for your second property but get a refund for it if you manage to sell your first property (co-owned or not) within 6 months of buying your second property. 

Of course, this method comes with the condition that you and your spouse are buying the second property together, and at least one of you is a Singaporean. 

Suppose the second property is still under construction. In that case, you’ll be eligible for the refund if you sell the first one within 6 months of the former’s Temporary Occupation Period (TOP) or Certificate of Statutory Completion (CSC) issue date, whichever is earlier.

Due to the pandemic, you can get a 6-month extension to sell off your first home. This means that you’ll have 1 year to sell it off. On the other hand, you’ll only be eligible for the extension if you’ve bought your second property on or before 1 June 2020. 

5. Downgrade to an HDB resale flat

If you’ve been planning to downgrade from your private property, you can do so without paying for the ABSD. 

Since you have to sell off your private property within 6 months of buying the HDB resale flat, you can get the ABSD remission upfront. 

6. Buy an EC

Here’s for the upgraders. Instead of looking into upgrading to a condo, consider the cheaper alternative: an EC. 

By upgrading to an EC, you don’t have to pay the ABSD. As per HDB’s regulation, you’ll have to sell off your current home within 6 months. 

Find out how you can upgrade from an HDB flat to an HDB Executive Condo (EC) here.

7. Decoupling

Decoupling is another common method to avoid the ABSD. 

It works on the premise that if you and your spouse have joint ownership of a property, half of the ownership can be transferred to either one of you. This frees up the other spouse to buy another property. 

Let’s say you transfer your ownership to your spouse. When you buy a new property, it’ll be considered your first, so you won’t have to pay the ABSD. 

On the other hand, decoupling can be pretty expensive in Singapore as it involves paying different types of stamp duty. For getting your share of the house, your spouse has to pay the BSD. 

And if the property was bought less than 3 years ago, you’ll need to pay the Seller’s Stamp Duty (SSD) for the share to be “sold” to your spouse. 

With a property that costs $1,200,000, your share will be 50% × $1,200,000 = $600,000. This means that the BSD your spouse has to pay will be:  

(1% × $180,000) + (2% × $180,000) + (3% × $240,000) = $12,600

And if the property was bought less than 3 years ago, say, 2 years 10 months ago, the SSD rate payable will be 4%. This means that the SSD you’ll need to pay will be: 4% × $600,000 = $24,000

Coupled with the decoupling cost, the total cost may exceed the cost of the ABSD. So be sure to do the math beforehand. 

Read more about decoupling here. 

8. Buy a dual-key condo

A dual-key condo is legally one property, but it’s 2 separate homes. It comprises one main unit and a sub-unit that are next to each other. 

With the sub-unit, you can rent it out for extra income. However, do note that dual-key condos are pricier than condos of the same size. 

9. Buy a property under a trust for your children

This is an option if you’re cash-rich. Since banks don’t offer home loans for properties bought under a trust, you’ll have to pay it fully in cash. 

Another caveat of this method is that your child has to be under 21 years old. Plus, it could potentially be an obstacle for your child in future. They won’t be able to apply for a new flat from HDB if they still own this property. And they’ll need to pay for the ABSD if they decide to get another private residential property themselves.  

10. Buy a commercial property

Unlike the BSD, the ABSD is only applicable for residential properties. So buying a commercial property, such as an office or retail space, can be a good option if you’re planning to invest.  

Bonus: for foreigners under specific FTAs

If you’re a citizen or permanent resident of Iceland, Liechtenstein, Norway, or Switzerland, or a citizen of the United States, you won’t have to pay 2 types of stamp duty for your first property in Singapore. 

Under the Free Trade Agreements (FTAs) with these countries, you enjoy the same treatment as Singaporeans. 

This means that unlike PRs and foreigners from other countries, you’ll only have to pay the ABSD when buying your second and subsequent property. 

Read more on our 10-step guide to purchasing a resale private property in Singapore here.

Still unsure of your stamp duties and mortgage requirements? Consider engaging a mortgage broker to help you through the process.

