Co-owner vs Essential Occupier: Which Should You Choose When Buying An HDB Flat

5 March 2024 | BY

Before buying an HDB flat, know the difference between being a co-owner and an essential occupier.

co-owner vs essential occupier

So you’ve fallen in love and your other half has asked you to buy an HDB flat together. As you’re reading up on homeownership must-knows, you come across the terms “co-owner” and “essential occupier”. The 2 terms sound so similar and you’re left wondering what’s the difference. Well, you’ve come to the right place.

In this explainer, we’ll delve into the definitions of a “co-owner” and “essential occupier” and provide situations on when it may be advantageous or disadvantageous to register as a co-owner or an essential occupier.

What is a co-owner?

house keysImage credit: TheSmartLocal

Being a co-owner of an HDB flat means you share the ownership property with at least one other person. Both the owner and co-owner of the HDB flat have full rights to the property. 

There are 2 ways you can co-own an HDB flat: joint tenancy or tenancy-in-common. The main difference between the 2 is what happens if one owner passes away.

Under joint tenancy, all co-owners own the whole interest together. If one of the owners dies, the right of survivorship applies. This means that regardless of whether a will has been left behind, the flat will be passed on to the remaining co-owner(s).

Under tenancy-in-common, the right of survivorship does not apply and the various co-owners hold separate and distinct shares in the flat. If there is a will, the flat will be distributed accordingly. If not, intestate law will apply*.

FYI: Intestate law does not apply to Muslims.

What is an essential occupier?

two people on a bed - co-owner vs essential occupierImage credit: TheSmartLocal

An essential occupier is a family member who is listed as part of the family nucleus, alongside the owner of the home in the Application Form. The essential occupier must qualify for an HDB scheme for purchasing an HDB flat.

As an essential occupier, you will also have to live in the flat until the Minimum Occupation Period (MOP) is fulfilled. Additionally, you are also not allowed to be an essential occupier of one HDB flat and a co-owner of another at the same time.

You do not have any legal right to the HDB flat; you only have the right to live in the property so long the owner is alive or you are married to them. If the owner of the flat passes without a will, you may not get the flat. 

According to Singapore’s intestate law, if your spouse is survived by you and your children, you get half and your children get the other half in equal portions. For those with no kids and your partner’s parents are still around, you receive half and they get the other half in equal portions.

What is a family nucleus, according to HDB?

Under the family scheme, HDB defines a family nucleus as:

  • You and your parents, and siblings (if any)
  • You and your parents, if you’re single
  • You and your fiance/fiancee, if you are engaged to be married
  • You and your spouse, and children (if any), if you’re married
  • You and your children, who are under your sole custody, if you are widowed or divorced
  • You and your sibling(s), if you’re orphaned

When would you choose to be an essential occupier?

Regardless of whether you’re an essential occupier or co-owner, the full housing grant amount will be disbursed equally. If you’re listed as an essential occupier for your first home, you will be considered a second-timer buyer for your next HDB flat purchase.

Knowing this, you may be wondering then what are the other pros and cons of having an essential occupier. To help you better understand, we list out various possible scenarios.

1. You and your spouse want to buy multiple properties in the future

ai-generated image of a couple holding a bag of money in front of hdb blocksImage credit: Dall-e

When buying their first home, most couples tend to purchase an HDB flat together, with both parties owning equal shares. However, some prefer acquiring property under one person’s name. 

This is especially useful if you’re intending to buy multiple properties in the future. There is one way to own an HDB flat and condo at the same time, and that’s by buying your HDB flat first. 

By listing only one person as the sole owner and the other as an essential occupier, the other party could purchase a private property without having to pay Additional Buyer’s Stamp Duty (ABSD). Currently, the ABSD rate for the second property for Singapore Citizens is 20%. 

Additionally, the party listed as the essential occupier can get a bigger bank loan to finance the private property. This is because they are considered a first-time buyer. For your first property loan, you are subject to a loan-to-value (LTV) limit of 75%. If you’re taking on a second mortgage, your LTV limit is reduced to 45%

The downside of it all is it may be more difficult to secure a higher loan amount for the HDB flat you’re trying to purchase. The Mortgage Servicing Ratio (MSR) caps the gross household income amount you can use to service your mortgage repayments at 30%. If you are not cash-rich, this may be an issue as you’d have to pay for a larger portion of your home in cash.

2. If only one person has full-time employment

man working in a co-working space - co-owner vs essential occupierImage credit: TheSmartLocal

Another situation where you might want to list your partner as an essential occupier would be if it’s a single-income household. This is assuming one spouse is the sole breadwinner and the other is the homemaker with no full-time employment. 

Unlike the first scenario, only one person is likely financing the property. Also, the homemaker is unlikely to make a monthly cash contribution to their CPF OA account. As an essential occupier, you would not be able to use your CPF OA monies to pay for the property anyway. 

Note: For those buying an HDB flat under the Non-Citizen Spouse Housing Scheme with a non-resident foreign spouse, you are subject to a different set of criteria. The grants you qualify for are also different. 

3. You want to buy a 3Gen HDB flat

3gen hdb flat - co-owner vs essential occupierImage credit: MET Interior

3Gen HDB flats are about 54sqft larger than the average 5-room BTO flat. Aside from size, 3Gen flats have more bedrooms than a 5-room HDB flat—each 3Gen HDB flat has 2 master bedrooms with an en-suite bathroom attached and 2 common bedrooms. 

As the name suggests, 3Gen flats are made for multi-generational families to live together. To qualify for a 3Gen flat, you and your spouse will form the core family nucleus, and at least one of your parents must be a Singapore Citizen or Permanent Resident.

You will also have to meet other eligibility criteria for your 3Gen HDB flat purchase.

4. You’re single, don’t mind living with family & want to unlock more grants

single man working alone at homeImage credit: TheSmartLocal

35 is the magic number for many single Singaporean citizens looking to buy an HDB flat. If you’re single and don’t want to wait that long, listing a family member as an essential occupier can be a strategic move. 

Not only will you be qualified to buy an HDB flat under the Public Scheme, but also you can ‘unlock’ more CPF housing grants. 

You could apply with another single sibling or your parent(s). By leveraging these housing subsidies, buying a home could become more affordable and you may have more options that fit your budget.

Choosing between being a co-owner vs an essential occupier

Whether you choose to list your co-applicant on your BTO application as a co-owner or essential occupier comes with various pros and cons. As always, consider your financial goals and needs before making a decision.

Still, know that if you want to change the status of an essential occupier to a co-owner down the road, you can. However, it is advisable to seek professional advice or consult with HDB before doing so.

With this in mind, we hope you feel more confident to make an informed decision when buying an HDB flat. If you’re still browsing the market and want to learn how to budget for various housing types, check out our articles:

Cover image credit: Dall-e

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