Navigating the HDB Resale Levy: What You Need to Know

Buying a home in Singapore can be a complex process, especially when it comes to navigating the various fees and levies involved. One such levy that homebuyers need to be aware of is the HDB resale levy. Whether you are a first-time buyer or a seasoned homeowner, understanding the HDB resale levy is crucial to making informed decisions.

What is the HDB Resale Levy?

The HDB resale levy is a fee imposed on buyers who previously enjoyed housing subsidies and are now purchasing a second subsidized flat from the Housing and Development Board (HDB). The levy is meant to help maintain a fair and sustainable public housing system in Singapore.

Who is Required to Pay?

Not all HDB buyers are required to pay the resale levy. It applies to two groups of buyers:

• Those who previously bought a subsidized HDB flat and are now purchasing a second subsidized flat.
• Those who previously bought a subsidized HDB flat and are now purchasing a new Execuitve Condominium (EC).

If you are purchasing your first subsidized HDB flat, you will not be required to pay the resale levy.

How is the Resale Levy Calculated?

The amount of the resale levy depends on various factors such as the date when the subsidised flat is sold and the type of subsidised flat sold. 

How to Pay the Resale Levy?

The resale levy can be paid using your sales proceedsand/ or cash. Depending on the type of mortgage loan that you have for your existing HDB subsidised flat, the order in which resale levy will be deducted varies. 

HDB LOAN

If your existing mortgage loan is with HDB, deduction of resale levy will be as such;

1. **Outstanding Loan:** The first step is to use the sales proceeds from the home to pay off any remaining balance on the HDB loan.

2. **HDB Resale Levy:** After the loan is settled, the next amount deducted is the HDB resale levy if applicable.

3. **Required CPF Refund:** Following the payment of the resale levy, the sales proceeds must be used to refund the Central Provident Fund (CPF), which is a compulsory savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare, and housing needs. The refund consists of the principal amount withdrawn for the home purchase along with the accrued interest.

   - If the sales proceeds after paying off the loan and HDB resale levy are not enough to cover the Required CPF Refund, the shortfall does not need to be paid in cash if the flat is sold at market value. Instead, the net sales proceeds will be proportionally refunded into the CPF accounts of each co-owner according to the formula shown.

4. **Other Miscellaneous Costs:** Any additional costs such as the solicitor's fees are then deducted from what remains.

5. **Remaining Proceeds Paid Out to You:** Whatever proceeds are left after settling all the above payments will be paid out to you.

If you are required to pay the resale levy and fail to do so, the HDB has the right to take legal action to recover the outstanding amount. This can result in additional penalties and complications, so it's essential to fulfill your obligations and pay the levy on time.

BANK LOAN

If your existing mortgage loan is with BANK, deduction of resale levy will be as such;

1. **Outstanding Loan:** The first step is to use the sales proceeds from the home to pay off any remaining balance on the HDB loan.

2. **Required CPF Refund:** Following the payment of the oustanding loan, the sales proceeds must be used to refund the Central Provident Fund (CPF).

 - If the sales proceeds after paying off the loan is not enough to cover the Required CPF Refund, the shortfall does not need to be paid in cash if the flat is sold at market value. Instead, the net sales proceeds will be proportionally refunded into the CPF accounts of each co-owner according to the formula shown.

3. **HDB Resale Levy:** After the loan and required CPF Refund  are settled, the next amount deducted is the HDB resale levy if applicable.

4. **Other Miscellaneous Costs:** Any additional costs such as the solicitor's fees are then deducted from what remains.

5. **Remaining Proceeds Paid Out to You:** Whatever proceeds are left after settling all the above payments will be paid out to you.

If you are required to pay the resale levy and fail to do so, the HDB has the right to take legal action to recover the outstanding amount. This can result in additional penalties and complications, so it's essential to fulfill your obligations and pay the levy on time.

In short, the difference between HDB loan and BANK loan is that for HDB loan resale levy will be deducted from the sales proceeds first before the required CPF refund is being refunded. For BANK loan, the required CPF refund needs to be refunded first before resale levy can be deducted from the sales proceeds.

Conclusion

The HDB resale levy is an important factor to consider when purchasing a second subsidized HDB flat or transitioning to a private property. Understanding the levy and its implications can help you make informed decisions and avoid any potential issues in the future.

Remember to stay updated with the latest information from the HDB website or consult with a housing agent to ensure you have the most accurate and relevant information regarding the resale levy.

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