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

A property stamp duty is kind of like COE. Just like how COE drives up the cost of owning a car, the stamp duty is one of those fees that makes buying a property so expensive in Singapore. 

But unlike vehicles, there’s also a stamp duty for selling a property in Singapore. In this article, we dive deep into the 3 main types of property stamp duty in Singapore: BSD, ABSD, and SSD. 

What is the Buyer’s Stamp Duty (BSD)? 

The Buyer’s Stamp Duty, or BSD, is a form of stamp duty that you need to pay as long as you buy or acquire a property in Singapore. 

Regardless of your residency status or the number of properties you own, you’ll have to pay for it. 

How to calculate the BSD? 

How much you’ll need to pay for the BSD depends on 2 things: 

• Purchase price or market value of the property, whichever is higher
• Prevailing BSD rate

As of 20 February 2018, the current rates are as follows: 

Purchase price or market value of the property	BSD rates for residential property
First $180,000	1%
Next $180,000	2%
Next $640,000	3%
Remaining amount	4%

Let’s say you’re buying an HDB resale flat for $725,000. The calculation for the BSD will be: 

(1% × $180,000) + (2% × $180,000) + (3% × $365,000) = $16,350 

But if you’re a PR, foreigner buying your first property, or Singaporean buying your second property, you’ll also need to pay another type of stamp duty: ABSD. 

What is the Additional Buyer’s Stamp Duty (ABSD)? 

The Additional Buyer’s Stamp Duty (ABSD) is a stamp duty that you may have to pay on top of BSD when you buy a residential property in Singapore.

Whether you need to pay for the ABSD depends on 2 things: 

• Your residency status
• Number of residential properties you own

Alt-text: A phone calculator on top of a notebook and laptop. The calculation of your ABSD is dependent on your residency status and the number of properties you own. 

How to calculate the ABSD?

Just like the BSD, the ABSD is calculated as a percentage of the property’s purchase price or market value, whichever is higher. 

However, the rate you’ll need to pay depends on your residency status and the number of residential properties you own. If you’re a PR or foreigner, you’ll have ABSD exposure. 

Since its introduction in 2011, the ABSD rates have changed over the years. Depending on the property market condition, the government can revise the ABSD rates again. 

Here are the current rates, as of 6 July 2018: 

Buyer profile	ABSD rates from 6 July 2018 onwards
	First residential property	Second residential property	Third and subsequent property
Singapore citizens	–	12%	15%
Singapore PR	5%	15%	15%
Foreigners	20%	20%	20%
Entities	25% (plus an additional 5% for housing developers)	25% (plus an additional 5% for housing developers)	25% (plus an additional 5% for housing developers)

What if you’re buying with someone who doesn’t have the same residency status as you? 

Here’s where it can get a little tricky. The short answer is that the higher ABSD rate will be applicable. 

Let’s say you’re a Singaporean and currently own 1 property. Your spouse is a PR and also presently owns 1 property. Both of you are planning to buy another condo at $1,200,000 together, without selling current properties. 

In this case, the ABSD rate will be based on your spouse’s profile, which will be 15%. This translates to: (15% × $1,200,000) = $180,000 

How to avoid the ABSD? 

There are a few ways in which you can go about without paying for the ABSD.

1. When you’re selling your current property before buying a second property

If the buyer for your current property has exercised the Option to Purchase (OTP) before you exercise the OTP for your purchase, there is no ABSD exposure.

2. When you and your spouse are selling your first property after buying a second property

Technically, both of you will still have to pay for the ABSD first, but you can get a remission for it when you sell your first property within 6 months from the exercising date of your purchase.

 For the uncompleted property, you have 6 months to sell after obtaining TOP/CSC for the new property. 

Afterwards, you’ll need to apply for the remission within 6 months after its sale, provided the ownership status remains. 

3. When you’re downgrading to an HDB resale flat 

You won’t be subjected to ABSD if you’re downgrading from private property to an HDB resale flat. This is because you need to sell off your private property within 6 months after buying the resale flat. 

