For many of us, selling our HDB is an easy task. The tricky part comes when we are buying another HDB at the same time and timing the transition to make it a smooth sailing shift.
In this article, we will be touching on one of the commonly used facility, HDB Enhanced Contra Facility or HDB Contra Facility in short for resale flats. There is another type of HDB Contra facility for new flats called the Contra Payment Facility.
Understanding HDB Contra Facility?
To put it in simple terms, HDB Contra facility allows you to sell your current HDB (Home A) and at the same time utilising the sales proceed, which includes the CPF + accrued interest and Cash Proceeds, to offset the payment for your next HDB (Home B) purchase. However, the CPF monies refunded cannot be used to pay for the stamp duty and conveyancing fees for Home B.
Pre-Requisites For HDB Contra Facility
HDB Contra Facility is only applicable if your current home (Home A) is fully paid or under HDB Mortgage and your next purchase (Home B) is deemed to be fully paid or purchased using HDB Loan. At the same time, all other party in the transaction, buyer for Home A and seller for Home B, MUST NOT apply for HDB Contra Facility. For an easy guide, you may refer to our flowchart below.
When applying HDB Contra Facility, Home A transaction must be completed before or on the same day as Home B completion. You may also refer to HDB for more in depth conditions for HDB Contra Facility to be applicable..
Typically, the amount of CPF Monies available to be used will be calculated up to the date of HDB’S acceptance of Home B’s resale application, or otherwise stated, any other date which HDB or CPF board may decide.
Each buyer of Home B can retain up to $20,000 in their CPF Ordinary Account, inclusive of CPF Monies refunded from sales of Home A. The rest of the available CPF monies MUST BE utilised to for payments of Flat B. The balance of the purchase price are further reduced by approved HDB Loan or Cash Proceeds from Home A.
NOTE: If you are taking a second HDB Housing Loan, up to 50% of the CASH proceed from Home A is required for the payment of Home B before HDB Housing Loan kicks in. Generally, second HDB loan flat buyers can keep the greater of $25,000 or 50% of the cash proceeds (including the cash deposit received).
To calculate your cash proceeds, you may read more from our previous article, Guide TO Calculate Sales Proceeds (Cash Proceeds).
Temporary Extension Of Stay with HDB Contra Facility
At this point, if you have already understood the mechanics of HDB Contra Facility. You might be wondering, if both homes are completed on the same day, or Home A to be completed earlier than Home B, where do I find the time for renovation and shifting?
You are right, hence, the temporary extension of stay comes into play and is a crucial factor to ease your transition. It allows you to extend your stay in Home A up to 3 months from the date of completion to facilitate your renovation and shifting to Home B.
To apply for a Temporary Extension of Stay, buyer of Home A must be agreeable in the first place, prior to the conclusion of sales. A one time $20 administrative fees and an increase amount in property tax (to 10%) is payable by the buyer for Home A as HDB deems the flat as a “rented” unit during this extension period. As a general market practice, seller will reimburse these fees back to the buyer.
The timing to sell and buy at the same time is indeed critical. At times, you may even need to compromise on either your sales or purchase to match the timings. When planning, work out the individual timeline for both Home A and Home B. It does get a bit more complicated when you are planning for the timeline to match for both homes as well as other details including HDB submission days, buyer’s exercise period as well as HDB’s timeline for completion.
Other than HDB Contra Facility, there are also other means of facilities or procedures to assist you in transiting to your next home. Do check with us if you would like to find out more.
When in doubt, it is always advisable to seek assistance from a professional.