- The outstanding loan is usually redeemed from the sale proceeds on completion.
- CPF money used for the property must be refunded with accrued interest.
- Check your loan's lock-in period and Seller's Stamp Duty before granting an option.
- Once the buyer exercises the option, you are generally bound to complete.
Start with your net proceeds
Before agreeing a price, it is worth estimating what you will actually receive. A simplified calculation is the sale price, less the amount needed to redeem the loan, less the CPF refund, less any Seller's Stamp Duty and sale expenses such as legal fees and agent's commission.
This matters most if you are relying on the proceeds to buy your next home.
Your housing loan
Where the property is mortgaged, the buyer will expect to receive it free of your mortgage. You do not normally have to repay the loan from your own cash first. Instead, your lawyer obtains a redemption statement from the bank and arranges for the loan to be paid off from the sale proceeds on completion, after which the mortgage is discharged.
The redemption amount can be higher than the balance shown in your banking app. Depending on your loan, it may include interest up to the redemption date, fees and early redemption charges.
Lock-in periods and notice
Many bank loans have a lock-in period, during which repaying the loan can trigger a penalty. Loans may also require advance notice of redemption, and failing to give it can lead to extra charges. Check both with your bank before you commit to a sale date.
Refunding CPF
If you used CPF savings to buy the property or pay the loan, the amount used must generally be refunded to your CPF account when you sell, together with accrued interest. Accrued interest is the interest those savings would have earned had they stayed in CPF, so the refund can be noticeably larger than the amount you withdrew.
The sale proceeds are generally applied first to the outstanding loan, then to the CPF refund, then to other sale expenses. For owners aged 55 and above, part of the refund may go towards the retirement sum. Your estimated refund can be checked through CPF's online services.
Seller's Stamp Duty and the option
If you bought the property within the Seller's Stamp Duty holding period, the sale may attract SSD. The date the buyer accepts the option usually counts as the date of sale, so check this before granting an option.
Once the buyer validly exercises the option, you are generally bound to sell and cannot accept a higher offer elsewhere. Make sure the price, completion date, possession terms and any items staying in the property are right before the option is granted.
Tenants and vacant possession
If the property is tenanted, decide at the outset whether you are selling with vacant possession or subject to the tenancy. Do not promise vacant possession unless the tenancy allows you to deliver it by completion. If the buyer is taking over the tenancy, arrangements will be needed for the rent, the security deposit and the tenancy documents.
Completion
On completion, the buyer pays the balance, your lawyer applies it towards the loan redemption, CPF refund and agreed adjustments, the transfer is completed and the keys are released. Your net proceeds are then paid to you according to the completion account.
If the sale price may not be enough to repay the bank in full, speak to the bank and a lawyer before committing, and do not assume the bank will release its mortgage if it is not paid in full.
A lawyer can review your situation and explain your options.
This article is general information on Singapore law and is not legal advice. Rules and agency policies change, and every situation is different. For advice on your own circumstances, speak with one of our lawyers.
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