I'm thinking of upgrading from m HDB to a condo, should I sell my HDB prior to purchasing a condo or the other way round?

Yes and no. Choosing either option includes careful consideration of various factors like financial capabilities, types of condo, and the methodology of upgrading, long-term capital appreciation, and more. Selling the HDB first clears your financial slate, allowing you to maximize your LTV ratio and minimize the stress of managing two properties. On the other hand, buying a condo first usually requires significant financial liquidity or bridging loans to manage two properties simultaneously. Moreover, there's potentially higher financial risk if the HDB takes longer to sell or sells for less than expected.

Will a bridging loan help in my upgrading of HDB to a condo?

Yes, if you do not have sufficient money set aside for the upgrading, especially before selling your HDB. The bridging loan is a short-term loan designed to provide immediate funds to cover the gap between the purchase of your new property (condo) and the sale of your current property (HDB flat). In addition, you can avoid financial stress and the risk of losing your desired condo due to a delay in selling your HDB flat. Do note that lodging loans typically have higher interest rates compared to traditional home loans, so it's essential to factor in these costs.

3 Ways To Upgrade From HDB To Condo

Opting to upgrade from a HDB to a condo in Singapore constitutes a significant decision, which includes careful consideration of various factors like financial capabilities, types of condo, suitable home loans, and the methodology of upgrading—whether to sell your HDB prior to purchasing a condo or vice versa.

Here’s an in-depth comparison of the three ways to upgrade, focusing on key financial metrics and conditions to help you kickstart this process.

Option #1: Sell HDB First, Buy EC Later

During the initial stages, the goal is to thoroughly assess your current financial standing. This includes reviewing all outstanding debts, existing savings, and monthly income. The Mortgage Servicing Ratio (MSR), which limits mortgage repayments to 30% of your gross monthly income, will be a key factor.

Similarly, the Total Debt Servicing Ratio (TDSR) ensures that your total monthly debt repayments do not exceed 55% of your gross monthly income. By understanding these ratios, you can determine your borrowing capacity. This period also involves setting a realistic budget for the new EC, considering the Loan-to-Value (LTV) ratio, which typically requires a 25% down payment.

Phase 1: Preparation and Selling the HDB Flat

Evaluate Financial Situation and Set Budget (2-4 weeks)
List HDB Flat for Sale (1-2 weeks)
Market and Sell HDB Flat (8-12 weeks)
Complete Sale Transaction (12-14 weeks)

Phase 2: Buying the Executive Condo (EC)

One of the more important things to note in this phase 2 (if you're planning to take out any home loans) is that obtaining in-principle approval (IPA) from banks is especially helpful in managing your funds for your mortgage. An IPA gives you a clear understanding of your borrowing limit and reassures sellers of your purchasing power, while ensuring that the chosen loan terms comply with your MSR and TDSR limits.

Research and Select EC (2-4 weeks)
Secure Financing Pre-Approval (2-3 weeks)
Book the EC Unit (1-2 weeks)
Exercise the Option to Purchase (OTP) (3-4 weeks)
Complete Loan Application and Approval (4-6 weeks)
Sign Sales and Purchase Agreement (SPA) (3-4 weeks)
Pay Stamp Duty and Legal Fees (1-2 weeks)
Progressive Payments and Completion (12-24 months)

Option #2: Sell HDB First Before Private Condo Purchase

Phase 1: Preparation and Selling the HDB Flat

The process of listing your HDB flat for sale and the research of Phase 1 is the same as Option 1 above. However, when it comes to Phase for Option 2, there are some differences to note.

Private condos generally offer a wider variety of options than ECs in terms of location, price, and amenities, which are often located in suburban areas and cater to a specific segment of the market. This might take more time as there are more options to evaluate.

Evaluate Financial Situation and Set Budget (2-4 weeks)
List HDB Flat for Sale (1-2 weeks)
Market and Sell HDB Flat (8-12 weeks)
Complete Sale Transaction (12-14 weeks)

Phase 2: Buying the Private Condo

Again, getting an IPA from banks, comparing loans, and choosing between fixed or variable interest rates are necessary for this phase. However, you can take the MSR out of the equation for buying private properties. Without the MSR cap, you may qualify for a higher loan amount when buying a private condo.

