When you and your Significant Other have bought your first BTO, your names are both locked in until at least the end of your flat’s Minimum Occupation Period (MOP)━in other words, at least 5 or 10 years. Until the end of that period, neither of you can buy another property, much less another HDB flat.
Then, there’s the obstacle that is Additional Buyer’s Stamp Duty (ABSD), which you’ll incur on buying a second property, regardless of whether your first property was a private or public house. Enter decoupling: a ‘strategy’ that some Singaporean couples have adopted to work around this, leaving one of your names free to own another property.
More commonly, couples have been known to decouple their names on private property. But is HDB decoupling possible? Is it even legal? Here’s what decoupling is, and whether it’s a wise move to make.
Disclaimer: This article should not be taken as advice on how to decouple your HDB flat. The information has been sourced from publicly available materials.
What is decoupling?
Image credit: ZR Lin on Unsplash
Decoupling is when one co-owner transfers their share of ownership of a residential property to the other. As a result, one person becomes the sole owner, and the other becomes an essential occupier.
Usually, decoupling occurs between spouses or partners. In the case of HDB flats, the essential occupier no longer has legal ownership, but must live in the flat until the MOP is met. Their right to reside there depends on being married to the owner, or the owner being alive.
The trade-off is that the essential occupier’s name is free, because in the eyes of the law, they do not own any property. This allows them to purchase another property without incurring ABSD.
When decoupling, how are you going to finance the HDB flat?
In the process of decoupling, the essential occupier’s income will no longer be considered in the loan assessment.
Let’s say you’re eyeing a home that costs $550,000. That’ll get you a 4-room BTO flat in a prime neighbourhood, or an older 3-room HDB resale flat on the city fringe, built in the 1980s.
Assuming you qualify for an HDB loan with a 25-year loan tenure, bearing in mind that the maximum Loan-to-Value (LTV) limit is 75%, and the Mortgage Servicing Ratio (MSR) is 30%, your estimated monthly installments will be $1,871.
Considering the 3% interest rate floor HDB uses to calculate home loan eligibility, the owner needs to have a gross monthly income of at least $6,520 per month, and cough up an upfront $62,500 as down payment.
On top of this, any grants that you received for the flat as a couple will be halved; the essential occupier would have to refund their CPF usage, their share of the grants, and any interest that may have accrued in the time that has elapsed.
Couples who are best positioned for this are likely to be older, who have been working for a while, or are in an age-gap relationship. Being further along in their career, they would typically draw higher incomes, and have more CPF savings.
Another thing to note: the essential occupier can’t use their CPF savings to pay for the flat, but you can help boo settle the monthly mortgage payments with cash.
What happens when you’re ready to buy your condo?
When the MOP for the HDB is up, and you decide that you want to use your freed-up name to purchase a condo, your income will similarly be the only one assessed for the application of a bank loan.
Realistically, $1.5m can get you a 1-bedroom condo in the CCR/RCR, or a 2-bedroom unit in the OCR. If you qualify for the maximum 75% LTV limit for a 25-year loan tenure, there will also be the 55% Total Debt Servicing Ratio (TDSR) to consider.
You will have to fork out a $375,000 down payment, of which 5%, or $75,000, must be paid for in cash. Assuming you’re borrowing at the 4% interest rate floor used by banks to compute TDSR, your estimated monthly mortgage repayments will be $5,938. That means you need to earn at least $10,797 per month.
Buying the condo while still paying off the HDB flat means your household will be servicing two mortgages every month.
Comparatively, couples who did not decouple and bought a second property the usual way would have to pay a 20% ABSD on the latter. If they take on a second loan to finance their condo, they would have a 45% LTV limit and the purchase would require a down payment of $825,000, of which 25%, or $375,000, must be paid for in cash.
Their monthly mortgage would work out to be $3,567 over a 25-year loan tenure, assuming a monthly household income of at least $6,490━excluding what they’re already paying on their first property.
What if you decide to sell your HDB flat in the future?
If all goes well, you’ll become a power couple rolling in the dough and stick to Plan A: one HDB, one condo.
But life has a funny way of throwing us curveballs. You might change your mind and think of selling your HDB flat to upgrade to a condo with the proceeds. What happens then?
There’s a good chance that you, as the sole HDB flat owner, will have used a large portion of your CPF OA savings to fund the purchase of the HDB flat. On selling the HDB flat, you’ll have to return all CPF funds with interest into your CPF account.
Any HDB housing grants that you initially received need to be returned. You’ll also have to clear the outstanding loan amount. It doesn’t stop there━you likely will have to fork out for the property tax, service and conservancy charges, legal fees, and seller’s stamp duty fees. After all is said and done, your proceeds may not be that significant a sum.
How to decouple your HDB BTO flat
If you still want to decouple your HDB BTO flat, here’s how to do it:
| Action | Waiting time |
| Submit your HDB flat application and decoupling request. | 1-3 weeks |
| Resubmit documents such as the HFE application and the BTO application form (as requested by HDB). | 2-4 weeks |
| HDB should update you that an appeal has been submitted to CPF regarding the payment method (amount to be refunded to occupier’s CPF account if occupier had previously paid for the downpayment via their CPF OA). | 2 weeks |
| Once your application has been processed, HDB will schedule an appointment for you to sign the sub-transfer documents.
HDB will also reassess any relevant grant amounts previously given (if applicable) and credit assessment based on the new family nucleus (i.e. owner and occupier instead of two owners). |
1-3 weeks |
| Head to HDB for sub-transfer appointment and sign the new lease agreement.
At this point, you will have to pay stamp duty (in cash, applicable for non-married couples only) and sub-transfer fees (payable by cash or CPF). |
4 weeks |
| Receive a new HFE letter based on the sole owner’s income.
Depending on the outcome of your grant and income assessment, you may have to submit opt-out forms for grants. |
2-3 weeks |
| HDB will schedule an appointment for your key collection. | 2-4 weeks |
| Collect your keys | – |
The sub-transfer process takes about 4 months to complete. If you have urgent housing needs, factor in deferring your BTO key collection. Do note that you have to put in the request for the decoupling before you collect your keys. We’ve not heard cases of decoupling for HDB resale flats, but you could write to HDB for more information regarding this.
Is HDB decoupling legal?
The short answer is that HDB decoupling is not permissible by HDB. Generally, married couples are not allowed to decouple their HDB flat except under special circumstances like divorce or demise.
Decoupling is more often seen in the purchasing of private property. But if you’re trying to hack the system, it’s really not worth it. Decoupling is not illegal, but tax evasion is.
For more content on HDB rules:
- Is it legal to install a CCTV outside your HDB?
- 10 HDB rules you should know to avoid flouting the law or getting neighbour complains
- Step-by-step guide & cost breakdown on how to upgrade HDB to Condo
Cover image adapted from: @livspacesg, The Smart Local
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