Time For Retirement
You work your whole life, paying a mortgage for years. The bulk of your asset is stored in your HDB. You are going to retire, you stop working, stop getting monthly income. You are staying with your spouse in a proudly owned HDB. Your children have already formed their own family and have moved out. You have so much empty spaces in your house that you have never stepped foot on for a long time. You are wondering, should I downgrade my HDB? This post will give you an idea of who is suitable to downgrade and how to decide if you should downgrade.
Downgrade Your HDB When You Can
Are you aware that only 4% of HDB go through SERS(enbloc). Which means that when your property lease goes to zero, your property is worth nothing. Over the course of your life, you have paid maybe 20 plus years of the mortgage? Your property is now worth $500-600K? What if I tell you that if you continue to live in this property, you will lose that $500K and you will be wasting your hard earned money paying for the property?
Your Money Is Stuck In The Property
Let’s say your HDB is worth $600K, you feel that you have $600K right? What if you need $20K now, can you just take it out from your HDB? You can’t, that is why your money is stuck in the property. Any profit you make is just paper profit. Only when you dispose of your property, you can realise the profit, you can get it back in terms of cash.
You Will Be Left With Nothing
You have $600K in your property now, what about 20 years later when you want to retire? Is your property still worth $600K? High chance is that it is worth much less. Your HDB would have aged, furthermore, the government is not going to extend your lease. Would you buy a HDB which has a 40-year lease left for $600K?
Will you be willing to let go of your property at $300K? Unless you stay with your children you are still left with nothing. Why? You will need another property to stay in, you move to another 3 room HDB that is worth $300K and you are left with nothing, you do not even need to downgrade anymore.
Of course, if you downgrade to a really small HDB at a very inconvenient location you will still get back something but this is not the point of our discussion. If you can already see, your choices are limited if you drag on.
Why Should You Downgrade Your HDB?
You want to take out the cash you have stored in your HDB before it goes to zero. Use the cash for your retirement and enjoy the savings you have placed in your HDB months after months. Enjoy the fruits of your labour. Are you planning to never touch your HDB at all? This means that you will never get back any money from your property.
With your $600K property, if you downgrade now to a 3 room HDB costing $300K. You can still get back $300K of cash from your property. If you wait, you may never get back this $300K anymore. Your money is being kept in a corner, not working for you, slowly depreciating as time goes by.
Who Should Not Downgrade Their HDB?
- Families who still has many occupants and need a large space.
- HDB owners who is already living in a small space, e.g. 2 room HDB.
- HDB value that is too low for downgrading.
- You have ample of cash and you do not need the money at all.
If you are living in a small HDB or your value is too low, which usually come hand in hand. You should not downgrade. You will not get much out of it.
When I mention that you have ample amount of cash, you can consider downgrading as well. As mentioned above, if you continue living in your HDB you will not be able to get an money from your property. It would be the same as paying for an investment but not getting any returns at all.
Downgrade Or Not?
It depends on the individual, a proper financial calculation needs to be done as well. This is to ensure that you have a roof over your head and at the same time cash out on the profits that should be yours from your HDB. Contact me now to know your options and get a free analysis on whether you should downgrade your HDB.