Buying a Property: FAQs
Pls see below for the answers to the following Frequently Asked Questions:
1. Order of Payments for New Launches / Resale Properties
2. Stamp Duty & Loan-to-Value
3. Setting up a Trust to purchase a new property on behalf of your child
4. Decoupling / Part-Purchase
5. Purchasing a Property as Tenants-in-common
1A. ORDER OF PAYMENTS FOR NEW LAUNCHES (in terms of % of purchase price)
Note:
1. Option
5% in cash
2. 15% (8 weeks later)
15% in cash and/or CPF
3. BSD and ABSD
Cash is usually paid first, because CPF typically cannot be withdrawn in time; Buyer will be reimbursed by CPF subsequently
1B. ORDER OF PAYMENTS FOR RESALE PROPERTIES
2. STAMP DUTY AND LOAN TO VALUE (LTV)
3. Setting up a Trust to buy a New Property on behalf of your child
This is usually done by parents for their children who do not have the legal capacity (i.e, below 21 years old) to own a property in his/her own name yet. These parents set up a trust to purchase a property for the child (the beneficial owner), which must be paid for fully in cash.
The parents (“the Settlor”) may entrust another party (“the Trustee”) to look after the trust property for the benefit of the child (“the Beneficiary”). The property (that is purchased under a trust) belongs to the child (the beneficial owner) and the trustee is accountable to the beneficiary for the property, and must manage the trust property, such as paying the relevant taxes and duties. Any rental collected from the property will go into the trust and can only be used for the property’s maintenance.
Unless otherwise specified, the trust will automatically end when the child reaches 21 years of age, and the property will then be transferred legally to his/her name. The parents can specify in the trust the length of time after which it will end, but ultimately the ownership must be transferred to the child.
(Note: please consult your lawyer before making any decision).
4. Decoupling / Part-Purchase
Decoupling / Part-Purchase involves one spouse legally giving up his or her co-owner status to become an authorised occupier. This creates a sole owner, leaving the other spouse free to buy another home without having to pay the ABSD, as that purchase will be seen as his or her first. The savings can be substantial, but we should all ensure that the ABSD saved should exceed the cost of decoupling.
Stamp duties. This is because transferring a half share to one of the co-owners is still subject to the standard BSD rate of 3-4%, as it is considered a transaction. In some cases, seller’s stamp duty may be payable if the property was bought less than three years ago. Legal fees will cost a few thousands.
Bank loans. Furthermore, if there is an outstanding home loan, then this loan must be discharged and a new mortgage obtained from the bank. There may be a penalty for redeeming the loan and there may be additional cost of getting a fresh mortgage. Also importantly, consider if the salary of the sole owner can support the fresh loan.
CPF refund. If the CPF monies are involved, we must consider the refund of CPF money to be made to the spouse giving up the co-ownership.
https://www.straitstimes.com/business/get-the-sums-right-before-decoupling-to-buy-property
(Note: please consult your lawyer before making any decision).
5. Purchasing a Property as Tenants-in-common
Some couples are purchasing their first property as tenants-in-common, instead of as joint tenants (usual arrangement). One method is to have one spouse own 99% while the other owns only 1%. Any future payment of BSD and SSD due to a de-coupling / part-purchase will only be payable on that 1% share being transacted. However, there may be a number of implications, especially in the event of divorce or death.
(Note: please consult your lawyer before making any decision).
