Decoupling is a strategy that homeowners in Singapore often consider to restructure their property ownership and take advantage of additional property purchases. By transferring ownership, typically from joint tenancy to tenancy-in-common, owners may be able to acquire a second property without paying Additional Buyer’s Stamp Duty (ABSD). This process involves legal steps, financial implications, and a thorough understanding of Singapore’s property laws.
What Is Decoupling in Property in Singapore?
Decoupling refers to the process where co-owners of a property divide their ownership, where one of the two co-owners transfers their share of the property to the partner. This is typically done when a property is owned under joint tenancy, and the goal is to restructure the ownership into tenancy-in-common. If you are wondering how to avoid ABSD for your second property, decoupling is a popular strategy. Decoupling allows the owner who is removed from the property to purchase a new property without incurring ABSD, as the second property is considered their first.
What is the ‘99-to-1’ loophole?
The “99-to-1” loophole refers to a strategy where a property owner transfers their share of ownership to another person (spouse, family member, etc.), allowing them to buy another property without ABSD. This can be done by changing the ownership structure from joint tenancy to tenancy-in-common, where one owner holds 99% of the share and the other holds 1%. The person holding the 1% share can sell their stake, allowing them to purchase a property without triggering ABSD.
What Are the Property Types That Can Be Decoupled?
Property types that can undergo decoupling in Singapore include:
- Private Properties (Condominiums, Apartments, Landed Properties): Private properties are generally free from restrictions for decoupling. However, owners should avoid decoupling within the three-year Seller’s Stamp Duty (SSD) period to minimise costs.
- Executive Condominiums (ECs): Decoupling of ECs is allowed only after completing the five-year Minimum Occupation Period (MOP). This ensures the property has been occupied by the original owners before ownership restructuring.
- Landed Properties: Both private and certain types of landed properties qualify for decoupling. However, owners should check for any specific restrictions, such as leasehold conditions or other estate-specific criteria that may affect eligibility. Ensure the property is not subject to any legal or financial constraints, such as restrictions or unmet eligibility criteria, to avoid complications.
Can I Decouple HDB?
Decoupling is not permissible for HDB flats after April 2016 for married couples. However, there are exceptions:
- Decoupling of property is allowed if one party buys over the other’s share after a divorce.
- HDB transfers between family members, such as from parent to child, are allowed but must adhere to HDB’s regulations.
How to Decouple Property in Singapore?
The process of decoupling a property in Singapore can generally be broken down into the following steps:
- Transfer via Gift – One party can gift their share of the property to the other, legally transferring ownership.
- Part Purchase – The property can be purchased partially from the other co-owner.
- Re-structuring Ownership – The transfer changes the ownership from joint tenancy to tenancy-in-common.
Step-by-Step Breakdown:
- Step 1: Consult a professional (lawyer or financial advisor).
- Step 2: Ensure both parties are in agreement and understand the financial implications.
- Step 3: Legal documentation is drawn up to restructure ownership.
- Step 4: Complete the transfer of property title.
How Long Does the Decoupling Process Take?
The entire decoupling process generally takes 10 to 12 weeks, depending on the complexity of the case, legal proceedings, and financial requirements. This timeframe includes obtaining approvals, legal checks, and completing the necessary documentation.
When Can I Proceed to Purchase My Second Property without ABSD After Decoupling?
Although the decoupling process typically takes 10 to 12 weeks to complete, you can proceed to purchase your second property without incurring ABSD as soon as you enter a contractual agreement to sell your share of ownership in the current property. This means that even before the decoupling process is finalised, once the sale agreement is signed, you are eligible to treat the property as your first, thereby exempting you from ABSD on your next purchase. It's important to note that the transaction must be legally binding and recognised, ensuring that the ownership change is properly documented.
