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What Happens To Your Housing Loan Once You Sell Your House?

Posted by Jayson Ang on July 5, 2023

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TLDR

When selling your home in Singapore, ensure you pay off your outstanding home loan, refund any CPF monies used, and cover miscellaneous fees like agent commission and legal fees. For upgrades to Executive Condominiums (EC), consider whether to settle your mortgage upfront or use sale proceeds. Existing property loans are exempt from TDSR, allowing you to obtain a second loan for upgrades. Consider your financial situation and consult with experts for strategic real estate advice.

If you’re a first-time home seller, there could be things you’re not familiar with. You might ask yourself, “What happens to my mortgage when I sell my house?”

Or if you’re going from a flat to a condo or EC, you might wonder how much of your HDB sale proceeds you’ll be able to use.

Fear not – we’ll help you work it out!

Can You Sell Your House Before Paying Off Your Mortgage?

Absolutely! Yet, in order for the ownership of the property to be officially transferred to the buyer, you must pay off your current loan first.

Your Sale Proceeds Will Be Used To Pay Off Your Mortgage

Selling your home comes with several financial considerations – like paying off your mortgage, refunding to your CPF, managing grants and commissions, and more – that will impact the final sale price.

Keep these details in mind and you’ll be prepared to navigate the process with confidence.

Pay Your Outstanding Home Loan

Your first step should be to take care of any outstanding home loans, be it from HDB or a bank. The amount will be taken from the sale proceeds. With your CPF, you can cover the downpayment and any additional expenses such as stamp duties and legal fees.

Refund your CPF monies

If you had utilized your CPF Ordinary Account (OA) funds to pay for your home, you would need to reimburse the principal amount, plus any accumulated interest, back to your CPF account.

This could have been utilized to finance your down payments, monthly payments, and buyer’s stamp duty. Moreover, for those who had been awarded any housing grant, you would have to return it to your CPF OA.

To ensure that you take into account the accrued interest for all of the above, remember that this is the interest that the principal amount would have earned if it was sitting in your CPF OA instead of being used to pay for your house.

With a current interest rate of 2.5% per annum, we have provided a step-by-step breakdown of calculations in our article.

As an alternative, you can log in to your CPF account or use HDB’s sale proceeds calculator.

Don’t let the amount taken from your sale proceeds discourage you; the amount refunded to your CPF account can always be used to finance your next home!

Miscellaneous Fees – Agent Commission, Resale Levy Etc

Your sale proceeds will also cover a variety of additional costs, such as an agent commission (typically 2% of your home’s selling price), legal fees, and a resale levy (if applicable).

Remember, agent commission is negotiable – so don’t hesitate to make sure you get the best deal! Plus, keep in mind that if you’re looking to buy a subsidised flat for your next home, you’ll likely be subjected to a resale levy.

Should You Pay Your Existing Mortgage Upfront If You’re Waiting For The Completion Of Your New EC?

When you decide to upgrade from an HDB to an EC, you have the advantage of not having to put your current home on the market for six months after you receive the keys to your new EC.

Furthermore, you won’t have to pay the Additional Buyer’s Stamp Duty (ABSD)! You may be wondering if it’s better to settle your mortgage loan ahead of time or keep up with the monthly payments until you can sell your house; the choice is yours!

When considering your next purchase, it’s essential to look at your cash flow, available financing, and living expenses. Ask yourself if you have enough money to pay off your mortgage, plus enough extra to cover the downpayment, legal fees, BSD, and resale levy (if applicable).

Rather than paying off your mortgage upfront, you could use the sale proceeds from your property to cover the remaining balance.

Having more money in the bank for emergency funds or investing it in higher-yielding options could also be beneficial.

Ultimately, it’s up to you to consider the advantages and disadvantages of both choices.

Exemption Of Existing Property Loan From TDSR

Even if you already have an existing property loan, you can still obtain a second loan.

For instance, if you’re looking to upgrade your HDB flat, your current mortgage payments won’t be calculated into your Total Debt Servicing Ratio (TDSR), which means it won’t affect the amount of money you can borrow for your new property.

To get the loan, you’ll need to provide certain documents such as a copy of the HDB approval letter and a letter of undertaking for the sale of your HDB flat.

If you’re selling an EC (after MOP) or a private property, you don’t have to worry about TDSR – simply provide a signed sale and purchase agreement with the buyer and a certificate from IRAS to prove stamp duty payment, and your monthly loan repayments are taken care of!

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

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