Here’s the ultimate guide to first-time home ownership in Singapore

Firstly, if you are reading this article to prepare your first house purchase, congratulations! Buying a house in Singapore is a tough luxury, and buying it for the first time is an arduous process that can kill the excitement of owning your own property. You may be asking questions such as: what’s the best type of property that I can afford? What are the differences between all my possible options?

Find the answers to all your questions with this ultimate guide to first-time home ownership:

Build-to-Order (BTO)

Source: TODAYonline

Build-To-Order flats are newly designed apartments mass released to meet the public housing demand. Construction will begin only if 65-70% of the apartments in the flat have been booked. The construction will be aborted if this requirement is not met.

Pros

BTOs are cheaper than other options, such as resale flats. What’s more, the flats are completely new, and you begin with a 99-year leasehold status.

Cons

BTO flats tend to be smaller than that of resale flats due to land constraints in Singapore. They are generally built in newer estates, so it is difficult for couples to live near their families. BTO prices are also non-negotiable.

Application Process

1. Check your eligibility

Unfortunately, not everyone is qualified to buy a BTO. In order to qualify, you must fulfil one of the following criteria:

  • Be at least one citizen, applying with at least one other citizen or PR as a family nucleus, meaning spouse and kids (if any), parents and siblings (if any), or children under your legal custody (only for widowed/divorced applicants)
  • Be applying with your fiancé(e), and be prepared to register your marriage before taking possession of your flat if applying for additional or special CPF housing grants, or within 3 months of taking possession of flat.
  • Be a single citizen aged 35 and older (only eligible for 2-room flats in non-mature estates)
  • Be a citizen with a non-citizen spouse on a visit pass or work pass (only eligible for 2-room flats in non-mature estates)
  • Be a single citizen aged 35 and older applying for a flat with up to 3 single citizen co-applicants (only eligible for 2-room flat in non-mature estates)

In addition, you must ensure that you have not hit the income ceiling for the type of flat you’re applying for, or own any other property.

  • 2-room flexi flat: $6,000, or $12,000 for short-lease flats (max 45 year lease)
  • 3-room flat: in non-mature estates, $6,000 or $12,000 depending on which project you’re balloting for; $12,000 in mature estates. Check the sales launch to know the exact income ceiling.
  • 4-room flat or bigger: $12,000, or $18,000 if you’re purchasing the flat as an extended or multi-generation family.

2. Ballot for a flat

This is arguably the hardest step in the application process. First, you’ll have to check the HDB website regularly for news of upcoming sales launchesWhen you see a launch in an area that you are interested in, you have to pay $10 to ballot for it. How many tries it takes you to get successfully ballot for a flat then depends on your luck. Some people get it on the first or second try, while others have to try up to 10 times.

3. Obtain a loan

You have a choice between taking out an HDB loan and a bank loan. Make sure to compare between the two thoroughly before making a decision. If you are taking out a bank loan, get an approval in principle (AIP) – a letter declaring how much the bank will loan you. If you’re taking out an HDB loan, get an HDB Loan Eligibility letter (HLE).

4. Select your flat and pay option fee

Your queue number will determine your priority in choosing a unit. The number of people allotted queue numbers usually exceed the number of units, so if your queue number is too far off, you will most likely have to ballot again.

When it comes time to show up at HDB Hub to book your flat, bring along your IC and income documents, as well as your HLE if you are taking a housing loan from the HDB.

Once you’ve selected your unit, you have to pay an option fee on the spot. This will be $500 for 2-room flexi flats, $1,000 for 3-room flats and $2,000 for 4 room or larger flats. You will also apply for your CPF housing grants at this point, so download the necessary application forms and bring them along to your flat booking appointment.

5. Sign the lease agreement and pay the downpayment

You have to sign the lease agreement within four months of booking a flat. On the day you sign the lease agreement, you must pay the downpayment, as well as stamp duties and legal fees.

