A Guide To Lease Buyback Scheme In Singapore
Planning for one’s golden years allows families and individuals to effectively cope with anything that life throws at them with full confidence. The good news is that the retirement plans for Singapore senior citizens have greatly improved over the last few years. This includes the Lease Buyback Scheme (LBS), which gives retirees a great way to supplement their retirement income by selling HDB flat back to HDB (the Housing Development Board).
So, what is Lease Buyback Scheme, and how does it work? Let’s dive into what Lease Buyback Scheme is and what it does.
What Is Lease Buyback Scheme?
The Lease Buyback Scheme (LBS) is a programme for Singapore citizens to monetize their HBD flat and receive more retirement funds. The tool allows flat owners in their golden years to sell back to HDB a portion of their flat’s lease and to get a steady stream of cash proceeds while still living in their properties.
The funds are deposited into the Citizens CPF Retirement Account (RA) up to either the Basic Retirement Sum (BRS) (for homes with two or more owners) or the Full Retirement Sum (FRS) (for one-owner households), allowing the applicant to buy a CPF Life Plan, which offers a monthly bonus for the rest of the applicant’s life. If you are eligible (the eligibility age is currently set at age 65) and decide to apply for the Lease Buyback Scheme, you get a chance to determine how much of the outstanding lease to keep.
The HDB Buyback Scheme for elderly people was launched in 2009, but several changes have been introduced over the years to make selling flat back to HDB more convenient for Singaporeans. Currently, this HDB sell back scheme is appropriate for all HDB flat types, and the monthly payout limit has increased.
How Does Lease Buyback Scheme Work?
There are a number of things you need to know about the HDB Buy Back Scheme for elderly people:
1. Firstly, the scheme has a minimum lease that a homeowner must retain, based on your age category, so you’re not allowed to sell off the number of years you wish.
2. Secondly, the sale proceeds are mainly put into your CPF retirement account.
3. If you receive a minimum of $60,000 in your CPF retirement account, you also receive a Lease Buyback Bonus (LBB).
4. If you die before the expiry of your remaining lease, the family members you choose to inherit your flat can receive a reimbursement for the premature expiry of the lease.
1. The Minimum Lease
To help ensure that your HDB property can last the rest of your life, you’re required to retain a given length on the lease depending upon the age of the youngest flat owner. Provided that the minimum criterion is met, the remaining number determines the amount of proceeds a homeowner can get.
Lease Buyback Options
|Youngest flat owner’s age||Minimum Lease Retained (Years)||Other Options (Years)|
|75-79||20||25, 30, 35|
|Over 80||15||20, 25, 30, 35|
2. Where The Sale Proceeds Go
You need to note that you won’t receive the whole amount in cash upfront. The HDB Lease and Buy Back Scheme is designed to ensure your security in your retirement years so that the net proceeds will be put into your CPF Retirement Accounts.
CPF RA Top-up for Owners
|Age||1 Owner Top-Up Requirement||Top-Up Requirement for two or more owners|
If you have a minimum of $60,000 in your CPF Retirement Accounts, the finances will be used to purchase a CPF Life Plan. That way, you can receive a monthly payout. The disadvantage is that you have no say unless you are at least 80 years old.
Once you meet this age top-up requirement, you will be able to receive the remaining amount: a maximum of $100,000 for each household. Anything above $100,000 means that you must top up your CPF RA further before receiving additional funds in cash.
3. The Lease Buyback Bonus
In case you top up your RA with cash proceeds up to $60,000, you are eligible for a Lease Buyback Bonus (LBB). Even if you don’t manage to get this amount, you still get the Lease Buyback Bonus.
