One of the common topic was being raised by my customer, “Why a lot of HDB upgrader prefer to buy EC rather than private condo? Is it easy and affordable to upgrade to EC rather than private condo?” Let me share some of the tips on purchasing the Executive Condo.
Ideally, we can all sell our existing flat and move into a new Executive Condominium (EC).
But mostly it’s not as simple as that: besides the issue of financing, there's a problem that we still need a roof over our heads, while the EC is being built.
Following are some possible solutions of this problem:
Let’s take a look at some financing issues first:
If you take an HDB Concessionary Loan to buy your flat, read this first.
Back when you take an HDB loan, you managed to borrow up to 80 percent of the flat's price. The remaining 20 percent might come from a combination of cash or CPF.
But this won't be the same for an EC, because there are no HDB loans for ECs. You will have to take up a bank loan.
Now, for a bank loan, the maximum financing is 75 percent of the property’s price. Another 20 percent can be paid through a combination of cash or CPF, but an absolute minimum of 5 percent of the property’s price has to be paid in cash.
So if you are buying an EC unit with a price of $850,000, you have to pay at least $42,500 in cash. Under MAS Notice 632, Singapore banks cannot lend you money for this amount, or any part of your down payment.
For an EC, you don't have to pay the Additional Buyers Stamp Duty (ABSD)
Those who are upgrading from HDB to private condos have to pay the ABSD within two weeks of signing the purchase agreement.
They can then apply for a Matrimonial Home ABSD remission upon selling their 1st property and get a refund if certain conditions are met.
For example, one of the condition is that a couple will have to sell their HDB within 6 months of Option Acceptance of their second property (for resale properties) or 6 months of TOP (for building in progress properties) in order to get the ABSD remission.
If you're moving from an HDB to an EC though, this is not for you.
Two ways to pay for your EC:
The first method is to use a Progressive Payment Scheme, also known as the Normal Payment Scheme (NPS).
Under the NPS, you will have to service the loan for your EC while continuing to service any loan repayments for your flat.
The purchase price is usually around 3% lower for those who choose this payment method.
Another factor of the NPS is that the monthly repayments gradually increases over time, so it is affordable only in starting.
Here's the 10 stages of a Normal Payment Scheme in the typical case of a buyer who uses 5% cash, 20% CPF and takes a 75% maximum loan.
Stage 1: OTP
- Pay 5% in cash.
Stage 2: Sale & Purchase Agreement and stamp duties
- Pay 15% through CPF, at completion of the purchase usually within 9 weeks of your OTP issued.
- Buyer Stamp Duty has to be paid within 2 weeks of the exercise of the Sales & Purchase agreement (you have to pay in cash first, but you can get a refund from your CPF later).
Stage 3: Foundation work completion (approx. 6 months)
- Pay 5% in CPF and another 5% disbursed from your home loan (Mortgage payments begin).
Stage 4: Concrete reinforced framework completion (approx. 12 months)
- 10% Payment through your home loan (monthly repayments will increase)
Stage 5: Brick wall Completion (approx. 18 months)
- 5% Payment through your home loan.
Stage 6: Ceilings & Roofing completion (approx. 1 year and 9 months)
- 5% Payment through your home loan.
Stage 7: Windows, doors, electrical wiring and plumbing completion (approx. 2 years)
- 5% Payment through your home loan.
Stage 8: Car park, drainage, and roads complete (approx. two years and three months)
- 5% Payment through your home loan.
Stage 9: Temporary Occupancy Permit (TOP) - your developer will give you an indicative date for this. It is usually 3 - 4 years later for a brand new launch.
- 25% Payment through your home loan.
Stage 10: Completion of Sales & Purchase, issuance of Certificate of Statutory Completion (CSC) and 12 months after TOP
- Remaining 15% Payment through your home loan.
Deferred Payment Scheme - A much more affordable payment option
This scheme is for those HDB owners who cannot afford to service a second home loan under the NPS while they're paying for their existing flat.
The DPS is much simpler:
You pay the 5% (in cash) to secure the OTP, and the 15% to complete the sale and purchase agreement, similar to the NPS above.
After that, you don't have to worry about financing the new EC until it receives its TOP.
If your TOP happens to be 3 years later, you don't have to pay anything over those 3 years.
This gives you much time to save up cash and CPF, and then sell your flat closer to the key collection date.
Upon TOP, you will then pay another 65%, and the rest is paid at around the time of the CSC.
The demerit of DPS is that you'll need to pay more for the property - usually a 3% more. But you saved yourself from interest repayments and buy a lot more time without any financial stress, as you're not servicing any bank loan until you collect the keys.
I have served some HDB upgraders for purchasing the Executive Condo. Hope the above article will benefit you. I am much willing to assist and advise you for the purchase, do call Jeslyn Tan Hp 98798348 for more information.