How much your downpayment is depends on the type of loan you have taken. If you are taking a HDB loan, you will have to pay 10% of the purchase price using cash and/or CPF. Those taking out bank loans will have to pay a 20% downpayment, of which at least 5% must be in cash and the rest can be paid using CPF.

Waiting Period

Generally, there is a waiting time of three to four years from the date the construction begins. As the start time is dependent on when HDB receives enough applicants, the actual wait time may increase.

Resale

Source: DollarsAndSense

Resale flats are older than BTO flats, and most have less than 99-year left on the lease.

Pros

Usually, resale flats are bigger than new BTO units, and come with established amenities and infrastructure. There is comparably very little wait time as resale flats can be acquired as soon as both parties come to a mutual agreement.

Cons

Resale flats are typically much more expensive, and the buying process can involve several third parties such as housing agents and lawyers. Resale flats are also less than 99 years – it is even possible to end up paying too high a price because of Cash Over Valuation – and for a flat with not many years left

Application Process

1. Check your eligibility

The first thing you should do is to determine your eligibility to apply for a resale flat. Families and married or engaged couples can freely apply for an HDB resale flat together. For singles, you need to be at least 35 years old before you can apply. There are also restrictions on citizenship status. In general, there must be at least 1 Singapore Citizen or 2 Singapore Permanent Residents listed in the flat application.

2. Apply for a loan

Next, you need to decide how you will finance the purchase of your flat. You can choose to apply for a loan from HDB, or take up a mortgage loan from the banks.

3. Start looking for your flat

You can start looking for a flat once you have begun the process of applying for a housing loan. There are many portals, websites and apps you can use to find available flats. Examples would be PropertyGuru and STProperty. Shortlist the properties that you are interested in, and contact the owners for a viewing.

4. View and research suitable units

If you view any flats you like, do some research to find out more about the unit, its neighbours and the neighbourhood. For example, you may want to check if there are any upcoming development plans.

You can also request for additional viewings where you can ask more in-depth questions and take a more thorough look at the intended unit. You can also ask for an indicative selling price from the owner.

You will also need to check the ethnic quotas of your intended flat to make sure you are eligible to purchase it.

5. Negotiate a selling price and OTP

When you have made the decision to purchase a certain unit, you can offer a buying price to the owner. If the owner accepts the price, he or she will offer you an Option to Purchase (OTP). An OTP is a contract between you and the seller. It reserves your right to purchase the unit at the agreed selling price for the next 21 days. During this period, the owner is legally forbidden to sell the unit to anyone else. As the owner incurs an opportunity cost, you will have to make monetary compensation. This OTP fee is set at between S$1 to S$1,000.

To exercise your OTP, you have to proceed with the sale application. If you do not proceed with the sale after 21 days have passed, the owner can offer the flat to another buyer. The OTP fee is not refundable under any circumstances.

6. Apply for a valuation report

Once you have been granted the OTP, apply to HDB for a valuation report, which will determine the value of the unit you are buying. This report is necessary for processing your housing loan.

7. Complete the resale checklist and exercise your OTP

The resale checklist is an HDB document that ensures you are aware of the standing policies. You have to complete and submit this checklist before you can exercise your OTP.

You exercise your OTP by a) signing on it, and b) paying the Deposit to Seller. This amount must not exceed S$5,000, including the OTP fee you paid earlier. Once you have done these two steps, you and the seller must submit the resale applications to HDB.

8. Attend the first and second HDB appointments

After both sets of resale applications have been submitted, HDB will proceed to process the resale application. There will be two appointments you have to attend.

During the First HDB Appointment, your eligibility to purchase the unit will be verified. In addition, you will also:

  • receive a briefing on the resale procedure
  • give your authorisation for HDB to act for you in the conveyancing
  • determine the manner of holding (i.e., determine joint tenancy or tenancy-in-common if there are multiple buyers,) and
  • fix the completion date for the purchase

The next appointment is the Resale Completion Appointment. This is when you sign the mortgage document and agreement. You will also make any outstanding payments during this appointment.

