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What happens when a property is owned by two or more persons, and one person passes away? What’s the difference between “joint tenancy” and “tenancy-in-common”? |
| 7. |
What happens to a property in the event of a divorce? |
| 8. |
What is negative equity, and how does it affect a home buyer? |
| 9. |
There are many housing loan packages offered by banks. How do I know which is best for me? |
| 10. |
What is refinancing, and why do people refinance their housing loans? |
| 11. |
What is “cash-back”, and is it allowed? |
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| 1. |
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In addition to the CPF housing withdrawal limits which define the amount of CPF that can be used for housing, members should also be aware of factors like the CPF Minimum Sum requirements when they reach 55 years old, the effect of changes in housing loan interest rates, reductions in the amount of contributions to the Ordinary Account as they get older, etc.
Please click here for the list of factors. |
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It depends on whether you have pledged your property under the Minimum Sum Scheme instead of setting aside the Minimum Sum in cash when you reached 55.
If you have done so, you will be required to refund the amount that was pledged, plus accrued interest to your CPF Retirement Account when you sell your property.
No refunds to your CPF account are required if you did not pledge your property under the Minimum Sum Scheme. |
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| 3. |
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Generally, when you sell your property, you’d need to refund the CPF savings you had earlier withdrawn for the purchase of the property. This includes the interest you would have earned, had the savings remained in your CPF account
It’s a straightforward matter when the sales proceeds are enough to pay the remaining loan to HDB or the lending bank, as well as making a full refund of your CPF savings.
What happens if the sales proceeds aren’t enough?
Here’s a simplified table showing the “priority” of payments, ie. how the sales proceeds would be applied.
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Priority of Payment |
HDB Flat Financed with HDB Loan |
HDB Flat Financed with Bank Loan |
Private Property Bought Before 1 September 2002 |
Private Property Bought or Refinanced After 1 September 2002 |
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First |
Outstanding HDB loan and interest, and resale levy if applicable |
Outstanding housing loan with bank |
CPF savings withdrawn for purchase of property |
Outstanding housing loan with bank |
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Second |
CPF savings withdrawn for purchase of property, and CPF interest |
CPF savings withdrawn for purchase of property |
Outstanding housing loan with bank |
CPF savings withdrawn for purchase of property |
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Third* |
Outstanding HDB upgrading cost if any |
Housing loan’s interest, and CPF interest |
Housing loan’s interest, and CPF interest |
Housing loan’s interest, and CPF interest |
* the housing loan interest here is applicable only in the event of a forced sale, and is calculated from the date of payment default. |
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| 5. |
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Property bought with CPF savings are not covered by CPF nomination.
When a member passes away, the property will form part of the estate of the deceased member. The CPF savings withdrawn for the property need not be refunded to the deceased’s CPF account.
A homeowner can make a will and state who should get the property, in the event of his death. If a person dies without making a will, he is said to have died “intestate”. The estate will be distributed according to the rules of intestacy as laid down in the Intestate Succession Act.
For Muslim homeowners, Singapore’s Syariah Court has jurisdiction over the method of distribution of a deceased person's estate among his next of kin in accordance with Islamic law. The rules of intestacy are not applicable.
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Person died intestate, leaving: |
Distribution |
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Spouse only; no children or parents |
All to spouse |
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Spouse and children |
Half to spouse and half to children equally |
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Spouse, parents; no child |
Half to spouse and half to parents equally |
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Parents; no spouse |
All to parents equally |
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Siblings and their children; no spouse, child or parents |
All to be shared equally among siblings and if they have already passed away, their children |
| 6. |
Grandparents; no spouse, child or parents |
All to grandparent(s) equally |
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Uncles and/or aunts; no spouse, child, parent, siblings or grandparent |
All to uncles and/ or aunts equally |
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No spouse, child, parent, sibling, grandparent, uncle or aunt |
All to Government | |
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| 6. |
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The law provides for two forms of ownership: “joint tenancy” and “tenancy-in-common”. The form of ownership is stated on the title document for the property.
This is where all the owners have an equal interest in the property regardless of the amount of money each co-owner had contributed towards the purchase of the property.
Married couples usually opt for joint tenancy when they buy a property. A joint tenancy overrides any will, and the survivor always gets the automatic right to assume ownership of the deceased’s share.
