Before we explore the 3 things that you should never do before your flat reaches its MOP, let's first understand what the term stands for.
What is MOP?
MOP applies only to flats bought from HDB, be it from the developer or the open market.
MOP stands for Minimum Occupation Period. It is usually for five years and you will have to physically reside in your flat before you can sell/rent it out, or even buy another private property.
When does the HDB MOP start?
It starts from the day you collect your keys and does not include any period when you're not residing in the flat.
The HDB MOP helps to prevent homeowners from flipping their newly-purchased flat for a profit immediately.
It excludes any period where you do not occupy the flat, such as when the whole flat is being rented out or when you go overseas to work.
For example, if you've lived in your flat for three years, but spent two years working overseas, then when you return, you will need to live in your flat for another two years before you can rent, sell or buy another private property. However, to be safe, if you have difficulty ascertaining whether you can now sell your flat or not, simply request for confirmation from HDB itself. Here's a link for you to do so.
Otherwise, the MOP duration simply depends on the purchase mode, flat type, and date of flat application:
How can I check my HDB MOP?
Simply log in to your MyHDB page with your SingPass.
Under My Flat, head to Purchased Flat > Flat Details > Minimum Occupation Period (MOP).
So now that we have explored what the term stands for and how to check if you are eligible to sell your flat, let's take a look at the 3 things you should avoid before your flat reaches its MOP.
3 things you CANNOT do before your flat reaches its MOP.
Before your flat reaches its MOP, you are NOT allowed to:
Sell your flat (except back to HDB for special reasons)
Rent out your whole flat (but renting out rooms is okay)
Purchase a private property
An exception to this rule is any one-room resale flat, purchased without grants. Such flats have no MOP.
Now, as long as you live in your flat and occupy at least one bedroom, you can rent out any of the extra rooms. You’ll need to make sure each rental is a period of at least 6 months, otherwise, you run the risk of having your flat confiscated by HDB.
If you are keen on renting out your flat/bedroom(s), do note that you must obtain HDB's approval before you do so. You can submit your application through one of these channels:
Do take note of these regulations for renting out your flat/bedroom(s) so that you don't run the risk of having your flat confiscated by HDB!
Take a look at the video below to learn more.
What should I do once my flat reaches MOP?
Once your flat reaches MOP or is about to reach MOP (preferably 3 months before), call your trusted realtor and start planning for the next property move. Don't wait too long as based on past trends, the value of HDB flats have a negative correlation with its age.
Simply put, the longer you wait to sell, the lower its value.
Here are some options...
Upgrade to a private property
There are two ways to go about it. You can sell your flat and upgrade or you can buy first, then sell your flat.
If you sell and upgrade to a new condo (building under construction), then you may need to rent out a place as you wait for your new condo to be ready. Some may feel that this is a hassle and not financially wise... but think about it.
If you buy a new condo, you'd have already attained the first-mover advantage. Say you purchase a new condo at $1.5 M. Since it takes about 3-4 years to be ready, you may need to rent a place for 3 years for example. Take yearly rental to be $24,000 (that is about $2000 a month). If you need to rent for 3 years, that brings the total rental expense to $72,000. However, once your new condo is ready, the capital appreciation just needs to be 5% of the $1.5M for you to already be able to cover your rental expense for the last 3 years. And based on the market trend, with the first-mover advantage, new condos tend to appreciate more than 5%.
But not all is rosy, do ensure that you engage a realtor that will help you with the market research as well. Cause not all properties are equal.
Next, you can choose to buy a private property first and then sell your flat. This is usually more convenient as it eliminates the need for temporary accommodations. But, do note that when you buy a second property before selling your flat, you'll need to pay the ABSD (Additional Buyer Stamp Duty) as usual. If you’re a married couple and at least one of you is a Singapore citizen, you can get ABSD remission if you sell the flat within six months of buying a second property. If you can’t sell the flat within six months, then you may not be able to get the remission.
So, whether you should sell first then buy or buy first then sell really depends on your situation. Speak to me and I'll help you out.
Move in with your parents or elsewhere as you rent out your HDB flat
This is only applicable to Singapore citizens. For Permanent Residents, do note that you can only rent out rooms, not the entire unit.
You can get passive income from your current HDB flat as you are now able to rent out the entire flat. You can do this as a way to earn so that you can use the saved rental income as a downpayment for your next property.
There are definitely other options apart from those mentioned above. At the end of the day, it really depends on your situation, needs and budget.
If you want to know more about your next best move, have a question or just want to explore your options... get in touch with me and I'll help you out!
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