On the other hand, while selling off your property can help you save on ABSD, you may have to pay for another type of stamp duty in Singapore: SSD. 

What is the Seller’s Stamp Duty (SSD)? 

Unlike the BSD and ABSD, the Seller’s Stamp Duty (SSD) is a stamp duty on the sale or acquisition of residential properties in Singapore. 

Specifically, you’ll need to pay the SSD if you sell off your residential property within 3 years after its purchase. SSD is also only applicable for properties bought from 20 February 2010 onwards. 

This means that the SSD won’t be applicable when you sell your HDB flat after the 5-year Minimum Occupation Period (MOP). 

How to calculate the SSD? 

How much you’ll have to pay for the SSD depends on 4 things: 

• Type of the property to be sold
• Date of the property purchase or acquisition
• Date of the property sale
• Property price or market value, whichever is higher

Just like the ABSD, the SSD rates have been revised over the years. 

The current SSD rates are as follows: 

purchase	Holding period	SSD rate
From 11 March 2017 onwards	Up to 1 year	12%
	More than 1 year and up to 2 years	8%
	More than 2 years and up to 3 years	4%
	More than 3 years	No SSD to be paid

Let’s say you bought a condo for $1,300,000 on 1 July 2020 and decide to sell it 10 months later, on 1 May 2021, for $2,000,000. 

Since it’ll be less than 1 year since you’ve bought it, the SSD you’ll need to pay will be 12% of the selling price, which is $240,000. 

On the other hand, if you decide to wait longer and sell it on 1 May 2022, which will be 1 year 10 months after the purchase, the SSD to be paid will be 8% of the selling price. This equals $160,000. 

You may also use IRAS’ stamp duty calculator to calculate the BSD, ABSD, and SSD to be paid. 

When do you not need to pay the SSD? 

Similar to the ABSD, there are certain scenarios in which you’ll be exempted from the SSD. 

1. Bankruptcy

If you’re declared bankrupt and ordered to dispose of your property to pay off your debt, you won’t need to pay the SSD. 

2. Inheritance

This only applies when you inherit an HDB flat. If you own an HDB flat and inherit another one, you’ll need to sell off one of them. This is because you can only own one HDB flat at any one time. 

Similarly, if you own a non-HDB flat and inherit an HDB flat, you’ll need to dispose of the latter. 

In both cases, you won’t have to pay the SSD. 

3. Marriage

Let’s say you own an HDB flat and marry someone who has an HDB flat under his or her name. 

Both of you will need to live under one HDB flat and dispose of the other flat, without having to pay for the SSD. 

Paying property stamp duty in Singapore

As you can see, whether it’s BSD, ABSD, or SSD, the amount to be paid for stamp duty in Singapore is substantial. 

Before jumping into buying a property, be sure to take into account any conditions and exemptions. While the BSD is unavoidable, you may not have to pay the ABSD if you meet certain criteria. 

Likewise, it’s better to hold off selling your property for a few years to reduce or even avoid paying the SSD. Doing all these can help you save money and get you closer to your financial goals. 

Still unsure of your stamp duties and mortgage requirements? Consider engaging a mortgage broker to help you through the process.

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

Planning to buy a home for the first time? Whether it’s an HDB or a private property, there’s a lot of things to consider — from the location of your new home to the type of home loan to get. While looking up on home loans in Singapore, you might have come across various terms such as SIBOR, fixed deposit rate, SORA and board rate. 

Essentially, SIBOR, fixed deposit rate, and board rate are all interest rate benchmarks used by banks in Singapore to price home loans. As they can increase and decrease over time, they’re all considered floating rate. This also means that your monthly instalments will change according to the interest rate charged. Let us dive deeper into what each term means and their differences. 

What is SIBOR? 

SIBOR stands for Singapore Interbank Offered Rate. It refers to the daily projected rate that banks in Singapore might borrow from each other via the interbank market. 

One main aspect of SIBOR is that it’s an average rate derived from the projected borrowing rates submitted by various banks in Singapore. So it’s not influenced by any single bank. 

