Buying a HDB Flat with parents? Here’s what you need to know

There are many reasons why we would like to move out of our childhood home. It may be because of the old infrastructure, the benefits of cashing out or even to move nearer to your school or office.

If you are single, and you or your family intends to purchase a new or resale HDB flat under you and a parent's name, there are a few considerations you should take note of when buying an HDB flat with someone other than a spouse.

Public Scheme

The intent of this scheme is for family members who form a family to purchase a new or resale HDB flat.

Conditions:

• Buyer and at least one listed occupier must be Singapore Citizens or Singapore Permanent Residents for at least 3 years

• Listed occupier must form a family nucleus with the buyer, in other words, be a parent, sibling. Children who are at least 21 years old under legal custody, care, and control (for widowed/ divorced persons) also qualify.

• The usual conditions of buying a new HDB flat or resale flat still apply. These include rules regarding income ceiling, property ownership as well as the Ethnic Integration Policy (EIP) and SPR quota.

Grant available:

You can apply for the Proximity Housing Grant (PHG), which was introduced in August 2015 with the aim of fostering closer family ties and for mutual care and support.

For singles who buy a resale flat to live with their parents, the amount is $15,000.

However, there are also some disadvantages to this when buying an HDB flat with your parents as a single.

Possible disruption to future plans

Here are some things to be aware of:

• If you get married and want a nest of your own, the current house that you co-own with your parents may need to be sold.

• Alternatively, parents will need to buy over your share, causing financial strain.

• If you use the Proximity Housing Grant, you will not be considered a first-timer when you intend to buy a flat with your future spouse.

• Your ageing parents may not be able to service the loan, which may lead to you financing the loan alone.

Type of Co-Ownership Is Important

For purchase of HDB between people who are not spouses, the type of co-ownership becomes even more important.

This is because if the co-owners are spouses, the rules on intestacy protect the surviving spouse’s ownership of the HDB flat. However, with parents (and siblings or joint singles), things are not so simple.

Briefly, the flat can be purchased under Joint Tenancy or Tenancy-In-Common forms of co-ownership.

For Joint Tenancy, co-owners are both entitled to the whole property, as if they were a single owner. It has an implicit right to survivorship, so when one party dies, their share of the property is automatically passed on to the surviving parties, irrespective of the existence of any will or “default” rules on intestacy.

Tenancy-In-Common contains no right of survivorship, so each co-owner has a separate share in the property. Thus, it is important to have a will to indicate how one’s share of the property should be distributed.

It is important to thoroughly the legal and financial arrangements so that there will be no disagreements or fallouts years down the road.

Real client case-study

On New Year's Eve, I managed to help my clients secure a rare huge 4-room HDB without Cash Over Valuation (COV).

I was particularly moved by my client's story. She is a beloved daughter who purchased a place together with her mother. Dutifully, I informed her about the cons of buying as a parent and child. Even though it could have led her to not going ahead with the purchase, she was very appreciative of me for telling her all the options and made her decision to proceed as a well-informed buyer.

I'm very happy for her for making such a bold and informed decision.👏👏
I'm very sure this "present" for her mom will bring her many blessings in future.

There is nothing that can outweigh a mother's prayers.