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HDB Contra | Useful Scheme for HDB Second Time Buyers

HDB Contra | Useful Scheme for HDB Second Time Buyers
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Looking to downgrade or upgrade your HDB to another HDB and wondering how to go about doing it?

Not to worry, we are here to share some useful tips that can help you in this process – specifically this HDB Contra Scheme.

 

Many second time home buyers face similar concerns too. Here’s a list of the most common questions we hear from our clients all the time:

  • Should I sell my HDB flat first or buy first?
  • How long is the process of selling and buying HDB flats?

Since selling off an existing flat and purchasing a new one involves a potential buyer, a potential seller and yourself, it is a much more complicated process than when you first bought your first home.

Table of Contents

What is the HDB Contra Scheme about?

The HDB Contra Scheme, otherwise known as the Enhanced Contra Facility, is a useful but little-known scheme to help second-time home buyers.

A joint effort by HDB and the CPF board, it allows sellers to sell their existing HDB flat and concurrently buy another HDB resale flat using the proceeds (as well as the refunded CPF monies).

2nd-hdb-loan

What does that mean for you (the seller and second-time home buyer)?

It means you will need to pay a much lesser amount of cash upfront for your new HDB flat and get a reduced mortgage loan for the new flat.

Why? Because the proceeds from your old home will be used automatically to pay for the new home including the insurance premiums for the CPF Home Protection Scheme. 

However, do note that the CPF refunded monies cannot be used for the payment of fees like stamp duty and conveyancing fees.

How does the HDB Contra Scheme work in real life?

how-contra-work

Still unclear about how it works? No problem. We’ll use a simple case study to illustrate how the HDB Contra Scheme can work for you.

Parties involved:

  1. Group A – Aaron (Potential Buyer): Wants to buy your existing HDB flat
  2. Group B – You (Seller of existing HDB and buyer of new HDB): Wants to buy Cherrie’s HDB flat
  3. Group C –Cherrie (Seller of Cherrie’s HDB): Wants to sell her HDB flat to you

 

You will apply for HDB Contra Scheme. If approved, your sale proceeds and refunded CPF monies from your sold HDB flat to Aaron, will be channelled to making the purchase of Cherrie’s place.

However, amongst the three groups, only one group is eligible to apply for the scheme at any one time.

If you apply for the Enhanced Contra Facility, Aaron and Cherrie will not be eligible to apply for their own sale and purchases.

Conditions for applying Enhanced Contra Facility

Like all government schemes and grants, there are conditions for applying. Do remember to check if you fulfil these necessary conditions before going ahead with this.

  • You can apply for the ECF (Enhanced Contra Facility) if you are selling your existing HDB flat and buying an HDB resale flat. However, the buyer of your flat and the seller of your new flat cannot apply for this same scheme.

 

  • You cannot be an undischarged bankrupt or have any bankruptcy proceedings against you. HDB may not approve the ECF application if any of the following apply:
    • There is a mortgage in favour of a financial institution
    • There is a CPF mortgage/ charge on Flat A and/ or Flat B
    • Private solicitors must be engaged

 

  • ECF is not available for the following types of resale applications:
    • Conversion Scheme
    • Sale of part-share of an existing flat
    • Contra party buys another resale flat using a housing loan from a bank

 

  • The resale of Flat A must be completed before or on the same day as the completion of the resale of Flat B

Step by step guide to apply for HDB Contra

Fulfilled the conditions above, completed your HDB MOP completion and ready to apply for the Enhanced Contra Facility? Let us guide you step by step:

1) Log in to HDB Resale Portal and register your Intent to Sell.

 

2) Starts marketing your HDB flat for sale.

It can be done either DIY or by engaging a real estate agent to facilitate the two-way negotiations.

 

3) Upon successfully finding a Buyer (Group A), you can grant the Buyer (Group A) an Option To Purchase (OTP).

 

Must use the HDB prescribed (OTP) Option to Purchase as the form of contract in resale transactions. Do note, the Option Period for the (OTP) Option to Purchase is 21 days.

Buyer must exercise the OTP within that period, if not the deposit will be forfeited.

 

4) Following that you should register an Intent to Buy in the HDB Resale Portal and start looking for next HDB flat.

 

5) Upon successfully finding a flat you would like to purchase, Seller of the new house (Group C), will need to grant an Option to Purchase (OTP) to you.

 

6) All Groups, Sellers and Buyers, will submit a Resale Application within a previously agreed timeframe. Group B will indicate in Resale Application that he/she is applying for ECF.

 

7) Upon approval (HDB’s Approval Letter is posted in the HDB resale portal), the buyers and sellers will be notified via SMS or E-mail.

 

8) HDB completion normally is scheduled after 8 weeks from the date of Acceptance of the resale application after the required documents are submitted successfully.

Get a new home in 2020!

If you are looking to purchase your second HDB flat this year, I sure hope this guide has been helpful in your research on how to go about doing so.

Do bookmark this article for easy reference as the process can be a slightly long one.

selling-hdb-flat
Read related article: Best Kept Secrets For Selling Your House

If you come across any difficulties in the process or if you would like to engage an agent to help you manage the tricky negotiations on both fronts, please feel free to contact me  for a non-obligatory discussion on your needs.

I will provide: 

-An IN-DEPTH Financial calculation

-Highly relevant investment insights

-A curated list of the best buys in today’s market with good upside potential and minimal risks

-Proven methods and steps

Lets get in touch today to kickstart your property wealth planning journey.

How do you determine if you should Hold or Sell your current property?

Follow YouHome.sg’s decision making matrix to determine your best option.

Check Your Home Price Indication

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Self Introduction

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Rick Huang, Associate Deputy Group Director of OrangeTee & Tie, has been in the Real Estate industry for a decade.

He is driven, committed and is enthusiastic about real estate investments.

Today, he leads Team Youhome.sg, and together, he aims to provide his clients with the best experience in their property journey.

The team focuses on understanding the client’s finances and needs and is determined about delivering the best solutions and results for them.

Amidst the hustle and bustle, Rick enjoys quiet time and indulge himself in the intricate art of tea-brewing and teapot appreciation.

He would also take this chance to energize himself and reflect on his personal development and areas of improvement.

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As a investor interested in taking advantage of the booming property market in Singapore, I needed a realtor with in-depth knowledge of the local market. Using his understanding of the various sectors of the market, Rick generated a investment progression report and we decided to buy a condominium in a choice area with huge potential for multiple returns in the future. Thanks Rick, I will definitely be doing business with you for a long time!
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I am writing in to compliment Rick Huang for his invaluable service, for the sale of my Esparina Residences. The process was complicated but he was able to empathize with my situation and also provide brilliant advices that ensue the smooth transaction. In all, I am appreciative with his professionalism and human touch in this journey. Thank you!
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