This makes SIBOR one of the most transparent interest rate indexes. It’s also why SIBOR-pegged home loans are pretty popular.

Read this article as we explain more about SIBOR. 

What is SORA? 

SORA, or Singapore Overnight Rate Average is an alternative benchmark interest rate derived from the average rate of all interbank lending transactions. 

It’s calculated based on the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank market made between 8 am and 6:15 pm of each working day.  

The rate is published the following day at 9 am on the MAS website. 

Find out more about SORA and why it’s replacing SIBOR here. 

What is a fixed deposit rate? 

As the name suggests, fixed deposit rate refers to the interest rate earned in fixed deposit accounts. 

But it’s not only used to determine how much banks give payouts to their fixed deposit customers. In Singapore, a fixed deposit rate is also used by some banks to price home loans, with DBS being the first to do so in 2014.

Called the Fixed Deposit Home Rate (FHR) by DBS, the interest rate for these home loans is based on the average fixed deposit rate over a period of time. A home loan pegged to FHR6 means that it’s pegged to the 6-month average fixed deposit rate.  

It works on the idea that if the bank increases the interest rate for the home loans, it will also need to raise the interest rate for their fixed deposit accounts. While it leads to an increase in payouts for the customers, it also translates to higher costs for the bank. 

When the banks revise their fixed deposit rates, the loans that are pegged to the rates will be affected. However, there is little impact on ‘existing’ fixed deposit holders as their deposit will only be affected by the change when their fixed deposits mature or due for renewal. We have seen many other banks offering similar products a few years later, albeit with different names. 

Not only are the interest rates low, fixed deposit rates are pretty stable as well. Since banks don’t change their fixed deposit rates as much, there isn’t much volatility. 

On the other hand, a fixed deposit rate is still considered a type of board rate. Ultimately, it’s still entirely determined by the bank. 

Learn more about fixed deposit rates in this article

What is board rate?

Board rate is the bank’s own rate. Since the individual bank determines it, it has full control of it. 

For instance, if you’re taking a home loan that is pegged to the board rate and the banks decide to change it, they’ll only give you a 30-day notice before charging you with the  different interest rate. 

And unlike SIBOR and fixed deposit rates, banks in Singapore don’t reveal how they determine their board rates. Due to this lack of transparency, home loans pegged to board rates are less popular. 

What’s the difference between SIBOR, SORA, fixed deposit rate, and board rate? 

Now that we’ve explained what SIBOR, SORA, fixed deposit rate, and board rate mean, let’s explore their differences. 

Their differences can be broken down into 3 aspects – calculation method, volatility, and transparency. 

Calculation method

SIBOR, fixed deposit rate, and board rate all differ in the way they’re derived. 

SIBOR is calculated by the Association of Banks in Singapore (ABS) based on interbank borrowing rates. 

On the other hand, SORA is derived based on the average rate of all interbank lending transactions. It is governed by the Monetary Authority of Singapore (MAS).

As for fixed deposit rate and board rates, they are determined by individual banks in Singapore. But what sets the fixed deposit rate apart from the board rate is that the former is based on the interest rate for fixed deposit accounts. 

Volatility

SIBOR, SORA, fixed deposit rate, and board rate are all types of floating rate. As they can go up and down over time, they’re seen to be less stable than the fixed rates. On the other hand, they differ in the extent of volatility. 

Fixed deposit rate is considered the most stable among the 3 benchmarks as banks in Singapore don’t change their rates. While it moves in tandem with SIBOR, it doesn’t increase or decrease as much. 

In contrast, SIBOR is more volatile than fixed deposit rate, as it depends on the daily projected rate of interbank borrowing in Singapore. 

In the case of home loans, the interest rate can change every month if your home loan is pegged to the 1-month SIBOR. If it’s pegged to the 3-month SIBOR, the interest rate varies every 3 months. 

At the end of the spectrum is the board rate. Since the bank has full control over when it wants to change the interest rate, it’s deemed to be the most volatile of the 3 floating-rate benchmarks. 

As for SORA, it’s deemed to provide more stability as it’s backward-looking and calculated based on actual transactions.