Once everything is completed, you will be handed the physical title deed (if the seller has it) and the keys to your flat.

Waiting Period

Once you decide on a flat and exercise the option to purchase, it will take about 3 months to the point you receive keys to the flat.

Sale of Balance Flats (SBF)

Source: HugProperty

These may be brand new flats left over from previous BTO sale launches, surplus Selective En block Redevelopment Scheme (SERS) replacement flats, or units whose buyers backed out on the purchase. They may also be older flats that were repurchased by the HDB.

Pros

BTO flats take at least three years to complete and SBF launches offer a shorter wait. Depending on what you choose, you may get your flat almost immediately for completed projects and Repurchased Flats, or at least look forward to a shorter wait for the BTO flats.

Like BTO flats, SBF units are also greatly subsidised, compared to the transacted prices of similar resale flats in the neighbourhood, but they still cost more than if you’d joined the BTO queue. This is because the flat’s price is adjusted to the current market rate.

Cons

Competition is notoriously stiff for SBF homes. Like BTO flats, more SBF units are allocated to first-timers who need a home more urgently than upgraders. Since November 2015, 40 per cent of the two-room Flexi flats are set aside for elderly applicants; any unused quota is then distributed amongst the other households. Depending on whether the flat is in a mature or non-mature estate, the SBF distribution for non-elderly applicants will also differ.

Application Process

Interested buyers are required to submit their application within the application period. HDB then does a computer ballot to determine the queue number to book flats.

Waiting Period

If the unit is already built, you need only wait 3 months to collect the keys to your new home. If the SBF unit is still under construction, you will have to wait to collect your keys when the flat is completed.

(Resale) Private

Source: PropertyGuru

While 80% of Singaporeans may live in public housing, private housing offers the option of landed or non-landed properties. Private condominiums also provide access to recreational facilities like swimming pools or gyms that public housing HDB lack. However, you must also be prepared to pay about three times more for private properties, as private properly developers mostly cater to foreigners and high-income Singaporeans.

Application Process

1. Get an in-principle approval from bank

Compare the different loan packages available from both local and foreign banks before you choose to take on any. The banker will require you to submit a list of financial documents, such as your income statements. An in-principle approval will most likely be an email from the banker stating how much the bank will loan to you.

2. Start looking for your property

You can start looking for a suitable property once you have begun the process of applying for a housing loan. There are many portals, websites and apps you can use to source. Examples would be PropertyGuru and STProperty. Shortlist the properties that you are interested in, and contact the owners or your property agent for a viewing.

3. Negotiate a selling price and purchase OTP

When you have made the decision to purchase, you can offer a buying price to the owner. If the owner accepts the price, he or she will offer you an Option to Purchase (OTP). An OTP is a contract between you and the seller. It reserves your right to purchase the unit at the agreed selling price for the next 21 days. During this period, the owner is legally forbidden to sell the unit to anyone else. As the owner incurs an opportunity cost, you will have to make monetary compensation. This OTP fee is set at between S$1 to S$1,000.

To exercise your OTP, you have to proceed with the sale application. If you do not proceed with the sale after 21 days have passed, the owner can offer the flat to another buyer. The OTP fee is not refundable under any circumstances.

4. Exercise your OTP

Before the deadline on your OTP, you will need to exercise it to officially become a buyer of the property. When you exercise the OTP, it is likely that you will have to pay the balance of downpayment, usually comprising 4% of the purchase price. Check the terms of your OTP if you’re not sure.

Waiting Period

Waiting period for private property is much shorter than that of public housing, and can usually take just a couple of weeks.

However, do take note: if you are buying a private property when you already own a HDB flat, you have to fulfil the Minimum Occupation Period (MOP). The MOP for HDB is 5 years which means you have to stay in your current HDB for 5 years before you are allowed to purchase a private property.

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