Thus, if a husband passes away first, then the wife as the survivor automatically takes over the husband’s share of the property. Even if the husband had made a will which stated how his share of the property should be distributed, his wife will automatically get to inherit his share.
This is where each co-owner holds a separate and definite share in the property.
This arrangement is more common where the owners are not related to each other, eg. friends buying a property together for investment.
There is no right of survivorship in a tenancy-in-common. In other words, unlike a joint-tenancy, the deceased's interest does not pass automatically to the remaining co-owners.
Upon the death of a tenant-in-common, the deceased's interest can be distributed in accordance with his will (if any) or under the provisions of the Intestate Succession Act.
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| 8. |
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Generally, a home is said to be in “negative equity” when its market price is less than its outstanding loan.
Banks say that as long as customers pay the monthly instalments on time, they won’t ask them to top-up the difference between the market price and the outstanding loan.
However, if payment isn’t made for a few months, and the customer is unable to work out a payment plan with the bank, the bank may get a court order to do a “forced sale” to recover the outstanding loan and unpaid interest.
While it’s less common for HDB flats to be in negative equity, it’s possible for resale flat buyers to find themselves in such a situation, especially if they had bought the flat when prices were at a relatively high level. |
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There’s no simple answer because much would depend on a person’s financial situation.
However, you may want to consider these pointers when you shop for a housing loan:
Check the maximum loan duration or term that you can get. Some banks also set a maximum age limit, which would limit the loan duration. However, you shouldn’t decide on the maximum duration without careful thinking. The longer the duration, the more interest charges you’d be paying!
Ask the banks to show the instalment amounts using different interest rates, including interest rates that are higher than those quoted in the loan packages. This lets you assess whether you’d be comfortable if interest rates were to fluctuate.
Typically, banks offer fixed interest rates for the first 2 -3 years of a loan, with variable interest rates for the remaining years. If you prefer to be certain about your monthly instalment amount, then look for packages which offer a longer fixed rate period. See if the bank is able to provide you with the average interest rate figure over the entire loan period.
Some banks impose a penalty if customers leave in the initial years of the loan. This refers to the customer paying off the old loan, perhaps by refinancing using a new loan with another bank. The penalty could be about 0.5 to 1.5 per cent of the existing loan amount.
See if the banks charge a loan processing fee, pre-payment fee, or third-party fee such as legal fee, valuation fee and fire insurance premium. |
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Refinancing means getting a new housing loan to pay off the current loan. This is usually done because people believe they’d pay less interest on the new loan.
A lower interest rate will decrease your monthly instalment. But you may have to stay with the new loan for some time before the lower payments will offset the costs of refinancing.
If you’re thinking of refinancing, ask the bank to show you why their loan package is better than your existing loan. You should also check on any lock-in period that might come with refinancing, the legal fees, and other refinancing costs.
If you have a HDB concessionary loan and are thinking about refinancing to get a market-rate loan with a bank, do remember that banks may or may not be as flexible as the HDB in not repossessing properties when loans default. |
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| 11. |
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“Cash-back” arrangements occur when the buyers, sellers and housing agents collude to inflate the declared purchase price so as to enable the buyers to take a higher housing loan and/or to withdraw more CPF savings. These arrangements are supported by valuation reports, which are also on the high side.
Such "cash-back" arrangements are illegal. They are also not financially prudent for the buyer. The buyers’ retirement savings are eroded by the withdrawal of more CPF monies than is needed for the actual purchase. Buyers also expose themselves to greater financial risks by taking on bigger mortgage loans, which will result in more interest being incurred. Moreover, they will have to pay higher stamp/legal fees which are computed based on the declared resale price.
Sellers are also liable for a higher resale levy based on the declared resale price if they subsequently purchase another subsidized flat directly from HDB.
Parties involved in “cash-back” arrangements can be prosecuted for cheating or false declarations.
To curb cash-back arrangements, all members using their CPF savings for the purchase of HDB resale flats financed with a bank loan and/or servicing of the loan will require a valuation report from a private valuer assigned by HDB from 1 April 2005. This requirement will also apply to transferees who are taking bank loans to effect transfer of ownership of an existing HDB flat at market valuation. To read more about cash-back, please refer to our press release and FAQs.
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