Cikgu Norazimah

Your guide to buying a HDB BTO

July 01, 2018

To get a BTO flat is a big milestone in your lifetime. But to get a BTO flat is as tedious as it seems. You start facing different issues. You do not know where to start, how to start and when to start. You get confused with the steps, the processes and the terms when it comes to buying a HDB BTO unit. Keep on reading to have an idea on getting a BTO and say goodbye to those tedious issues.

Below are the 6 steps that you need to go through in order to buy a HDB BTO.

1. First of all, you will need to screen your eligibility to purchase a BTO flat.

2. After meeting the eligibility of buying a BTO flat, you can start looking for a BTO flat around the area you desire that suits your needs and wants in terms of location or others, and try balloting for the BTO flat online. Do wait patiently as you will need to wait for approximately a month time to get notifications on whether you have succeeded or failed to ballot for a BTO flat.

3. Thirdly, you need to get an approval in principle (AIP) from your desired bank if you require a bank loan. Another alternative is that you can apply the HDB Loan Eligibility (HLE) letter if you require a HDB loan. The difference between a HDB Loan and bank loan is that HDB Loan is 90% LTV whereas bank loan is only 80% LTV. The HDB Loan also allows you to pay for a lower down payment, however, HDB loan offers less flexibility. As for bank loan, it requires a higher down payment but comes with greater flexibility. Do take caution that the validation for HLE is only 6 months. More information on ways to apply can be found here.

4. Next, after getting a notification on your success ballot for a BTO flat, you can start looking for grant available from Special Housing Grant (SHG) and Additional Housing Grant (AHG). SHG is a housing subsidy that covers both the low and middle income families with grant ranging from $5,000 to $20,000, subject to buyer’s income. As for the AHG, it is a scheme that aims to help Singaporeans with lower income to purchase their first flat with grant ranging from $5,000 to $40,000, subject to buyer’s income as well. To qualify for an AHG grant, your household income should not exceed $5,000 per month, for a period of 12 months before your application for the flat. You will then be invited by the HDB person in charge to choose your desired flat and make payment for Option to Purchase (OTP). Again, do note that the time to wait is approximately 2 months to 3 months between the period of successful ballot and flat choosing.

5. After 2 or 3 months, you may sign the leasing agreement. You are also required to make payment for the down payment, conveyancing fees and stamp duties.

6. Lastly, sit back and wait for the collection of keys after the completion of your BTO flat.

What is AIP, HDB, BTO and OTP

You must be wondering what are some key terms that I have mentioned above. Let me explain. Firstly, Approval in Principle (AIP). AIP is a loan from the your desired bank to promise you according to your monthly salary, ratios of debt servicing and etcetera. However, this AIP is only valid for a month and is only applicable to bank loans. Secondly, ballot. HDB or BTO uses a computerized system for the balloting process to determine the queueing position to secure the flats. Bear in mind that every individual has different chances of balloting. Some applicants have better opportunities and some do not, depending on the type of applicant, such as (normal/public applicant, married child priority scheme - near parents/married child or married child priority scheme - with parents/married child).

Next, OTP. OTP as a document that save your rights in order to buy the flat. However, getting an OTP demands a deposit that is known as option fee. For or 4 or 5 room executive flat, OTP is priced at $2,000, a 3 bedrooms flat is priced at $1,000, a 2 bedrooms flat is priced at $500 and a studio apartment is priced at $250. In the event of backing out from buying the flat, the option fee will then be forfeited unless there is a good reason for deciding not to buy the flat. You will then need to write a letter to HDB to ask for a refund, but with no guarantee.

After that, conveyancing fees and down payment. Conveyancing fees are the lawful paperwork you are involve in when you purchase the house. For example, if you are using a HDB loan, the first $30,000 is $0.90 per $1,000, next $30,000 is 72 cents per $1,000 and following amounts above $60,000 is $0.60 per $1,000. Conveyancing fees could also be paid through your CPF. As for down payment, it the the total amount that you are required to pay in cash. For banks, downpayment is 20% of the property. 15% of the 20% can be paid via CPF or housing loan. However, the last 5% of valuation have to be paid through cash. As for HDB concessionary loans, down payment is 10% of the property’s valuation. In addition, all of the 10% can be paid via CPF or housing grant.

Differences Between a Bank Loan & HDB Loan

Before I conclude, it is crucial to know that there are differences between a bank loan and a HDB loan. To make it easier to understand, the main differences between a bank loan and HDB loan are as follow:

i) HDB loans are able to fund as much as 90% of the valuation whereas for bank loans, it is able to fund up to only 80% of the valuation.

ii) HDB loan has a fixed interest of 0.1% above the current SPF rate, which is approximately 2.6%, for the whole loan tenure, whereas for bank loan, the interest is not fixed. However, are cheaper, at approximately 1.7%.

iii) HDB loans typically have a tenure of maximum 25 years whereas bank loans are able to allow the extension of the loan tenure beyond 25 years. However, this will result in a larger sum for the down payment.

In other words, bank loans are known to have greater down payment but lower interest rate and better flexibility. As for HDB loan, it allows a lesser down payment but with greater interest rate and lesser flexibility. So if you are planning to apply for a BTO unit, think and choose wisely and accordingly.

In conclusion, the steps to getting a BTO unit is not that tedious after all, provided you follow the guide and plan ahead to avoid going through the unnecessary issues. You can understand more on the process of getting a HDB flat by reading stepby step guide to buying your first BTO flat and guide tobuying a new HDB flat.

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