For the senior citizens in Singapore, owning a fully paid up HDB can come in handy to provide for living expenses due to several government schemes. They are the silver housing bonus and enhanced lease buyback scheme. Another scheme which the government is studying is the reverse mortgage scheme. These schemes help to solve one of the problems for Singaporeans which is asset rich but cash poor.
1. Silver Housing Bonus (Only for ages above 55)
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By selling their HDB and downsizing to a smaller flat, studio apartment or to stay with family, they will enjoy a $20,000 Silver Housing Bonus in cash provided they join CPF Life.
2. Enhanced Lease Buyback Scheme (Only for ages above 63 and 3 room or smaller flats)
The household sells part of the flat’s lease to HDB and retains a 30 year lease and use the net proceeds to top up the CPF Retirement Account as well as get a cash bonus of $20,000. However, the household loses the property at the end and will not be able to pass it down to the next generation. There is also a potential problem should the owner happen to outlive the remaining lease period.
3. Renting of Flat or Room
Renting out a room or flat is by far the best option as it allows for monthly income without losing the property. However, the money will come in small amounts regularly as opposed to lump sum for the previous 2 schemes.
Studying of Reverse Mortgage Scheme
The government is also studying a reverse mortgage scheme which may potentially increase the amount of money which the household can receive. In a reverse mortgage scheme, the owner maintains the full lease of the HDB but takes a loan against it as collateral. The full loan amount including interest is repaid upon termination or death of the owner usually by selling the HDB. It will be an interesting scheme depending on how it is structured and whether the owner receives the loan amount in cash or as a top up to the retirement account.
So owning a HDB is a smart move as it can be monetized in the later part of life if the household has difficulty making ends meet. However, it is still best to plan for retirement without having to rely on these schemes as the amounts may not be sufficient and use them as backup plans.
About the Author
Calvin Yeo is the Managing Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is an online financial planning platform. He is also a Chartered Financial Analyst (CFA) as well as Certified Financial Planner (CFP).
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