Guide to Upgrading from an HDB Rental Flat to Owning an HDB Flat

Eugenia Liew
Guide to Upgrading from an HDB Rental Flat to Owning an HDB Flat
Singapore boasts one of the highest home-ownership rates in the world with about 90% of people here owning a home of their own. Despite this proud record, it also means about 10% of people here do not own their own homes – and have to rent.
Apart from renting from the open market, there is also an option to rent from HDB through either the Parenthood Provisional Housing Scheme (PPHS) or the Public Rental Scheme.
The PPHS is meant for couples or families who have booked an uncompleted HDB flat, which means they are in the process of waiting for their HDB flat to be completed so they can move into it.
On the other hand, the Public Rental Scheme is meant for lower-income Singapore Citizen households with no viable housing options or family support. According to the Ministry of National Development (MND) about 50,000 households are currently under the Public Rental Scheme.
For this group of families, upgrading to a home they can call their own is an endeavour many may strive for. Recently, the Straits Times published an article which mentioned that over 4,600 families living in public rental flats become HDB homeowners in the past five years.

What Is The Public Rental Scheme?

Flats under the Public Rental Scheme are heavily subsidised to cater to Singapore Citizen (SC) households who have no other housing options. There are also stringent eligibility criteria that have to be met in order for a household to get an HDB rental flat.
According to the HDB website, there are 1-room and 2-room flats available for rent under the Public Rental Scheme. A recent press release by MND also states that there is a very limited supply of 3-room flats to support larger families with children under the scheme.
There are also two schemes that people can apply under for their HDB rental flats:
  1. Family Scheme
  2. Joint Singles Scheme (JSS)
Those who apply under the JSS can only rent 1-room HDB flats, which are partitioned.
These HDB rental flats are primarily for those with a total household gross monthly income not exceeding $1,500. Those with a higher total household gross monthly income can still apply, and HDB will review their situation on a case-by-case basis.
The HDB website also indicates that “family support” is a criteria for these HDB rental flats. Applicants may not be eligible for HDB rental flats if any children is able to house them in their home or financially able to provide other housing options. For the full list of criteria to assess your eligibility, you can visit the HDB website.

How To Upgrade From An HDB Rental Flat To Owning Your Own Home?

As mentioned earlier, it was recently reported that over 4,600 families living in public rental flats became HDB homeowners in the past five years. This is a piece of positive news highlighting that it is possible to upgrade from renting a public rental flat to owning an HDB property.
When doing so, families currently living in HDB rental flats can lean on two main assistance schemes:
  1. Enhanced CPF Housing Grants (EHG)
  2. Fresh Start Housing Scheme (Fresh Start).

Using Housing Grants To Buy Your HDB Flat

As households living in HDB rental flat typically earn $1,500 and below, they are eligible for up to $80,000 in housing grants when buying an HDB BTO or up to $160,000 when buying an HDB resale flat.
For those who purchase a BTO flat from HDB, you can tap on the Enhanced CPF Housing Grant (EHG) of up to $80,000. In the latest February 2021 BTO exercise, the price of the most affordable 3-room flat was in Bukit Batok and cost $175,000.
For families who are considering this option, the downpayment will be paid for with the housing grant, so there’s little need for any cash outlay. Let’s take an example scenario:
  • Husband and wife earns $1,500 combined each month
  • They are under 35 years old
  • They have been working for at least 5 years
  • You are a first-time buyer
In this scenario that both husband and wife earn a combined monthly income of $1,500, they would be accumulating about $345 in their CPF Ordinary Account each month. After five years, this will grow to more than $21,000.
Price of HDB BTO Flat$175,000
Estimated costs and fees$2,500
[Less] Amount of Enhanced CPF Housing Grant– $80,000
[Less] Amount in CPF Ordinary Account– $21,000
Total remaining amount$76,500
This means the family will have to take a bank or HDB home loan worth $76,500. Assuming the husband and wife is able to take a 25-year HDB home loan, their estimated monthly repayment would be around $421 each month. Considering they received no increment in salary after purchasing their HDB flat, they would be able to use about $345 from their monthly CPF Ordinary Account contributions from work. This leaves them with about $76 that they have to fork out in cash to live in their own home.
This could technically amount to less than the rent they have to pay for an HDB rental flat. The rent for a 2-room HDB rental flat is between $90 to $275 a month, depending on income and whether you are a first- or second-timer.

Tapping on the Fresh Start Housing Scheme

The Fresh Start Housing Scheme aims to help second-timer families with young children currently living in HDB rental flats to own their own 2-room Flexi flats. Under the scheme, families can buy a short-lease 2-room Flexi flat in a BTO or Sales of balance Flat (SBF) exercise. As buyers are second-timers, there will also be a resale levy, however, this will be capped to $30,000 under the Fresh Start Housing Scheme.
Additionally, buyers will receive a Fresh Start Housing Grant of $35,000. This will be separated in a $20,000 lump sum and the remaining $15,000 paid over five years into your CPF Ordinary Account – which can be used for your monthly HDB home loan repayments.
While buying a home under the Fresh Start Housing Scheme can be more affordable than buying a flat with 99-year lease, it also comes with a 20-year Minimum Occupation Period (MOP) compared to the usual 5-year MOP.
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