Planning for a second property in future? Then this is a must read for you before your HDB BTO application. Having been through the age, when young couples are applying for Build to Order, one mistake, that is noticeable, is that when young couples applies for BTO, they often fail to plan ahead for the near future, say 5 or 10 years down the road.
Most often or not, young couples are not yet versed with the real estate scene, since the BTO that they are applying for is most likely going to be their first property.
We will be sharing some tips on how you can better position yourself to owning a 2nd property in the near future, maximise your cash proceeds strategically or even minimise loss due to excessive CPF usage.
Tip #1 Plan Ahead
As with our experience with many sellers whom have just fulfilled their 5 years Minimum Occupation Period, it is typical that they only start planning at the 4th year of owning at their home. Many of them didn’t even thought that they will be selling their house upon MOP at the point of BTO application. However, due to circumstances such as increase in family size or the desire to upgrade their lifestyle, or even moving closer to parents etc made them change their decision of holding on to the BTO.
If you are able to plan ahead 5 to 10 years down the road prior to your HDB BTO application, you would definitely be on an edge above the others and upon reaching MOP, you will then be more “ready to strike”.
For example, you may have the intention to sell your place upon MOP, hence spending lesser for renovation.
Tip #2 Buying Under Single Owner and Essential Occupier Structure
Instead of holding the property the traditional way , with both spouse as co- owner, you may like to explore the option of owning your HDB BTO with one spouse’s name with the other as an essential occupier.
Depending on financial situation and loan assessment, this may not be a readily available option for some. It may be taxing for some couple who just started working in the workforce.
However, If this option is within your means, it may work as an advantageous alternative for you.
Upon reaching MOP, the spouse registered as an essential occupier is free to buy a 2nd property WITHOUT paying for ABSD. This option works well if you plan to keep your HDB flat for a longer period of time and at the same time own a 2nd investment property.
On a downside, CPF monies and loan assessment is based on the sole owner only, which may limit your funds when buying a HDB BTO. Looking on the bright side, the low entry price is subsidised and it will be good to take advantage of it.
On another note, the trust and relationship between couples must be strong. Otherwise, we strongly do not recommend this mode of purchase. Should there be an event of breakup, the only one to gain is the owner of the flat unless both spouse have consensus to a pre-determined exit plan.
Tip #3 Appropriate Usage of CPF Monies for Mortgage Instalments
It is recommended to work on a mortgage repayment strategy with a comfortable ratio of CPF : Cash repayments for your monthly mortgage instalments. You may refer to our previous article to see how excessive usage of CPF monies in the long run may jeopardise your cash proceeds.
Furthermore, you can take advantage of your cash repayment as a form of fix savings to fund for your future purchase upon selling of your place.
With a strategic positioning and structuring of your ownership during your HDB BTO application, you will be more opened to various additional options i.e keeping your BTO and purchasing a 2nd property without ABSD or forced save a substantial amount of cash for your next purchase after selling the BTO.
Make sure to exercise with care and ensure prudency to prevent overstretching your own limit.