Essential occupier or co-owner: Which label do you use to register your family member when buying an HDB flat in Singapore? If you are looking to purchase an HDB flat, this may be a question you are mulling over.
This article will help you understand the pros and cons of adding an essential occupier to your property. We’ll also discuss common situations where you may want to have one on your HDB application form and what type of property they can purchase.
What Is an Essential Occupier?
Regarding HDB flat purchases, an essential occupier refers to an individual included in the owner’s family nucleus. An essential occupier is needed when the flat owner doesn’t meet the eligibility to purchase the flat alone. In this case, the occupier helps the household qualify for a flat under the relevant eligibility scheme.
Do note that essential occupiers are subject to the same 5-year Minimum Occupation Period (MOP) as flat owners. Their names cannot be removed during the MOP, and they must physically occupy the flat.
Eligibility for an Essential Occupier
As mentioned, to be eligible as an essential occupier, you must be part of a family nucleus and qualify for a home under one of HDB’s schemes.
HDB defines a family nucleus as:
- Spouse
- Children or adopted children
- Parents or parents-in-law
- Siblings
Essential occupiers can be Singapore Citizens, Permanent Residents (SPR), or non-citizens. If they are non-citizens, they must hold valid passes with a minimum six-month validity at the point of application. In cases where all the flat owners are SPRs, the proposed occupiers must have obtained the Permanent Resident status for at least 3 years.
Essential occupiers must not own an existing HDB flat. They may own private property if the flat owner has completed the MOP; however, if they are part of a Singapore Permanent Resident (SPR) household, the essential occupier is not allowed to own private property.
You can remove the names of existing occupiers if they no longer live in the flat, as long as doing so doesn’t impact your eligibility to retain the flat under the relevant scheme.
What Is the Difference Between a Co-owner and Essential Occupier
| Co-owner | Essential occupier |
| Has entire or partial ownership of the flat depending on joint tenancy or tenancy-in-common. | Has no legal ownership of the flat. |
| Can use their CPF to finance the flat, including the downpayment and mortgage repayments. | Cannot use their CPF to finance the flat, including the downpayment and mortgage repayments. |
| Can apply for a housing loan as a joint applicant or under a single borrower | Cannot apply for a housing loan as a joint applicant; the owner must apply as a single borrower. |
The biggest difference between being a co-owner and an essential occupier is the legal rights to the property. Unlike owners or co-owners, essential occupiers do not own the property; they only have the right to live on it.
When it comes to home financing, there are some key factors to keep in mind.
An essential occupier cannot use their CPF to pay for the property or the mortgage. Moreover, they cannot be included in the loan application, meaning only the owner’s income is considered when determining the loan amount. This places most of the financial responsibility on the owner and may result in a smaller loan.
However, there are some key scenarios in which listing an essential occupier could be an advantage.
When to Add an Essential Occupier?
1. Couples Who Want to Buy a Second Property
For those who want to own an HDB flat and condo at the same time, buying an HDB flat has to come first. Buying the two properties as co-owners and taking out loans to finance both properties would come with two issues.
They would have to pay Additional Buyer’s Stamp Duty (ABSD) for their second property, and the LTV limit for their second mortgage would be reduced to 45% (if they are still servicing their loan for their first property).
But if the property is owned by only one person, with the other listed as an essential occupier, the essential occupier is free to buy a private property without paying ABSD. That’s because the new property will be considered their first property purchase. Additionally, the essential occupier will be eligible for a bank loan with a Loan-to-value (LTV) limit of 75%.
Still, you must pay attention to the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR). It may be trickier to secure a larger loan amount for your initial HDB flat purchase as the MSR caps the gross monthly income you can use to repay your property loans at 30%. Based on one person’s salary, you may only qualify for a smaller loan and might have to pay for the shortfall in cash.
You can use our mortgage affordability calculator to budget for your new property.
2. Couples Who Want a 3Gen HDB Flat
The post-pandemic buying preference for larger homes endures. On average, 3Gen HDB flats are about 54 sq ft larger than 5-room BTO flats, with two master bedrooms and two common bedrooms per unit.
But since the eligibility criteria for 3Gen HDB flats require a married couple to form the core family nucleus alongside their parents (and at least one parent must be a Singapore Citizen or SPR), listing your parents as essential occupiers can unlock the opportunity to buy this flat type.
3. Singles Who Want More Housing Grants
If you’re a single who doesn’t mind listing their family member as an essential occupier (and live with them potentially), you could get more CPF housing grants.
If you are applying for a home with another single sibling or your parent(s), you could qualify for family grants if you meet the necessary requirements.
Note that if you are listed as an essential occupier, you will be considered a second-timer the next time you take a housing subsidy.
What Property Can Essential Occupiers Purchase?
As mentioned earlier, essential occupiers are not allowed to own an HDB. However, they can buy private property once the MOP is fulfilled. This will be considered their first property with regard to ABSD and LTV limits.
As always, consider your financial goals and needs before buying any property, especially when deciding whether to list an essential occupier.
Consult with professionals to make informed decisions. Our Mortgage Experts are available to guide you through the home financing process or answer any questions about securing a home loan. Best of all, it’s free!
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