5 Options After HDB Flat Reaches Minimum Occupation Period (MOP)

by Amanda Chiu

The Minimum Occupation Period, also commonly known as MOP, is a familiar yet frustrating term for many Singaporean homeowners! Why? Because it is a 5-year restriction which legally mandates homeowners to stay in their government subsidized BTO flats from the point they collect the keys to the flat, before they are able to sell it off on the open market and more.

Here is a quick recap of the things that homeowners CANNOT do during the MOP period:

  • Resell flat on open market
  • Rent out entire flat (must still live there if renting out rooms)
  • Buy other residential properties (local or overseas)

As you can see, for many homeowners looking to move to a new location, upgrade to private or for any other reason, this 5-year restriction really limits your options dramatically. And that is the reason why many Singaporean homeowners look forward to the end of their MOP period!

So, congratulations if your MOP term is coming to an end! But have you decided what to do next?

If you are still wondering what the best decision post-MOP could be, here are 5 popular options you can consider!

Continue Staying in Your BTO Post-MOP

While many Singaporeans excited to “unlock” profits from their BTO or wishing to upgrade their lifestyles rush to make changes, there is also the option to continue staying in your BTO for homeowners who are content with their home!

If you like your home as it is, enjoy the company of your neighbours and the surrounding amenities, then there really is no real motivation to move.

A friendly piece of advice: You do not have to follow what everyone else is doing! You do you!

Sell and Move to Another HDB Flat

Want to move closer to your workplace or your kids’ schools? These are common reasons BTO homeowners yearn to move from one HDB locale to another.

Good news! You can now do that post-MOP! But here are some things to take note when you make that new or resale purchase for your second HDB:

  • New Flat from Government: You will need to pay a resale levy on your first BTO. Why? This is to ensure that first timers enjoy more public housing subsidies than second timers.
  • Resale HDB flat or DBSS flat from Developer: No need to pay resale levy
  • All:
    • You must pay back CPF money used (principal & accrued interest) for the first BTO. Alternatively you can consider applying for the Enhanced Contra Facility (ECF) to allow you to directly use the sale proceeds and refunded CPF monies for the new purchase – this can dramatically help reduce your cash outlay required and mortgage loan required.
    • Ensure you sell your flat within 6 months to avoid paying ABSD tax on the second property.

Sell and Upgrade to Private Property

If you have been yearning to upgrade to a condo or landed property, now is your chance! There are two simple ways you can go about it – but do note that the sequence affects your total spend on the upgrade:

Sell HDB then Buy Private:

This is the most straightforward method to avoid financing problems. By selling off the HDB flat first, you get to collect the proceeds to pay back the loans and CPF accrued interests etc, before you get another round of loans for the new private property.

The downside? You might need temporary accommodations while there is a gap between the sale of the HDB and the purchase of the new private property.

Buy Private then Sell HDB:

Well, the other alternative may be more convenient in terms of moving but has significant downsides in the financing aspects.

  • ABSD will be levied on your second property (the new private property) if you are holding onto the existing flat upon purchase – at > 12% rates it is no small sum to be laughed at. While you could get remission if you sell the HDB within 6 months, there is the possibility you sell the flat much later and end up having to pay the tax. And just like that, your new private home is 12% more expensive.
  • Financing for your second home is also dependant on your existing loan being paid off – depending on the situation it could affect your ability to get enough financing for the new private property and having to fork out more cash up front.

Then again, it depends on your needs and requirements at that point in time! Just make sure you go in with both eyes open and aware of the potential downsides.

Move Out and Rent Flat

If you have the luxury of moving in with your parents or in-laws, you now have the option of creating a passive income stream for yourself in the short-medium term.

Post-MOP, homeowners are allowed to rent out their entire flat. If you have the option to stay somewhere else over the next few years, you can in fact rent out your entire flat for a steady passive rental income on the whole flat.

Tip: Some homeowners looking to upgrade to private properties choose this option to grow their cash so they can make the minimum cash outlay.

Hold onto Your BTO and Buy Another Private Property

Have enough capital and want a passive way of making rental income?

Now that the limits on buying a second residential property is lifted post-MOP, you can consider buying another private property for potential rental income (either from the HDB or private property).

Costs to take note of:

  • ABSD of 12% is mandatory on second property.
  • Flat loan: Either you need to pay off your HDB flat loan in full to get a bigger loan on the private property or leave the outstanding loan on the HDB and get a smaller loan on the new property

What Will You Do Post-MOP?

Whether you plan to stay, move, or get an additional property post-MOP, the key to making the right decision for you is to make sure you do your necessary homework beforehand and not over-extend your finances.

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