Research and Select Private Condo (2-4 weeks)
Secure Financing Pre-Approval (2-3 weeks)
Book the Private Condo Unit (1-2 weeks)
Exercise the Option to Purchase (OTP) (3-4 weeks)
Complete Loan Application and Approval (4-6 weeks)
Sign Sales and Purchase Agreement (SPA) (3-4 weeks)
Pay Stamp Duty and Legal Fees (1-2 weeks)
Progressive Payments and Completion (12-24 months)

Option #3: Buy EC or Private Condo First, Sell HDB Later

Phase 1: Buying the EC or Private Condo

The process of listing your HDB flat for sale and the research of Phase 1 is very similar to the Phase 2 steps of Option 1 and Option 2 above. However, there are some differences to note.

As there is a significant overlap in timelines, you may need a bridging loan to cover the down payment and initial costs of the new property before selling your HDB. Additionally, you must be prepared for the higher financial commitment as you will be holding two properties until the HDB is sold.

Research and Select EC / Private Condo (2-4 weeks)
Secure Financing Pre-Approval (2-3 weeks)
Book the EC / Private Condo Unit (1-2 weeks)
Exercise the Option to Purchase (OTP) (3-4 weeks)
Complete Loan Application and Approval (4-6 weeks)
Sign Sales and Purchase Agreement (SPA) (3-4 weeks)
Pay Stamp Duty and Legal Fees (1-2 weeks)
Progressive Payments and Completion (12-24 months)

Phase 2: Selling the HDB

Evaluate Financial Situation and Set Budget (2-4 weeks)
List HDB Flat for Sale (1-2 weeks)
Market and Sell HDB Flat (8-12 weeks)
Complete Sale Transaction (12-14 weeks)

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Comparison Of The 3 Different Ways To Upgrade From HDB To Condo

Criteria	Sell HDB First, Buy EC	Sell HDB First, Buy Private Condo	Buy Condo First, Sell HDB Later
MSR	30%	Not Applicable	30% (EC), Not Applicable (Private)
TDSR	55%	55%	55% (both properties considered)
LTV Ratio	Up to 75%	Up to 75%	Up to 45% (existing loan), 75% (no loan)
Loan Tenure	Up to 30 years	Up to 30 years	Up to 30 years
Fixed/Variable Rates	Both available	Both available	Both available
Financial Liquidity	Requires selling HDB first	Requires selling HDB first	Requires significant liquidity/bridging
Risk	Lower (no bridging loan needed)	Lower (no bridging loan needed)	Higher (managing two properties)
Affordability	More affordable	More expensive	Depends on managing dual ownership
Convenience	Must find new home quickly	Must find new home quickly	More time to find right condo

Frequently Asked Questions

I'm thinking of upgrading from m HDB to a condo, should I sell my HDB prior to purchasing a condo or the other way round?: Yes and no. Choosing either option includes careful consideration of various factors like financial capabilities, types of condo, and the methodology of upgrading, long-term capital appreciation, and more.

Selling the HDB first clears your financial slate, allowing you to maximize your LTV ratio and minimize the stress of managing two properties.

On the other hand, buying a condo first usually requires significant financial liquidity or bridging loans to manage two properties simultaneously. Moreover, there's potentially higher financial risk if the HDB takes longer to sell or sells for less than expected.
Will a bridging loan help in my upgrading of HDB to a condo?: Yes, if you do not have sufficient money set aside for the upgrading, especially before selling your HDB. The bridging loan is a short-term loan designed to provide immediate funds to cover the gap between the purchase of your new property (condo) and the sale of your current property (HDB flat).

In addition, you can avoid financial stress and the risk of losing your desired condo due to a delay in selling your HDB flat. Do note that lodging loans typically have higher interest rates compared to traditional home loans, so it's essential to factor in these costs.