Lease Buyback Bonus Allocation
|Flat Type||Fixed Lease Buyback Bonus||HDB Pro-rated Bonus|
|Three-Room Flat||$20,000||$1 for every CPF top-up of $3|
|Four-Room Flat||$10,000||$1 for every CPF top-up of $6|
|Five-Room Flat||$5,000||$1 for every CPF top-up of $12|
4. Reimbursement After Premature Termination Of The Lease
In the event you die before the expiry of your remaining lease, your remaining beneficiaries can decide what they wish to do with the flat they have inherited. They can either live in the flat for the balance lease period or terminate it at their own discretion. For the second option, they will receive a prorated bonus depending on the total value of the remaining portion of the lease of the flat.
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Benefits Of Lease Buyback Scheme
Some flats can be hard to sell, and hence, the Lease Buyback Scheme is a great way for Citizens to boost their retirement funds.
In addition, homeowners can enjoy a reasonable bonus by topping up their CPF account with a minimum of $60,000 from the LBS Singapore. Fortunately, you can receive a prorated bonus if the amount of money in your RA hasn’t reached that amount, thanks to the gahmen for helping seniors who have little retirement savings.
Even after the HDB has acquired the tail-end lease, you can still lease out the rooms in your property for extra income depending on the size, location, and the market value of the flats.
Disadvantages Of Lease Buyback Scheme
The HDB Lease Buyback Scheme seems quite helpful for elderly people who need to supplement their retirement funds. Nonetheless, this HDB scheme for elderly flat owners does have its drawbacks. These include:
- Inability to sell off the flat
- Chances of outliving the owner lease
- One can make as much by simply renting out the rooms
1. Inability to sell off the flat
The Lease Buyback Scheme HDB will protect you, but the biggest disadvantage is that you cannot sell the flat once you have taken part in the program. In exchange for the proceeds, you’ll no longer be able to list your house in the open market. Homeowners also are unable to rent out or sublet the house no matter how generous the offer is.
2. Chances of outliving the lease period
So what would happen if you outlive the lease duration after taking part in the HDB elderly scheme? Even though the HDB has made assurances that you won’t be left homeless, if you outlive the remaining lease, there’s no clear indication of your financial status or even the housing arrangement options you’ll have.
3. One can make as much by simply renting out the rooms
By renting out the rooms, homeowners can typically make around \$500 to \$600 per room per month. If you have two or more rooms, you might be making even more cash than your CPF RA payouts.
This can boost your retirement money too, and you won’t have to lose your legacy, risk outliving the lease, or lose the ability to sell off your home.
Who Is Eligible For The Lease Buyback Scheme?
Before you begin planning to participate in the HDB Lease Buyback Scheme to increase your retirement income, you first need to meet the eligibility criteria.
The Lease Buyback Scheme is available to Singaporeans and other applicants holding onto HDB flats or four-room houses. You are also required to meet the following eligibility conditions:
- The eligibility age of the youngest owner should be at least 65 years old. For a couple, each individual must be at least 65 years old
- At least one flat owner must be a Singapore citizen
- No concurrent home ownership
- Gross monthly household income should be $14,000 or less
- All flat owners must have been staying in the property for at least 5 years
- Must keep at least 20 years of lease to sell to HDB to get the proceeds.
How To Apply For Lease Buyback Scheme?
For homeowners planning to apply for the Lease Buyback Scheme, the HDB offers tailored financing counseling programs, which you can schedule online. During the counseling sessions, participants will be provided with a variety of monetization schemes (such as Silver Housing Bonus  and Lease Buyback Scheme). If you’re convinced, you can apply for the HDB Lease Buyback Scheme in person. The owner’s flat is then valued by a staff member of the HDB’s Panel of Private Valuers.
Lastly, a financial counseling session helps to allow the homeowners to determine how much they can receive from the LBS proceeds, LBS bonus, and the monthly income they can expect from the CPF Life plan. At the end of the transactions, you can expect your CPF RA to be credited with the LBB and the monthly income in one or two months. Keep in mind that there are legal and administrative fees associated with the LBS. These fees are typically deducted from the LBS cash proceeds.
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