In Singapore’s fast‑moving property market, homeowners sometimes choose to sell their current home before committing to the next one. On paper, this seems like a sound strategy. After all, you want to secure your sale proceeds, avoid the risk of owning two properties simultaneously, and avoid incurring additional costs due to Additional Buyer’s Stamp Duty (ABSD). But in reality, selling your home first will expose you to financing and affordability pitfalls, regulatory hurdles, and timing mismatches that can derail your plans.
#1 Buying Without An In‑Principle Approval (IPA)
An IPA is your bank’s preliminary confirmation of how much they are willing to lend. Without one, you are only guessing how much leverage you can command when searching for your next home. If you overestimate your affordability, you risk committing only to discover later that your loan application is only approved for a smaller amount. This could lead to an urgent scramble for funds, or worse, losing your deposit because you can’t afford the property.
Always secure an IPA before making any offer, and make sure it’s up to date, especially if your financial situation changes.
#2 Valuation Gaps and Loan Shortfalls
Banks base their loan amounts on property valuations, not your agreed purchase price. If your property’s valuation comes in lower than expected, you’ll face a loan shortfall that must be covered in cash. This can derail your purchase if you don’t have sufficient liquidity. To avoid this, prepare a cash buffer or arrange bridging finance to cover any gaps.
#3 Overestimating Your Affordability
It’s easy to assume that the sale proceeds from your current home will fully fund your next purchase. In practice, there are a number of hidden or unexpected costs that eat into your funds. Deductions include outstanding mortgage repayments, CPF refunds, accrued interest, agent commissions, stamp duties, and renovation costs. These can significantly shrink your usable cash, causing you to overestimate your affordability.
In most cases, you should never buy the most expensive property you think you can afford. Instead, start with a conservative budget with a buffer of at least 10% of your intended purchase price.
#4 Forgetting About CPF Accrued Interest
If you used CPF Ordinary Account funds for your current property, you must refund both the principal and accrued interest when you sell. This repayment goes back into your CPF account, not your pocket, which means less cash available for your next downpayment. Many sellers are caught off guard by how much interest has accrued over the years.
Always make sure to check your CPF Home ownership dashboard early, or use CPF’s housing usage calculator for a better idea of how much you can use.
#5 Having the Seller Back Out Despite Exercising The Option to Purchase (OTP)
An OTP is meant to give you exclusive rights to purchase a property, but disputes and loopholes can still arise. The sellers is legally prevented from selling their property to anyone else, but they themselves may attempt to back out of the deal, even though it will mean legal consequences for them. Other disagreements over conditions can also delay completion of the contract.
Protect yourself by engaging a conveyancing lawyer to draft or review OTP terms and ensure that your deposit and rights are clearly safeguarded.
#6 Additional Buyer’s Stamp Duty (ABSD)
ABSD rules are strict, and timing matters. If you buy a new property before selling your current one, you may be liable for ABSD upfront, with refunds only available if you meet specific deadlines. Missing these deadlines can cost tens of thousands of dollars. Always consult your lawyer on stamp duty obligations and ensure you understand the refund conditions before committing.
#7 Downgrading To An HDB Flat Without Factoring In The 15‑Month Wait‑Out
If you’re moving from private property to an HDB resale flat, you may face a mandatory 15‑month wait‑out period before you’re eligible to buy. This relatively new rule, introduced in September 2022, means you have to either rent accommodations during this period or find some other housing arrangement. Since it’s only been in effect for over three years, some homeowners either overlook this regulation until it’s too late or assume they can appeal for it to be waived.
Neither situation is ideal, but do note that Singapore citizens aged 55 and above are exempted from this waiting period if they move from a private property to a 4-room or smaller flat.
#8 Timing Mismatches And Temporary Housing Costs
The completion dates of your sale and purchase rarely align perfectly, leaving you without a home for weeks or months if you’ve sold your home before securing your next property. Temporary rental costs, storage fees, and moving expenses can add up quickly and eat into your proceeds.
Even after purchase, delays in renovation, defects rectification, or late handover of new units can leave you without a livable home. Legal disputes or administrative bottlenecks can also push back timelines.
Build contingency time into your plans and be ready to mitigate this by negotiating an extended stay with your buyer or planning short-term rental accommodation in advance.
Consider Working With A Mortgage Broker In Singapore
Selling your home before buying the next one can be a smart move in Singapore, but only if you plan meticulously. Secure your IPA, check your CPF accrued interest, confirm HDB eligibility, and engage a reliable conveyancing lawyer. It may seem like a lot of effort but fortunately, these are all roles that a seasoned mortgage broker can assist you with.
The best mortgage brokers in Singapore offer their time and advice to help you make the decision that is right for your individual needs. Since they are often paid the same commission rates by the banks they refer you to, they offer their services to you for free. Consider our friends over at RedBrick and Cashew.
If you prefer a DIY approach, Cashew offers a user-friendly platform to compare packages across banks based on your loan inputs. Additionally, Cashew’s advisors also assist you in applying for the preferred loan package, all from the comfort of your home.
Alternatively, RedBrick offers a more personalised experience, with its professional mortgage brokers sharing insights into the nuances of each loan package during a free, non-obligatory consultation. Check out our home loan guide for more information.
Ultimately, the best choice is to work with a mortgage broker who has years of industry experience. A trusted mortgage broker would also be able to help you obtain an IPA, recommend the services of the best conveyancing law firms in Singapore, and guide you through the process of property sale and purchase.
