Only Private

[Arcachon]

[Arcachon]

SCENARIO 1: WHERE DECOUPLING RESULTS IN SAVINGS

Mr and Mrs Tay - who do not own any other property - bought an apartment together. After three years, they are considering buying an investment property that has a price tag of $1 million. Meanwhile, their home loan's lock-in period has expired and they can redeem their loan with no penalty. Their home is valued at $1 million.

If the couple had bought the investment property without decoupling first, they would be slapped with an ABSD of 7 per cent ($70,000) as it would be their second property.

If they decouple, their outlay includes the basic stamp duty of $9,600 (based on 50 per cent of the property value) plus legal costs of about $6,500. The couple should also take into account the cash difference between $1 million and the new mortgage granted to the sole owner, says Ms Lie.

The standard stamp duty is calculated as: 1 per cent on the first $180,000, 2 per cent on the next $180,000 and 3 per cent for the remainder. A quicker way to calculate is to take 3 per cent of the property value minus $5,400.

SCENARIO 2: WHERE DECOUPLING DOESN'T MAKE SENSE

Mr and Mrs Lim co-own their residential property in equal shares and it is valued at $2.4 million. They are keen to buy an investment property for $1 million.

Assume the couple opts to decouple and Mr Lim sells his 50 per cent share to Mrs Lim. There will be a standard stamp duty payable of $30,600. In addition, Mrs Lim - who owns another property here - still has to pay ABSD of $84,000 (7 per cent of $1.2 million).

On the other hand, if they opt not to decouple, their outlay will be lower. Assuming Mr Lim buys the investment property solely (as he does not own a second property here), he will fork out ABSD of 7 per cent or $70,000 for the $1 million investment property.

So the verdict in this case is not to decouple.

WHAT ABOUT HDB FLATS?

Since April 1, 2016, Housing Board flat owners are no longer allowed to transfer their ownership to a family member except under six special circumstances.

Previously, owners were not bound by such restrictions when transferring their flat to a spouse or immediate family member. Once they had given up their ownership, HDB dwellers could then buy a private property without incurring the ABSD.

Under newly tightened regulations, changes in flat ownership are allowed only on grounds of marriage, divorce, death of an owner, financial hardship, renunciation of citizenship and medical reasons.

These would include those who need help from family members in servicing the mortgage, or who have a chronic illness and wish to bequeath the flat.

Those who do not fall under the new guidelines will have their situations reviewed on a case-by-case basis.

It is anyone's guess whether the same restrictions may fall on private home owners in the near future. Meanwhile, it is prudent to work out your sums carefully before jumping in.

https://www.straitstimes.com/busines...o-buy-property