What does it mean for your home loan? 

Whether your home loan is pegged to SIBOR, SORA, a fixed deposit rate or board rate, one downside to its volatility is that you never know exactly how much you’re paying for your upcoming monthly instalments until you get the bill. This can make it harder to plan your financials. 

And when interest rates are increasing, you’ll need to pay more for your monthly instalments. 

On the flip side, having a floating rate home loan is useful when interest rates decrease, which is what’s happening now. This also means that you can enjoy lower monthly instalments. 

Transparency

Among the 3 floating rates, SIBOR and SORA  are seen to be the most transparent., they are  not influenced by any one bank. 

What’s more, the rates are published by ABS (or maintained in the MAS website). They’re open for everyone to see the trend and track the daily rate. 

Another interest rate benchmark that’s pretty transparent is the fixed deposit rate. While the individual bank determines it, it’s advertised together with fixed deposit accounts. 

This means that you’ll have an idea of how much interest rate will be charged for home loans pegged to the fixed deposit rate. 

On the other hand, most banks don’t publish their board rates. Usually, you’ll only know their rates when you enquire them. 

This table summarises the differences between SIBOR, fixed deposit rate, and board rate:

	SIBOR	Fixed deposit	Board rate	SORA
How is it derived?	Based on the projections of interbank lending rates	Based on fixed the deposit rate of the bank	Bank’s own rate	Based on actual interbank SGD cash market in Singapore
Who is it governed by?	ABS	Individual bank	Individual bank	MAS
How volatile is it?	Quite volatile	Less volatile	Most volatile	Less volatile
How transparent is it?	Quite transparent	Quite transparent	Least transparent	Most transparent

Should you choose SIBOR, fixed deposit rate, SORA or board rate for your home loan in Singapore?

If you value transparency and don’t mind a bit of volatility, a SIBOR or SORA-pegged home loan may be the most suitable loan for you. 

But if you prefer a more stable rate, a fixed deposit rate home loan may be better. 

Board rates may actually be cheaper than any other rates. But no one knows when the bank decides to change it. So you should only go for it if you believe that the bank will not increase it suddenly. 

Nevertheless, regardless of the floating rate you choose for your home loan, banks can still control the interest rate they want to charge using the spread. This also means that they can increase the interest rate by increasing the spread. 

So the interest rate for your home loan would look like this: 

SIBOR, SORA, fixed deposit rate, or board rate + spread = final interest rate

Let’s say you choose to take out a fixed deposit rate home loan. If the fixed deposit rate is 0.2% and the spread is 1.6%, the final interest rate for your home loan will be 1.8%. 

So before you choose to take a home loan pegged to either SIBOR, SORA, fixed deposit rate, board rate, or even fixed rate, be sure to take into account their differences, as well as interest rates and spread. 

Alternatively, consider engaging a loan broker who can help get the right home loan for you. 

At FinanceGuru, we seek to help homeowners find the best home loan and help them achieve their financial goals. Learn more about how you can optimise your home loan and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

Repricing and refinancing are sometimes used interchangeably when one is thinking of switching to a cheaper housing loan. While this is more than acceptable in a conversation with friends over lunch, it does make a huge difference to the starting point of your evaluation journey as you decide whether to reprice or refinance.

For clarity, refinancing means switching your mortgage for another with a different bank altogether. Repricing, on the other hand, involves switching to a different loan package within the same bank. 

The current mortgage market

With Singapore banks interest rates at their lowest in recent years, 2020 has proved to be an excellent review opportunity to secure more favourable interest rates on home loans. 

HDB owners, in particular, who had previously used an HDB loan to buy a flat, can look forward to a desirable bank loan rate. Currently, the HDB loan rate is around 2.6% p.a, whereas bank rates are around 1.3% p.a.

Find out more on HDB loan vs bank loan here.

If you’re concerned, rest assured that you can still use your CPF to pay for the mortgage, even after switching to a bank loan. 

Read about why you should do a home loan health check here.

What are the key areas to consider before refinancing?

