When you sell property in Singapore, it’s likely one of few reasons. You’re upgrading to a better property, you’re ‘right-sizing’ your home (for retirement, perhaps), or you’ve experienced a change in your financial situation and need to adjust your assets accordingly.
If you’re like most, you would have taken a home loan to finance the property’s purchase. For those still servicing that home loan, you may wonder, “What happens to my existing mortgage when I sell my property?” In this article, we’ll answer just that.
Have a specific home loan-related question to ask when you sell a property? Need more guidance on the financial aspect of the home selling process? Ask our Mortgage Experts.
What Happens to My Existing Mortgage When I Sell Property?
If you’ve not finished paying off your home loan, know that your mortgage doesn’t disappear the minute you sell your property. Whether you have a private home or an HDB flat, or are servicing your home with an HDB housing loan or a bank loan, you will need to settle any outstanding home loan amount.
This balance will be deducted from the money you receive from selling your property. If the money from the sale of your property is less than the outstanding loan, you will have to make up the difference in cash.
If you’ve used your CPF OA savings to pay off your home loan, you must return the amount with interest. You can check the accrued CPF interest amount anytime via the CPF mobile app.
Can I Sell My House Before Paying off My Mortgage?
Yes, you can kickstart the home-selling process before paying off your mortgage entirely. As mentioned, you’ll need to pay off any outstanding loan amounts. This should be completed before the property is transferred to the new owner.
Below are some scenarios for those intending to upgrade their property and when to pay their mortgage.
1. Upgrading from HDB Flat to EC: When to Pay Mortgage?
If you’re upgrading from an HDB flat to an Executive Condo (EC) that has not yet been privatised, you do not need to begin the home selling process to sell your home immediately. Since the EC is still subject to HDB rules, you only need to sell your current HDB flat within six months of receiving the keys to your new home. Additionally, you will not be subject to Additional Buyer’s Stamp Duty (ABSD).
So comes the dilemma: Does it make more sense to sell and pay off your HDB flat’s outstanding loan amount immediately? Or would it be a better move to continue with your existing monthly mortgage payments until the last minute?
Sell Your HDB Flat Later, Pay Off More of Your Current Mortgage
Paying off more of your home loan could potentially translate to higher sales proceeds when you eventually sell off your home. This is especially true if you were primarily servicing your mortgage with cash and if interest rates are low.
Furthermore, if you’re waiting for the completion of your new EC, you are in no rush to begin the home-selling process. You can take your time to find a suitable buyer who offers an agreeable price or sell when the market is at a high. In any case, you can use the money from the sale of your flat to pay off your mortgage.
Sell Your HDB Flat ASAP, Pay Your Existing Mortgage Sooner
However, if you are currently servicing a bank loan and are paying interest rates that are higher than you would like, it may make sense to settle the outstanding amounts on your existing mortgage quickly. However, do consider whether you have sufficient cash flow and emergency funds for a rainy day.
Ultimately, what you choose should depend on your financial needs and goals. Consider that you will need enough cash to pay for your EC downpayment, legal fees, Buyer’s Stamp Duty (BSD), and resale levy (if you sell a resale HDB flat). For those who are unsure, speak to a Mortgage Expert for tailored home financing advice before you embark on the home-selling process.
2. Upgrading from HDB Flat to Condo: When to Pay Mortgage?
For those upgrading from an HDB flat to a private property, you may be considering the pros and cons of buying first and selling later. If you’re still paying off your HDB flat and you secure your private property before selling your existing home, what happens is you could have two home loans to service.
The Loan-to-value (LTV) limit for your second mortgage will be capped at 45% (or 25% if the loan tenure exceeds 30 years or the loan period goes beyond the borrower’s age of 65), and a minimum cash down payment of 25%.
As you can see, this can pose a problem if you are not cash-rich and depend on a home loan to finance your property purchase. Don’t forget you have to consider your Total Debt Servicing Ratio (TDSR) too. Plus, you would have to pay the ABSD tax first before applying for the ABSD remission later.
But if you sell first and buy later, you would have settled your outstanding loan amount and potentially qualify for a loan with a higher LTV limit (up to 75% LTV limit and a minimum downpayment of 25%). Again, before you buy a property, it makes sense to ensure you can afford your home.
Looking for a home loan to finance your new condo purchase? Find the best home loan for you when you browse the latest mortgage packages on the market via our Mortgage Comparison tool.
3. Selling Your New Launch Condo before TOP
Sub-sales occur when a property bought directly from a developer is sold to another buyer before the development receives its Certificate of Statutory Completion (CSC). If you intend to kick start the home selling process and sell your new launch condo before it receives its Temporary Occupation Permit (TOP), consider if you need to pay Seller’s Stamp Duty (SSD).
The amount of SSD payable can go up to 12%, depending on how long you have held on to the property before selling it. Only if you’ve held the condo for more than three years from the purchase date will you not need to pay SSD. Coupled with BSD costs, you may lose if you sell your new launch condo before TOP at a slightly higher price than the purchase price.
Some new launch condo owners may consider this move, especially if servicing the mortgage has become a financial burden. Selling your condo quickly can be a way to cut losses when you settle up on your outstanding loan amount. But if you have holding power, holding off on the home selling process till after the TOP is obtained may be a more advantageous move.
Need More Home Financing Advice When You Sell Property?
Hopefully, this article has armed you with enough information to begin navigating the home-selling process. While we’ve covered common home financing questions, such as what happens to existing mortgages when you sell property in Singapore, we know everyone’s financial goals and needs are unique.
For tailored home financing advice, you can approach our team of friendly, dedicated Mortgage Experts. They can also assist you in picking a new mortgage for your next property purchase and guide you through the entire home loan application process. Best of all? It’s free!
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