Living to 100, part 5: Housing considerations

Living to 100: Housing considerations as you get older
Our health and lifestyle are main sources of concern as we get older; but we shouldn’t overlook how both these factors overlap with housing. Whether we live till 80, 90, or over 100, we will continue to need a roof over our heads - and for many Singaporeans, a common aspiration is to live out our lives in our own homes. Here are some key points to consider, to make that a reality:

1. Familiarise yourself with the Lease Buyback Scheme (LBS), if you live in an HDB flat
The Lease Buyback Scheme (LBS) allows you to sell back a portion of your flat’s lease to the government, subject to eligibility requirements. For example: if you are currently 65 years old*, you may not need 60 years of remaining lease on a flat. You could then sell back a portion of the lease, such as 30 years, for a top-up to your CPF, in addition to a cash bonus**.

It’s important to understand the LBS because it allows you to monetise your home, without having to sell. When we get older, moving house becomes more difficult: besides the physical need to move, we face issues such as financing difficulties for the new home, loss of friends and familiarity, and expenses such as renovation.

*65 is the minimum eligibility age at the time of writing (November 2024)
*The maximum cash bonus is $30,000 for 3-room or smaller flats, $15,000 for 4-room flats, and $7,500 for 5-room or larger flats (accurate as of November 2024.)

2. Beware of lease decay, especially in leasehold condo projects
Most of us know that HDB flats are on 99-year leases; this is why CPF restricts the use of your Ordinary Account funds, if the flat won’t last till the youngest buyer is 95. Younger buyers should be wary of purchasing old flats, as lease decay sets in sooner.

For leasehold condos however, there’s another risk to consider: that’s the potential for an en-bloc sale, or a collective sale. Most condos tend to go en-bloc after just 19 to 24 years, even if there’s still a long time remaining on the lease. This can pose an extreme inconvenience, if your condo goes en-bloc and forces you to find a new home, close your retirement (e.g., just as you turn 65). Again, remember that financing for a new home, as well as renovation costs, can be tough at an advanced age or on a retiree’s income.

3. Remember that maintenance fees never end
Condo properties have monthly maintenance fees. The larger the unit, the more you’ll pay. In general though, most condos - as of 2024 - have maintenance fees of around $350 to $400 per month. Large units, or luxury condos, can have maintenance fees that are much higher.

(It’s also not impossible for even a mass-market, fringe region condo to reach maintenance fees of $600+ per month)

For older home buyers, remember that you have to keep paying this bill, even after you’re done servicing the mortgage. It’s important to factor it into your recurring monthly costs, when doing your financial planning.

4. Be wary of mingling your finances to live together
Some Singaporeans sell their homes, and pass the money to children to move into a shared family home. This is a risky move, and should be done only after consulting with a finance professional.

Once your finances are merged, it is very difficult to reverse the home ownership decision. Elderly parents may no longer have the means to buy their own home, if they find they can’t comfortably live with children, in-laws, etc.

There are some safe ways to do this - such as making the move only if you have a fallback plan, or by using tenancy-in-common as a manner of holding. This allows one party to sell their percentage ownership of the property.

It’s advisable that you consult both a financial and legal professional, before making such a move with your children or parents.

(As an aside, children should remember that - if they co-own a private property with their parents - they will be ineligible to buy an HDB flat until they dispose of their share in the private property).

5. For young homeowners, mortgage insurance is more vital than ever
For HDB flats, you’re required to pay for the Home Protection Scheme (HPS), which covers your outstanding mortgage if you pass on. This is called mortgage insurance, and whilst HDB requires it, it's optional for private properties.

For young homeowners, who are in the early stages of paying for a private home, mortgage insurance is critical. If the worst happens, and they pass away in the first few years of taking on a mortgage, their spouse could be saddled with an outstanding bill of over a million dollars (given the typical price of a family-sized condo in Singapore).

Even if your family benefits from other forms of insurance, the outstanding mortgage could be so large that it wipes out your entire legacy.

For these reasons, it’s important to have and to keep up with mortgage insurance repayments. Fire insurance alone won’t suffice, as that only covers the rebuilding costs of the home. Some mortgage insurance plans are more comprehensive than others - for example, some mortgage insurance policies also provide coverage for burglaries, or even for tenants who cause damage to the property.

Do remember that families grow and shrink over the years
When you have your first or second child, or when your aging parents move in with you, there’s a chance you may need to upgrade to a bigger home. Conversely, when your children move out in your twilight years, it may be inefficient to keep paying for a larger home than you need.

This should be accounted for in your financial planning. It’s best to stay flexible when it comes to home ownership, and prepare for changes over time. Just as your needs change at different life stages, your home may have to as well.