In responding to a parliamentary question what would happen HDB owner’s estate after death, Minister for National Development, Mr Lawrence Wong, said, there were 1,890 such cases in the past 10 years from 2008 to 2017. The Minister was answering the question of:
“In each of the past 10 years, what is the number of HDB flats that have been transferred to the estate of the deceased owner who are also the flat’s owners; of these, what is the breakdown by flat types and by lease balance respectively; and how many beneficiaries/administrators of such estates have sold the HDB flat left over by the deceased.”
In answering the question of would happen to HDB owner’s estate after death, Mr Wong said: In cases where the flat is held in joint tenancy, the deceased’s interest in the flat is passed on automatically to the surviving co-owner without the need for a transfer to the estate of the deceased. The surviving owner may lodge a Notice of Death (NOD) with the Singapore Land Authority, to ensure that the title deed reflects the change in ownership. HDB does not actively track when an NOD is lodged, especially if the NOD was lodged without HDB’s assistance.”
He added: “On the number of HDB flats sold by an administrator or executor of an estate upon demise of all its owners, HDB’s records indicate that there were 1,890 such cases in the past 10 years from 2008 to 2017.”
The answer of what happens to a property owner’s estate after death depends on a wide variety of factors, like whether he or she insured, or how much of the house each borrower owns, etc.
If your property is an HDB flat (excluding Executive Condominiums), it depends on how you’ve been servicing the loan. If you’ve been paying your property loan through your CPF, you would definitely be under the Home Protection Scheme (HPS). It’s mandatory to buy this if you use your CPF to pay the home loan. If a borrower passes away, HPS immediately kicks in to pay off the remainder of the property loan.
If you don’t have HPS for some reason (e.g. you live in private housing, or didn’t pay through your CPF), then it depends on whether you purchased Mortgage Reducing Term Assurance (MRTA). MRTA is offered by several different insurers, and works the same way as HPS – if a borrower dies, it covers the remainder of the home loan. In case we need to say it, please make sure you buy this if you have a property loan.
In a worst case scenario, if there is no insurance payout, the surviving borrowers will have to take on the full loan repayment. The banks will usually try to work with surviving borrowers, to restructure the loan. Common outcomes for HDB owner’s estate after death are allowing free repricing (i.e. switching to a cheaper loan package, from the same bank), or extending the loan tenure (capped at 35 years, maximum).
Prominent personal finance adviser, Ryan Ong, gives an example of the worse-case-scenario of what happens to a owner’s estate after death:
“If your spouse that passed away earns $4,500 a month and he/she is the only breadwinner, then when you take over the property, you also take over the loan. The causes the bank to restructure the loan into 1 name. In order to restructure the loan to one name, the remaining “Owner” i.e. Mortgagor must also be the Borrower. The Borrower must then be able to PASS TDSR. If the borrower cannot pass the TDSR, the loan may be required to be PAID down or reduced. This would be a dire situation and could lead to losing your house.
If you’re in this situation, the first alternative is to see if anyone else in the family can contribute. If you have a child who’s already working, for instance, you can put their name on the deed, and take them on as a co-borrower (they will, of course, be able to tap their CPF for home loan repayments). As they’re younger than you, this can also lower your Income Weighted Average Age (IWAA), which allows you to stretch your loan tenure further. You could also enlist the help of your wider family (e.g. you in-laws) to do this, and plan to buy over their portion of the house when you’ve settled the loan.
But really, all of this can be avoided if you buy a mortgage insurance MRTA. However if your income alone can support the outstanding loan, then you should not worry too much as you will pass TDSR and be able to restructure the loan upon death of a spouse.”
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