March 14, 2018
Checking on your eligibility and deciding on a BTO or resale are just the tip of the iceberg!
Buying and owning an apartment in Singapore is never an easy affair. Money aside, if you are planning to get a HDB flat, there is a ton of rules, legislations and financial obligations to go through before you can own one.
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This applies to everyone, from the young, middle-income couple aiming for their brand-new BTO to singles trying to make their private space into a reality.
The five quick facts we are presenting to you below will serve as your introductory course to home ownership in Singapore.
Excited about owning your first home? Before you get your hopes up and prepare your housing fund for the new flat, you’ll need to check if you are eligible for the type of flat you’re looking at.
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You’ll need to meet some basic criteria:
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The abovementioned conditions are just the first of many layers you’ll have to peel off before the final decision kicks in. The next major decision is to choose between a new BTO or an existing resale.
On paper, there are more pros to lean yourself towards a resale unit. You have the pick of any location in Singapore and you don’t have to wait years before key collection.
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The downside to this? Cost. Homeowners usually aim for a central location, which is convenient and has a favourable property value. But this also means that paying a premium price.
So if cost is a huge concern, BTO flats may be more suitable for you. For one, BTOs tend to be launched in non-mature estates, giving you some breathing room on the cost front. On top of that, there are BTO launches every quarter, so it’s just a matter of waiting for a location that you fancy before you apply for that launch.
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Regardless of your decision, it’s always wise to get an approval-in-principle from your bank. This allows you to have an estimate of what you can expect to be paying over the course of the tenure.
For those on the BTO camp, the usual suspects fall inside the Bidadari, Tampines and Punggol estates. To sweeten the deal, a lot of these BTO projects can easily be mistaken for private condominiums due to the intricate design. And the size too.
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But don’t hop on the hype train just because everyone is eyeing these new projects. Get a good sense of where these new estates are, and determine the distance to supermarkets, schools, your parents’ home, bus stops and, of course, MRT stations. Needless to say, prices will trend upwards if you have most of these amenities surrounding you.
Once a location feels absolutely right for you, start the application process. Do it before the official opening of new MRT lines and shopping malls drive the valuations higher than they already are.
Simply put, when you have to decide between these two loans, it’s a matter of how much cash liquidity you can afford.
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HDB concessionary loans have a loan ceiling of up to 90%. That means you are looking at tunding the 10% down payment, monthly repayments and stamp duties using CPF OA. Further to that, the 10% downpayment is broken into 5% payment over two sessions: one during signing of the lease agreement, another during key collection. No cold, hard cash required, that’s the benefit of HDB loans.
Takers of private bank loans are subjected to a loan ceiling of 80%, which means down payment is higher at 20%. Out of the 20%, at least 5% has to be made in cash. If you have a greater capacity to tackle the payments in cash, there are 60% and 40% loan quantum options.
On the surface, it would seem like HDB loans have the advantage. But the reason why some folks prefer bank loans over HDB concessionary loans is for the flexibility it affords when it comes to interest rate hikes.
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Of course, private bank loans can also swing the other way and end up being higher than the fixed interest rates from HDB loans. But on the flip side, when market interest rates are attractively low, it’s the banks that are doing you the favour, while HDB loans would become a burden.
If you are taking up a HDB loan, you will have to apply for a HLE (HDB loan eligibility) letter which needs to be submitted during the signing of lease agreement. It is valid for six months. Bank loan applicants will have to submit a letter of offer from the bank instead.
Regardless if you are applying for a HDB or bank loan, know this: it’s purely a matter of knowing where you stand financially and understanding how much you can loan based on your total debt servicing ratio (TDSR).
Learn more about choosing between a HDB or bank loan.
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This should sway you over to HDB ownership. There are various CPF housing grants or special housing grants to offset the cost of purchase. Again, this is highly dependent on your monthly income as the housing grant is meant as a benefit for those within the lower salary range. If you qualify for such housing grants, it could mean up to $80,000 in subsidies for your new flat. That’s practically the bulk of your downpayment.