Many Singaporeans dream of having their own HDB, but what are the things that we have to consider before buying a flat?
First, there are a wide range of housing options available: Build-to-Order flats (BTO), Resale Flats and Executive Condominiums (EC). The main supply of HDB flats come in the form of BTOs, which are new flats that are launched quarterly in non-mature estates. When purchasing a BTO, it usually takes some time for the buyer to receive the flat as new launches are usually still uncompleted or under construction. However, due to the affordable prices, it usually is popular amongst first time buyers. If one is considering buying a BTO flat, simply head on to the HDB website at hdb.gov.sg and sign up for the HDB eAlert Service which gives alerts on upcoming launches through e-mails and SMS. The best part? This service is completely free of charge!
The process of buying a BTO is as follows:
The quarterly launch period usually takes place around the span of 1 week. Once interested, the buyer can indicate the type of flat and the respective estate in the HDB application (application fee is $10). After which, there will be computer balloting and when the buyer is successful, will be invited down to book the flat. There is a $2000 option fee and a HDB Loan Eligibility (HLE) letter must be present when coming down. Next, an agreement for the lease is to be signed where the downpayment is paid, which can be up to 20% of the price of the flat. The downpayment can either be paid by CPF or cash. The HDB loan will then be reviewed for disbursement and the buyer will be invited down to collect the keys, where the payment of the balance of purchase price will take place; either by cash, CPF or by a loan.
For a Resale flat, there are a wide range of flat types, design and location as these flats are bought from current owners and the prices are a result of negotiation between the buyer and the seller. Renovations done may be much lesser as compared to a BTO flat. Also, with the HDB resale portal, there will be no need to engage an agent or salesperson.
For ECs, these projects are developed and sold by private developers and will be fully privatised after 10 years. Some considerations when buying the ECs are price and waiting time, as these ECs are generally more expensive and might not be completed at the time of purchase.
However, who is eligible to purchase a flat?
For a subsidised flat, there needs to be a minimum of 1 Singapore Citizen (SC) and 1 Singapore Permanent Resident (SPR), whereas for a non-subsidised flat, at least 2 SPRs are required. A family nucleus is necessary, otherwise buyers will be opted under the Single Singapore Citizen scheme. Owners of private residential properties can only apply for a HDB 30 months after the sale of that property, and must be disposed within 6 months after purchase of a non-subsidised resale flat. The income ceiling of a buyer will also be taken into consideration.
Is there any way I can check for my eligibility online?
Yes, the HDB website also has an eligibility check, simply just key in your information and your results will be generated.
What are the subsidies that are offered by HDB?
You can refer to HDB’s slide here:
Also, here are some of the conditions for the respective grants:
Additional CPF Housing Grant (AHG):
- Have worked continuously for 12 months and employed at the time of application
Special CPF Housing Grant (SHG):
- A new flat
- 4 room or smaller
- Non-mature estate
CPF Housing Grant for Resale Flats:
- For 4-rooms or smaller, if both buyers are SCs, a $50,000 grant is given
- For 5-rooms or larger, if buyers are SCs/SPR, a $40,000 grant is given
- If a single household, the grants are half the respective amounts
Are there some priority schemes offered?
Yes, there are 3: Parenthood Priority Scheme, Married Child Priority Scheme, and Multi-generation Priority Scheme.
The Parenthood Priority Scheme applies for first time married couples with a child who is a SC under 16 years old, or expecting their first citizen child.
The Married Child Priority Scheme applies for flat buyers living near their parents, within 4 km their parents’ home.
The Multi-generation Priority Scheme is a joint application for parents and married children within the same BTO project.
For new flats that are not prepared, the Parenthood Provisional Housing Scheme (PPHS), provides rental flats below market prices for temporary accommodation after booking a new flat. This applies to married/courting couples and divorced or widowed parents with children.
What is the most important thing when buying a flat?
The most important thing to do is to plan for the purchase. Many of us have an idea of what we want in a HDB flat. A balcony? A large living room? Expensive location? There are many considerations, but what is important is financial planning.
It is simple as ABC! Ability, Budget, Credit.
- Ability to pay.
Ask yourself, how much is my household’s monthly income and expenses? Buyers should have a stable income and the ability to make long term loan repayments. Expenses include, typical household expenses; such as food, transport and medical expenses, housing expenses; such as monthly mortgage payments and utility bills and future expenses; due to lifestyle changes and unforeseen circumstances. Another question is how much extra cash do I have to pay monthly loan instalments?
- Budget your finances.
Usually, people engage in backward budgeting, which is looking at the price of the flat you want first, then decide on how much you need. However, we encourage looking at how much you have, then deciding on the flat that you want. This way, you will be able to know that you can afford the flat that you are deciding on.
We can assume that the price of a flat is equal to the sum of CPF savings, cash savings and housing loans. We remove housing grant out of the equation as it depends on a case by case basis and will only be confirmed after the application. Other costs that one must take note of are stamp costs and legal fees, which can only be paid using CPF savings or cash.
- Securing Credit.
Ask, what are the mortgage terms and conditions? Well, here are the eligibility conditions for a HDB loan:
- Singapore Citizen
- 12,000 family income ceiling
- Non-ownership of private residential property
- Have not disposed of a private residential property over the past 30 months
- Have not taken 1 HDB concessionary loan and last disposed a private residential property
- Only one owner-operated market stall/commercial/industrial property
- Up to 2 concessionary loans
Buyers need to obtain a HDB loan eligibility (HLE) letter before committing to buy a flat. This letter can be applied online and acts also as a financial tool which tells you more information on the loan that you are able to take.
The loan amount, interest rate (fixed or variable) and repayment period also has to be taken into consideration when obtaining a housing loan. The fixed interest rate of a HDB loan is 2.6%, 0.1% above the CPF interest rate. The repayment and loan amount has an impact on the total period, the smaller the loan, the shorter the period.
In total, there are 6 steps when applying for HLE:
Instalments are capped at 30% of applicants’ monthly income and there is a maximum repayment period of 25 years or until the age of 65, whichever is earlier. Loans are also assessed on an individual’s age, income and financial commitment.
Another useful tool is the HDB map service, which is able to tell you the remaining lease left on a property, which affects housing prices. For houses that have below 60 years of lease, there are tightened terms with regard to the granting of HDB loan and the usage of CPF monies.
All in all, with the right financial planning tools and mindset, this dream of owning a HDB flat will be as easy as A,B,C