A SINGAPOREAN GUIDE TO
PURCHASING A RESALE HDB
You've discovered the ideal unit you've been dreaming of – but what's the next step for purchasing it? Unlike the straightforward process of liaising directly with the Housing Development Board (HDB) for Build-To-Order (BTO) units, buying resale flats can be more complex as you won't have HDB's guidance throughout. If navigating the purchase of a resale HDB has been challenging for you, this six-step guide could provide the assistance you need.
BEFORE PURCHASING
1. CHECK YOUR ELIGIBILITY
Similar to many other public housing systems, only Singaporean citizens and Permanent Residents (PRs) are eligible to possess a HDB unit. To acquire one, individuals can submit an HDB Flat Eligibility (HFE) application through the HDB Resale Portal. Various schemes cater to different needs and preferences, such as purchasing with a family nucleus or collaborating with multiple single individuals to jointly buy a HDB.
2. MAP YOUR FINANCES
Another significant consideration involves securing financing for the purchase of an HDB Resale flat.
Based on your current income, you can estimate the potential bank loans available to you using the guidelines outlined in this article. Besides factoring in the cost of the flat itself, remember to account for furnishing and renovation expenses, which could significantly augment your budget. By calculating these figures, you can gain a clearer understanding of the price range within which your ideal home lies.
As elaborated in the article, the timeframe for exercising your Option to Purchase (OTP) is limited to three weeks, which may not provide ample time to explore the most suitable loan options available in the market. Furthermore, it's essential to consider the grants you're eligible for and weigh the pros and cons of obtaining a loan from HDB versus a private bank. Therefore, it's advisable to secure an In-Principle Approval (IPA) or HDB Flat Eligibility (HFE) Letter at this juncture or during your property search.
An IPA entails the bank's initial assessment of your financial standing, including the loan amount they're willing to extend, typically valid for 30 days. Although not legally binding, it offers valuable insights for your financial planning. Failure to obtain an IPA and encountering difficulties in securing a loan after committing to the OTP may result in forfeiting the option fee of $1,000, allowing the seller to explore other offers.
Alternatively, if you prioritize a lower down payment and stable interest rates, the HDB Concessionary loan might be a better fit. In this case, instead of an IPA, you'll need to apply for an HFE Letter, equivalent to an IPA for HDB Concessionary loans.
Since either a valid IPA or HFE Letter is mandatory before signing an OTP for a resale property, it's prudent to apply for one or both beforehand. Doing so not only ensures compliance but also offers insights into potential financial arrangements that may require consideration if you're seeking a higher loan amount than initially offered.
STEP 1: FLAT HUNTING
This step can be quite tiring, as it involves searching for the ideal flat to suit your needs. While preferences vary from person to person, a general guideline is to pay attention to the remaining lease duration. This not only impacts your eligibility for the Enhanced Housing Grant (EHG) but also influences the future resale value of the flat. Flats with only 20 years left on the lease tend to command lower prices and may prove more challenging to sell.
Furthermore, location plays a crucial role. Apart from considering proximity to public transportation hubs, it's wise to explore housing options near your family members, such as parents or children. By residing within 4km of your parents, you may qualify for the Proximity Housing Grant (PHG), which offers grants of $20,000, provided you meet other eligibility criteria.
Lastly, pay attention to the layout of the apartment. While some flats may boast larger square footage, irregular spaces could lead to inefficient use of space.
STEP 2: OBTAIN AN OTP
Now that you've secured an HDB you like, consider applying for an Option to Purchase (OTP). This document serves as a binding agreement between you and the seller, ensuring that they will hold the offer open exclusively for you for a set duration. During this time, the offer cannot be withdrawn, nor can the property be sold to another party. In return, you'll need to pay the seller up to a maximum of $1,000.
Within 3 weeks, this period allows buyers to get a valuation report from the HDB. If you intend to secure a financial loan from the bank, you must acquire a letter of offer. It is necessary to provide the banker with the appropriate documentation to facilitate the issuance of the letter of offer. Additionally, you must engage a private solicitor to represent you in your HDB purchase. All these tasks must be completed before the expiration of the Option To Purchase (OTP).
Additionally, it's advisable to secure your bank loan within this timeframe, aligning with the agreed-upon amount.
STEP 3: EXERCISE OTP
After exercising the OTP and submitting the $4,000 exercise fee, purchasers can place a caveat on the property title. It is crucial to do so in order to safeguard your interest as a buyer and prevent the seller from re-issuing the OTP. Simultaneously, both the buyer and seller engage in a Sale & Purchase (S&P) agreement for the property transaction.
Approximately 6-8 weeks will elapse from now until the contract is finalized, during which time your legal representatives will handle necessary legal procedures to guarantee a fair land title transfer.
STEP 4: SUBMIT TO HDB FOR APPROVAL
Buyers will need to submit their exercised OTP to HDB for approval. Apart from confirming compliance with citizenship requirements, meeting other quotas like Ethnic Integration Policy (EIP) and SPR quota is crucial.
STEP 5: PAY STAMP DUTY
HDB typically takes around 2 weeks to process your application for approval. During this time, HDB may perform technical inspections on the property, and you will be required to endorse documents on the HDB website. Rest assured, HDB will notify you via SMS. Additionally, both you and the seller will need to cover conveyancing fees as well as Buyer Stamp Duty. You can calculate the stamp duty using the IRAS Stamp Duty Calculator.
Source: IRAS
STEP 6: COMPLETION
Completion of resale flats typically occurs within 8 to 10 weeks following the Acceptance of Resale Application. Before completion, sellers must terminate all GIRO payments related to the flat, settle property tax dues until the year's end, and clear S&CC payments until the completion date. S&CC payments must be made physically at Town Councils to obtain receipts. Receipts for S&CC payments and proof of cleared property tax are essential during resale completion.
Buyers need to arrange for a house inspection to ensure vacant possession unless otherwise agreed upon and confirm all remaining payments related to the purchase. Approximately one week before the completion date, you will receive an SMS update specifying the scheduled time and date for your resale completion.
Congratulations on acquiring a new home!