Cost of Property Decoupling in Singapore
Property decoupling in Singapore involves a series of financial considerations that should be carefully evaluated before proceeding. Below are some key costs involved in the decoupling process:
Payment of Outstanding Mortgage
When decoupling, the person who will no longer be part of the property must pay off their share of the outstanding mortgage. This may involve settling the remaining loan balance that is associated with the portion of the property they are giving up. The exact amount depends on the loan tenure, interest rates, and outstanding balance at the time of decoupling.
Early Loan Redemption Penalty
Many home loans come with an early redemption clause, which means if you pay off the loan before its maturity, a penalty is imposed. This penalty is typically a percentage of the outstanding loan amount and can vary depending on the lender's terms.
Stamp Duty Fees
- Buyer Stamp Duty: Charged to the buyer of the property.
- Seller Stamp Duty: If applicable, the seller may be subject to stamp duty for the transfer.
- Additional Buyer Stamp Duty (ABSD): This may apply if the new buyer is acquiring the property as an additional purchase.
Legal & Conveyancing Fees
Legal fees for decoupling and transferring ownership may vary but are typically between SGD 5,500 to SGD 6,500, depending on the complexity. It is advisable to get in touch with a professional mortgage broker, as they can help you to find the best options available without incurring any additional cost.
Refund to CPF with Accrued Interest
If CPF funds were used to finance the property purchase, the person transferring ownership must refund the CPF account with the amount used plus accrued interest. This is a requirement under the CPF system.
Example of Cost Structure for Property Decoupling Process
- Joint Tenancy: In a joint tenancy, both owners have equal shares in the property. When decoupling, one of the owners will transfer their share, often at half of the property’s value.
- Tenancy-in-Common: In tenancy-in-common, owners can hold different percentages of the property. The transfer of ownership typically involves the transfer of one party’s share to the other, often in exchange for a price reflective of their ownership stake.
How to Minimise the Cost of Decoupling?
While the decoupling process can incur significant costs, there are ways to minimise them:
- Negotiate Loan Terms: If possible, try to negotiate the terms of your mortgage or consider refinancing before decoupling to lower the outstanding mortgage or early redemption penalty.
- Plan Ahead: Ensure you have sufficient funds to cover stamp duty, legal fees, and CPF refunds. Planning your finances beforehand can help mitigate the financial impact.
- Consider Timing: If your property has appreciated in value, you may want to wait until the market conditions are more favourable before decoupling, potentially reducing stamp duty and other transaction costs.
Things to Consider When Decoupling Your Properties
Before proceeding with property decoupling, there are a few factors to consider:
Timeline planning
Ensure that the entire decoupling process aligns with your broader financial goals and property purchase plans. The timeline for decoupling is typically 10-12 weeks, so it's essential to plan for any delays or unexpected costs during the process.
Financial Planning for Both Seller and Buyer
As the seller, you need to plan for the costs of decoupling, including any loan redemptions, stamp duty, and CPF refunds. On the buyer's side, ensure that you can finance the acquisition of the remaining share of the property, including potential mortgage arrangements.
Does the property decoupling process always save you money?
Property decoupling does not always guarantee that you will save money. While it can help avoid ABSD on a second property, the associated costs—such as mortgage repayment, stamp duty, legal fees, and CPF refunds—can add up significantly. Carefully evaluating the overall financial impact is essential to determine whether decoupling aligns with your goals.
If you’re considering decoupling, Mortgage Master can guide you through the process. Our experienced mortgage brokers in Singapore can help you assess your financial situation, calculate the costs involved, and find the best financing solutions to meet your needs. Get in touch with us today to make informed decisions and achieve your property aspirations.
Reference
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HDB Official Website: https://www.hdb.gov.sg/
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CPF Official Website: https://www.cpf.gov.sg/
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IRAS Website: https://www.iras.gov.sg/
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Dollarback Mortgage: https://dollarbackmortgage.com/
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Seedly: https://blog.seedly.sg/
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Decoupling Expertise: https://decouplingexpertise.sg
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PropertyGuru: https://www.propertyguru.com.sg/
