Guide to Right-Sizing your home for Empty Nesters

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below.

• Right-sizing your home can help you release cash proceeds from your current property
• Right-sizing options include HDB BTO, resale flats and condominium
• There are several government schemes that can help you with subsidies when you right-size

If you are in a life phase where your children have grown up and flown the coop, your once lively home might begin to feel a little empty. After all, you are living just with your spouse, and a 5-room flat could be too big now.

Right-sizing refers to a scenario where empty nesters sell their current property and move to a smaller one. Going into retirement, right-sizing your home could be a good option to unlock cash from your current flat while moving to one that is smaller and cosier.

In addition, there are several government schemes that can benefit you when you right-size. These include the Proximity Housing Grant, Deferred Downpayment Scheme, Temporary Loan Scheme, Silver housing Bonus and Senior Priority Scheme.

However, there are many factors to consider when it comes to right-sizing your home, especially in terms of cash flow and comfort level.

So, if you are thinking about right-sizing your flat and want to avoid making the wrong decision, here is a quick guide to help you.

3 Reasons to right-size your home

1. Less is more

Having a smaller home helps to reduce expenses such as utility bills and so on, in your daily life.

2. Easy to clean and maintain

A smaller house will offer you the convenience of being able to clean and maintain it more easily.

3. Different types of housing grants

You can tap on different types of housing grants that provide subsidies to assist you in right-sizing your flat.

Right-sizing options

Depending on the type of property you are living in, you have several right-sizing options. Each has its pros and cons:

• HDB Build to Order (HDB BTO)

If you are looking for the most economical option and don't mind waiting for 3 to 4 years, HDB BTO flat could be your best option.

Pros

1. Economical pricing

HDB BTO pricing is more economical compared to a resale flat and the cost of renovations would be lower as it is a new flat

2. More benefits and subsidies

There are housing grants available to assist in right-sizing your home.

3. Longer lease

All BTO flats come with a 99-year lease so you don't have to worry about outliving the lease.

4. Priority balloting

For the elderly who wish to stay near to their children, they are entitled to priority balloting, which means a higher chance of getting a flat.

Cons

1. Limited locations

BTO is determined by HDB launches and the location might not be the one you are looking for.

2. No rooms for negotiation

You won’t be able to negotiate the price as BTO prices are fixed.

3. Longer waiting time

The waiting time for a standard BTO project can take around 3 to 4 years.

• Resale Flat

If you prefer getting your flat straight away and can afford to pay a higher price, a resale flat would be suitable for you.

Pros

1. Shorter waiting time

You can get the keys to your home faster, compared with buying a BTO flat.

2. More flat options

You will have more options and freedom in selecting your location and flat type.

3. Price is negotiable

You will be able to negotiate with the flat owners, unlike HDB BTO where the price is fixed.

4. More benefits and subsidies

There are housing grants available to assist in right-sizing your home.

Cons

1. Higher price

It is more costly due to its location, amenities, and transportation options.

2. Shorter lease period

As it is a resale flat, the lease will be shorter than that of a BTO flat.

3. Higher renovation costs

You may have to pay for higher renovation costs depending on the flat’s condition.

• Condominium

This would be suitable for those who are financially strong and enjoy having access to facilities and privacy.

Pros

1. Tighter security

Many condominiums offer locked or gated entries that can only be accessed through the residents’ card or registering with the security. Besides, they have security personnel keeping watch 24/7 to ensure the safety of the residents.

2. Private amenities

Swimming pool, gym, tennis courts are usually provided in most condominiums for the residents to use and enjoy.

3. Maintenance-free

The maintenance fee charges cover a variety of services and expenses like elevator, and so on, which will allow you to feel assured and avoid worrying over maintenance.

Cons

1. Higher price

A condominium is more costly compared to HDB flats due their facilities, securities, and so on.

2. Limited housing grants

The housing grants applicable to a condominium are quite limited as most housing grants are for HDB flats.

3. Monthly maintenance fees

You would have to pay monthly maintenance fees.

If you would like to know more about the considerations for choosing between a condominium or an HDB, read more here.

Types of incentives when you right-size

To encourage the elderly to right-size their flat, the government has come up with different types of schemes.

• Proximity Housing Grant (PHG)

If you are buying a resale flat to stay near to your children, you will get to enjoy an incentive of $20,000 with the PHG. However, if you are staying with your children, you will be entitled to $30,000.

To understand about your eligibility criteria and more information on PHG, click here.

• Deferred Downpayment Scheme (DDS)

The DDS is a scheme to assist those who are right-sizing to defer their downpayment until they collect their keys to their next home.

This will help to ease the cash flow for elderly flat owners whose funds are tied up in their current flat and smoothen the right-sizing process.

With DDS, eligible flat buyers are only required to pay for the stamp duty and legal fees when they sign the Agreement for Lease about 4 months after booking a flat. They are required to pay for the purchase price of the flat once it is ready for key collection. If the new flat application is cancelled, the usual forfeiture of 5% of the flat price will apply.

To understand about your eligibility criteria and more information on DDS, click here.

• Temporary Loan Scheme (TLS)

The TLS helps flat buyers who intend to use the sale proceeds from the sale of their current flat to pay for their new flat without taking a long-term mortgage loan.

You can apply for a temporary loan to complete the new flat purchase first while waiting for the proceeds from the sale of your flat.

After your resale application and temporary loan have been approved, you will be invited to collect keys to your new flat.

The temporary loan will be offered at the prevailing non-concessionary interest rate. If the temporary loan amount (capped at the net sale proceeds) is not enough to complete the new flat purchase, you must top-up in cash within the time period for key collection.

To understand about your eligibility criteria and more information on TLS, click here.

• Silver Housing Bonus

The SHB is a scheme to help senior households right-size to an HDB or a resale flat while putting a specific sum of their cash proceeds from the sale of their existing flat into their CPF Retirement Account (RA).

There will be also a cash bonus of up to $20,000 as an incentive to lower-income elderly to supplement their retirement income.

• Senior Priority Scheme (SPS)

The SPS gives priority to elderly residents who wish to buy a 2-room Flexi flat near their child by allocating at least 40% of the 2-room Flexi flats to them.
After collecting the keys to your new flat, your married child who helped you qualify for the SPS must continue to live within 4 km* of your new flat.

To understand about your eligibility criteria and more information on SPS, click here.

Now that I have right-sized my flat, what can I do with the proceeds?

Since the goal of right-sizing is usually a way to save for retirement, you can choose to top up your CPF RA or pay for the new flat in full to avoid incurring more debts.
You can also look into income-generating investments for passive income.