{"id":22125,"date":"2018-12-31T16:37:54","date_gmt":"2018-12-31T08:37:54","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=22125"},"modified":"2022-06-13T17:05:52","modified_gmt":"2022-06-13T09:05:52","slug":"new-years-resolutions-hdb-owners-2019","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/new-years-resolutions-hdb-owners-2019\/","title":{"rendered":"9 Essential New Year\u2019s Resolutions That HDB Owners Must Make In 2019"},"content":{"rendered":"
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There\u2019s been a lot of griping by HDB flat owners this year, and who can blame them? For years, we\u2019ve assumed HDB flats are retirement assets \u2013 and now that bubble has been burst. Well don\u2019t make the same mistake! Here are some resolutions to keep to for the new year:<\/p>\n

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1. You will consider the remaining lease when before buying an old flat<\/b><\/p>\n

The Selective En-bloc Redevelopment Scheme (SERS) dream is dead. Only five per cent of housing estates qualify for it.\u00a0<\/span><\/p>\n

Now we know that most of us will just get the Voluntary Early Redevelopment Scheme (VERS) \u2013 a \u201cmeh\u201d scheme that will give you just market value (read: too little money) for your old flat; and even then, only if the majority of owners there agree to it.\u00a0<\/span><\/p>\n

So do yourself a favour, and consider the remaining lease before you buy \u2013 even if it\u2019s in a fantastic mature location like Queenstown. Flats that are past the 40 year market are not likely to help your retirement much, if you\u2019re buying in your 30s or 40s.<\/p>\n

2. You will not even think<\/i> about selling your flat, and then giving the proceeds to your children while you move in with them<\/b><\/p>\n

This is a good way for elderly Singaporeans to end up homeless.\u00a0<\/span><\/p>\n

Never, ever<\/i>, give all the cash from your selling your flat to your children; and never assume you can move in with them and get along. If a squabble starts and you\u2019re kicked out from the flat, you could be left without a roof over your head.\u00a0<\/span><\/p>\n

If that happens, it\u2019s very <\/i>difficult to get the money back from your children. The legal proceedings will be long and expensive, with no guarantee of success.\u00a0<\/span><\/p>\n

We\u2019re sure you love and trust your children, but just don\u2019t do this. They\u2019ll get their inheritance eventually.\u00a0<\/span><\/p>\n

3. You will not overstretch, and sell your flat to buy a condo you can\u2019t really afford.<\/b><\/p>\n

The world economy is not in great shape right now, and it\u2019s a really bad time to take big risks. In particular, note that home loan interest rates are going to rise significantly: two more interest rate hikes are planned in America in 2019, and this will make the monthly repayments less affordable.<\/p>\n

On top of that, remember that maximum financing from a private bank loan is now 75 per cent (or even les, if you buy while your flat loan is still outstanding). That means a bigger down payment, with climbing interest rates.<\/p>\n

Stick to the old formula for prudence: avoid upgrading if your eventual home loan obligations \u2013 with your other debts \u2013 would take up more than 40 per cent of your monthly salary.\u00a0<\/span><\/p>\n

4. You will only prepay your home loan after consulting a financial adviser or wealth manager<\/b><\/p>\n

We\u2019re aware that the sooner you pay your flat loan, the less interest you\u2019ll end up paying. But that alone is not a good reason to rush repayment.<\/p>\n

If you empty out your savings to speed up your flat repayment, what are you going to do in an emergency? What if you get retrenched, or are medically unable to work? You can\u2019t pay for lunch by telling the chicken rice man you have no cash, but \u201chey I have a fully paid-up flat!\u201d<\/p>\n

Do you really want to end up having to sell your flat, because you decided to lock all your money in it and become asset-rich \/ cash-poor?\u00a0<\/span><\/p>\n

There are <\/i>situations where it might be okay to rush your home loan repayment \u2013 but the considerations are not simplistic. You need to take into account your liquidity issues, and whether it\u2019s worth doing it given the low interest rate (2.6 per cent per annum for HDB loans).<\/p>\n

Ask a financial adviser or wealth manager first<\/i>. Don\u2019t read an internet article about repaying your home loan early, and imagine it applies equally to everyone.<\/p>\n

\u00a0<\/span>5. You will not do that ridiculous \u201ctrick\u201d of locking one room, and then renting out the whole flat; and you will stop it if you\u2019re doing it<\/b><\/p>\n

If you lock up one room, you\u2019re not technically renting out the whole flat, right?\u00a0<\/span><\/p>\n

That clever bit of sophistry is not <\/i>okay with HDB, no matter what some people may have told you. And the possible consequences of doing it are severe \u2013 even if HDB doesn\u2019t confiscate your flat, you\u2019re going to end up in legal issues when you need to suddenly kick out tenants, who have signed a lease with you (it\u2019s your fault for taking tenants when you\u2019re not allowed to).\u00a0<\/span><\/p>\n

The costs of getting caught are so high, it\u2019s not worth the extra rent you\u2019re making.\u00a0<\/span><\/p>\n

6. You will not resort to in-store credit or bizarre in-house financing when you renovate<\/b><\/p>\n

A lot of HDB owners decide to revamp their homes for the new year. That\u2019s all well and good, but watch the use of loans.<\/i><\/p>\n

If you must borrow money to renovate (we always suggest you just save up for it), always use a reno-loan first. This is specifically designed for renovations \u2013 it\u2019s typically capped at $30,000, or six months of your income (whichever is lower), and can be obtained at a rate of around five per cent per annum. Check with loan comparison sites, and you may find an even better deal.<\/p>\n

But don\u2019t <\/i>use bizarre in-house financing loans, which may use rest-rates or administrative fees to become more expensive than you imagine. And as for in-store credit, watch out: you may be able to walk out with your furniture at $0 down today, but you could face effective interest rates as high as 48 per cent per annum (more than twice your average credit card).<\/p>\n

7. You will get home content insurance at last<\/b><\/p>\n

Your flat comes with basic fire insurance (you\u2019re paying for it, whether you want to or not). But home content insurance is optional, and can be cheap as $50 to $70 per year. What does it do that fire insurance doesn\u2019t?<\/p>\n