Read article: New private property sales drop 58% last April 2020
But is the Silver Home Bonus strategy worth considering? Or are there any better choices out there?
What’s the Silver Home Bonus strategy?
Launched in 2013, the Silver Home Bonus (SHB) utilizes a money bonus incentive to inspire elderly families to downsize their current property to a lesser value 3-room or smaller HDB apartment whilst placing a predetermined sum of the money profits from the sale of the present apartment into their CPF Retirement Account (CPF-RA).
To qualify for the SHB, the senior families must also participate/be engaging in CPF Life–a lifetime annuity scheme utilizing CPF-RA cash for monthly premiums. All currencies in the CPF-RA is going to be utilized for CPF Life, which will provide seniors a monthly retirement income for life.
The incentive for engaging in the SHB is that a money bonus up to $30,000.
What’s the CPF-RA top-up quantity and money bonus calculated?
(The cash proceeds from selling your current property is the sale cost of this house, minus the outstanding loan, the cost of the upcoming apartment and any resale price payable.)
The most amount of money bonus a senior family qualify for is $30,000, if $60,000 in cash profits are utilized to top-up the CPF-RA.
Provided that your money proceeds from the sale of your current property is over $60,000, you are going to need to re sell your CPF-RA using $60,000. An exception is created when you have fulfilled the prevailing Total Retirement Amount (FRS), in which case you will continue to keep the surplus cash profits.
In case the money proceeds is lower compared to $60,000, your top-up sum can also be reduced, and the money bonus will be pro-rated to 50% of money profits donated to CPF-RA.
Who’s eligible for the Silver Home Bonus strategy?
There Are Lots of eligibility standards to fulfil so as to qualify for the SHB:
No second property possession
The Present property to be offered should fulfill the following criteria:
For HDB apartments: Have to have fulfilled with the Minimum Occupation Period (MOP)
For personal land: Annual value of land has to be 13,000 or reduced
The HDB flat You Plan to purchase should fulfill the following standards:
Timeframe: Flat could be bought before purchase of existing home, or over 12 weeks of finishing sale of existing home
The cost of this apartment must not exceed the selling price of the Current property
Be aware that if selling your current house, beware of creating a negative selling.
When Can I use for the Silver Home Bonus?
Seniors can do so once they complete the trade to their brand new apartment, and they have a 1 year window to do so. The one-year phase starts on the date of crucial collection or conclusion of sale, whichever is later.
What is the difference between the Lease Buyback Scheme?
While the two are means to monetise a HDB apartment, LBS is for seniors who want to reside within their present apartment, whereas SHB is for all those who wish to market their current property and purchase a 3-room or smaller apartment. The SHB also includes personal home with an yearly value of $13,000 or not.
Seniors may just select one from both schemes.
Is the Silver Home Bonus Acceptable for me?
There are numerous choices to enhance your retirement income, and also the Silver Home Bonus is only one of these.
Obviously, seniors may nevertheless downsize without consuming this strategy, if the perceived advantages to maintaining the entire cash profits reevaluate that of a’money bonus + needing to put cash in CPF Life’.
We believe that, although the SHB might be acceptable for seniors that are additionally empty-nesters (i.e. people living in massive houses whose kids have moved out) and want to downsize to something much more manageable or cheap, the most essential issue isn’t to wait till 55 to plan for retirement and also the supplemental income you’ll get.
Before you reach age 55, you will have more freedom of choice with economies on your CPF-OA, which may be utilized to cover an present home loan, as an example.
If you’re 54 years old, then you might use to CPF to book the savings on your CPF-OA so the amount won’t be moved to your CPF-RA if you turn 55. You may apply to book your CPF-OA savings to the following functions:
Repayment of the Present home loanand/or
Should you would like to downsize until you turn 55, then you may use your CPF Ordinary Account (CPF-OA) savings prior to purchasing another home after putting aside the BRS (which comprises savings on your CPF-SA).
If purchasing another property is inside your financial skill, you could have the ability to unlock a constant flow of income (from your current or recently bought property) that may exceed/complement exactly what CPF Life could offer, while also appreciating the capital appreciation that personal residential property may bring.
Additionally, do not forget that the sooner you intend for your and buy your next house, the larger the mortgage you’ll be able to procure, because bank mortgage tenures are capped at a maximum age of 65.
Another option for supplemental income would be to lease out the empty rooms on your current home (e.g. to student renters ) or to lease out the whole area whilst living with your kids.
Should you determine that the Silver Home Bonus would be your very best alternative moving ahead, in addition, it is very important to consider carefully exactly what following land to downsize to. Will a brand new BTO apartment be the smartest choice, or a ready-to-move-in resale apartment in a central location with all amenities within easy access?
A financial adviser or a financially-qualified realtor can allow you to make the ideal choice to get a comfortable retirement, and permit you to enjoy your golden years to the max.