FinanceGuru who has been receiving more refinancing inquiries over the past few months, observes that homeowners who used to be paying over 2% interest rate, would now be enjoying substantial savings with the current rates now cut by almost half.  

“Regardless of your preference for fixed or variable packages, refinancing with the low home interest rates environment could yield substantial savings,” Jasper Eng, Head of Mortgage, FinanceGuru. 

Eng added that homeowners should look out for several key areas of consideration before deciding to refinance their housing loans.

1. Eligibility 

Check if your home loan is still within the lock-in period. 

Most home loan packages, especially those with a fixed-rate, feature a lock-in clause that typically spans from 2 to 4 years. 

If your loan is still within the lock-in period, it would not be worth refinancing right now as your current bank will charge a penalty fee.

2. Benefits

Eligible homeowners who would benefit most from considering mortgage refinancing are:

1. Those not under a lock-in clause     
2. Investors who are looking to put the property on the market for sale soon
3. Landlords who have a priority to keep repayments low
4. Those considering reducing debt obligations 

Let us have a more detailed look at the amount of savings you can expect, in each of these 4 instances, based on:

Loan amount	$500,000
Interest rate	1.5%
Repayment period	20 years

• Those not under a lock-in clause
  As shared earlier, if you’re still within the lock-in period of your housing loan, refinancing while under the clause will incur a penalty which is typically calculated as a percentage of the loan quantum. 
  
  For instance, if the penalty is 1.5% of your loan amount, your savings from refinancing would need to exceed your penalty cost of $7,500.

• Investors who are looking to put the property on the market for sale soon
  If you’re contemplating a change in your financial goals, planning more space for the family, or looking to sell your house in the near term, you should explore a package with no penalty in the event you will to sell your property. 
  
  Your primary goal should feature paying the least amount of money interest to reap greater capital gains ultimately. 
  
  In this current low-interest rate environment, you’ll benefit from opting for a package with the lowest rates, regardless of whether you choose a fixed or a variable rate loan. 

• Landlords who have a priority to keep repayments low
  Like homeowners looking to sell their property soon, the emphasis for landlords should be to minimise repayments to preserve rental gains. 
  
  The lesser repayment you pay upon refinancing, the more rental income you’ll receive after deducting your property’s monthly repayment. 

• Those considering reducing debt obligations 
  If you’re facing any financial difficulties or looking to reduce outgoings, a good place to start is to reduce repayments on high-ticket items such as your home loans. 
  
  If you’re able to refinance your home loan for a lower interest rate of 1.50% compared to your previous rate of 3%, you’d be paying $2,413 a month after refinancing. 
  
  Compared to the previous monthly repayment of $2,773 a month, you’d be looking at savings of $360 per month and a cumulative savings of $21,451 (after reduction of monthly instalment and interest) over a period of 3 years.  

Consider getting a mortgage advisor for a more thorough calculation to determine the best option available to you. Our team of Mortgage Specialists at FinanceGuru can help you navigate the refinancing maze, recommend the best bank loan and handle the paperwork for ZERO fees. Make an appointment with the experts at FinanceGuru now.

3. Savings you can look forward to

The small monthly savings may not seem like much but see how the cumulative savings from the 3 year period could come up to. 

If you expand this calculation for the full tenure of your home, the yearly savings of $7,150, based purely on an additive calculation, could come up to almost $214,500 by the end of a 30-year loan. 

Most would pose the cost of conveyancing fees and valuation fees charged by the banks as a deterrent to consider refinancing. However, if refinancing your home loan would lead to a decrease in monthly repayments to $300 a month, based on $2,000 conveyancing cost and a $500 valuation fee, then the time and money would be well spent. 

You can look forward to recoup these upfront costs of conveyancing and valuation fees in less than 6 months. These savings could well be amplified if the bank offers to subsidise your legal fees.  

Learn more about cash-out refinancing for your private property here. 

Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Learn more about optimising your home loan and uncover hassle-free ways that will save you time and money. Get a non-obligatory assessment and loan product recommendations today.