Married couples can save tens of thousands of dollars when purchasing a second property, thanks to decoupling. Through this simple process, it’s possible to minimise the impact of stamp duties. Read on to learn more about this:
What is de-coupling?
An example of de-coupling is when a husband, who co-owns the house with his wife, sells his share of the property to her. As this means the husband no longer owns any residential property, he can then purchase a residential property without incurring the Additional Buyers Stamp Duty (ABSD) for a second house.
A variation of de-coupling is “part purchase”. This is similar in principle, except that it can happen between multiple co-owners. For example, if four people are co-owners, one of them can buy over the shares of all the others.
De-coupling is only possible for co-owners of a private property.
1. Does De-coupling always lead to net-savings?
If the new property that you intend to acquire is significantly lower in value than your share in the current property, there may not be net savings in the de-coupling. As such, it may not be worth to de-couple. In addition, net-savings from de-coupling generally only applies for married couples purchasing their second property, not third or fourth.
For instance, if husband buys the partial interest of the property from wife, ABSD still applies if husband owns more than 1 residential property. Buyer’s Stamp Duties remains payable as there is a purchase of a partial interest of a property. Seller’s Stamp Duties may apply depending on when the property was purchased.
In short, de-coupling might be a good method and makes all financial sense if you are purchasing a second property that is comparatively higher in value than your share of the existing property.
2. Do you need a new bank loan?
Do check your eligibility to refinance the current property, as well as the loan quantum you can obtain for the purchase of the new property.
In particular, find the balance cash required for completion once you have confirmed your loan quantum. Typically, your existing property loan will be redeemed, and you will receive a fresh loan from the bank. You can choose to pay up your existing housing loan fully as well.
(Note that if you choose to fully pay your housing loan before the end of the loan tenure, the bank may impose penalties).
If CPF monies had been used in the purchase of the first property, the amount used from your CPF, together with the accrued interest, will be refunded back into your CPF account (although you can still use your CPF to purchase the next property).
3. How does the manner of holding matter?
There is a difference based on whether you and your spouse own the property as joint tenants or tenants-in-common. In a joint tenancy, for example, there are no separate shares in the property. In these situations, you may need to convert to a tenancy-in-common before decoupling.
For more information, get in touch with Anthony Law Corporation.