So you want to buy a BTO flat. Good on you, and congratulations on this new milestone in your life. There’s just one issue facing you: the steps, processes and terms. Which are so labyrinthine, you could house a decent sized family of minotaurs in them. I suggest you check out our handy flowchart, and save yourself the trouble of devising new profanities for phone operators:
A brief overview of on how to buy a BTO flat (all bold terms are explained in the glossary below)
- Check your eligibility to buy.
- Look around for a flat you want, and ballot for it online. You’ll have to wait about a month to be notified of whether you’re successful or not.
- Get approval in principle (AIP) from the bank if you want a bank loan. Or, get the HDB Loan Eligibility (HLE) letter if you want a HDB loan. Take note that the HLE is only valid for 3 months.
- If you successfully ballot for the flat, look for available grants (SHG, AHG). You will then be asked by HDB to go select your flat and pay the Option to Purchase (OTP). The waiting time between a successful ballot and choosing your flat is roughly 2-3 months.
- Sign the agreement to lease. You will need to pay the down-payment, stamp duties, and conveyancing fees at this point.
- You will be asked to collect the keys, upon completion of the flat.
Key Terms to Understand
AHG – Additional Housing Grant. A scheme to help lower income Singaporeans buy their first flat. The AHG ranges from $5,000 to $40,000, depending on your income.
In order to qualify, your household income must not exceed $5,000 a month, for a 12 month period before the flat application.
AIP – Approval-in-Principle. This is a promise by the bank to loan you $X, based on your income, debt servicing ratios, etc. Note that the AIP has an expiry date (valid for 1 month), and is only relevant to bank loans. For HDB loans, you need a HLE letter (see below).
Ballot – HDB uses computerised balloting, when determining the queue position to book flats. Some applicants are given better chances at balloting than others:
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1st Time Applicant
2nd Time Applicant
Normal / Public Applicant
Married Child Priority Scheme (Near parents / Married child)
Married Child Priority Scheme (With parents / Married Child)
Conveyancing Fees – The legal paperwork involved in buying the house. The cost is as follows, if you use a HDB loan:
- First $30,000 – 90 cents per $1,000
- Next $30,000 – 72 cents $1,000
- Subsequent amounts above $60,000 – 60 cents per $1,000
For bank loans, you can choose any law firm on the bank’s board. The price can differ by a few hundred dollars, so shop around to find the cheapest (the price is usually between $2,200 and $2,500). Conveyancing fees can be paid via CPF.
Downpayment – The amount that you will have to pay in cash.
- For banks, the down-payment is 20% of the valuation. 15% of this down-payment can come from CPF or housing grants. The last 5% must be paid in cash. Also see the SDS below.
- For HDB concessionary loans, the down-payment is 10% of the valuation. All 10% of the down-payment can come from CPF or housing grants.
Note that there is a significant difference between the HDB and bank loans, particularly in terms of interest rates. For more information, see: What is the difference between a bank and HDB loan? below.
HLE – HDB Loan Eligibility. This letter states whether you are eligible to take a HDB Concessionary Loan and is valid for 3 months.
JSS – Joint Singles Scheme. You can read about it in our full article.
Married Child Priority Scheme – A scheme to encourage people to live near their parents. Applicants who live within the same estate of their parents, or in a neighbouring estate, have more chances during balloting.
OTP – Option to Purchase. This document reserves your right to purchase the flat. Getting the OTP requires a deposit called the option fee. The amount is as follows:
- 4 / 5 Room Executive Flat – $2,000
- 3- Room Flat – $1,000
- 2- Room Flat – $500
- Studio Apartment – $250
Note that, if you pay the option fee but decide not to buy the flat, you will forfeit the option fee. If there’s a good reason why you had to back out (e.g. medical emergency, sudden change in finances, and so on), you can write to HDB to request a refund of the option fee; but there is no guarantee that they will do so.
SDS – Staggered Down-payment Scheme. This lets you make the down-payment in two parts, if you are using a bank loan. You would pay:
- 5% in cash and 5% in CPF or grant money, when signing the lease agreement, followed by
- 10% down payment in cash or CPF when signing the terms of agreement
SHG – Special CPF Housing Grant. A housing subsidy which covers both low and middle-income families. The amount of the grant ranges from $5,000 to $20,000, depending on your income.
To qualify, your monthly household income must not exceed $6,500 for a 12 month period before the flat application.
Stamp Duties – You have to pay stamp duties because… there is no because. Look, you just have to pay them. Stamp duty rates are as follows:
- First $180,000 – 1%
- Next $180,000 – 2%
- $181,000 and above – 3%
What is the difference between a bank and HDB loan?
For full details, see our article on this topic. The main differences are:
- HDB loans can finance up to 90% of the flat, whereas bank loans only finance up to 80%
- HDB loan interest is fixed at 0.1% above the prevailing CPF rate (around 2.6%), for the entire loan tenure. Bank loans are not fixed, but have been much cheaper (around 1.7%) for the past decade.
- HDB loans have a maximum tenure of 25 years. Bank loans can extend the loan tenure past 25 years, but this results in a bigger down-payment.
Overall, bank loans have a higher down-payment, but offer lower interest rates (at present) and greater flexibility. HDB concessionary loans require a lower down-payment, but have a higher interest rate (at present) and less flexibility.
For more assistance, talk to the SmartLoans.sg mortgage specialists. It’s free.
Got a question about buying your flat? Ask us in the comments box, and we’ll get back to you!
Thant Zin Myint, sarihuella, Marra Taqos