Beware of these hidden costs when you upgrade your flat

Upgrading your current HDB flat to a bigger HDB, such as HDB Tampines is a huge decision that a family makes. As the family expands, naturally you will need a bigger home to cater to everyone’s needs. Most people without a big budget will normally sell their 3 or 4 bedroom HDB flat in order to buy a 5 bedrooms resale HDB. However, upgrading your flat is not as affordable as what people think. There are many hidden costs that most people neglect when it comes to upgrading their flats. This article will guide you through the hidden costs when you upgrade your flat.

A homeowner of a 4 bedrooms HDB flat in Tampines found out that a resale price of a 4 bedrooms flat in Tampines is $428,000 as of 2016. The new 5 bedrooms BTO flats in Tampines would cost approximately $398,000 to $501,000, with an average price of $450,000, as of August 2016. The homeowner will then naturally think that he will be paying for ex additional $22,000 if he were to upgrade his flat. However, his calculation is not entirely correct, as there are other hidden costs that are needed to be taken into account, such as:


1. Resale Levy Payable
The next important rule that most first time homebuyers missed out: the resale levy payable. A BTO flat is also considered as a subsidised flat. Therefore, if you were to sell your current HDB flat to purchase another new HDB flat, you will then have to pay a resale levy. The resale levy is depending on the size of the HDB flat. The table below will give you an idea how much your resale levy is if you were to sell your current HDB flat.

Size of HDB flat	Resale Levy
2 rooms	15,000
3 rooms	30,000
4 rooms	$40,000
5 rooms	$45,000
Executive	$50,000

Therefore, do your planning ahead. Many young couples did not realise there is a resale levy payable when they first purchase their HDB flat, thinking that they could always upgrade their house when needed. 5 years later when they have children at home and are planning to upgrade to a bigger HDB flat, only then they find out that they are required to pay a resale levy if they were to buy a new HDB flat. Hence, do your planning ahead if you want to avoid paying for a resale levy.

Costs: $40,000


2. Agent Cost
In order to sell your flat, most people would choose to engage with a real estate agent. Normally, a real estate agent will charge a 2% commission for selling the HDB flat. However, the commission fee is negotiable between the real estate agent and you.

Let us say if you manage to sell off your 4 bedrooms flat for $428,000, a 2% commission fee will be approximately $8,500.

Cost: 8,500


3. Renovation Cost
Renovation fees can be expensive and this is one of the costs that most people underestimate and overlook. Home renovation might cost more than what you expect, even if it is only a basic simple renovation. You are actually selling off a fully furnished flat for a new HDB flat that requires renovation. There are lots of renovation items that will cost you a lot after you itemize them, such as the lighting fixtures, curtains, air conditioners units, bathroom accessories, electrical works, window grills, cement screeding, painting, haulage fee and more miscellaneous fee that will add up to a huge amount after you are done with the renovation. That being said, if you plan to renovate your new HDB flat, be prepared to have at least $30,000, even if you were to keep renovation at its simplest and using your existing furniture from the old house.

Cost: $30,000


4. Stamp Duty

You are required to pay for stamp duty if you buy a new HDB flat. Stamp duty is calculated based on the selling price of the HDB flat:

First $180,000: 1%
Next $180,000: 2%
Remaining amount: 3%

For example, you will need to pay $8,100 as stamp duty fee for a HDB flat that is priced at $450,000.

Costs: $8,100


Before you make a decision of upgrading your flat, do calculate the hidden cost before you upgrade your flat. Based on the hidden costs stated above, it would cost the homebuyer approximately $108,600 to upgrade to a larger HDB flat. Therefore, do think thoroughly before deciding to upgrade your flat. You definitely do not want to end up being in a huge debt.

In conclusion, owning a property is still considered a great financial decision, especially to young working adults in Singapore. However, do bear in mind that owning a house is actually more expensive than what most people expect.

xoxo,