A Singles Guide to Buying a BTO

Several of my single (some unavailable) peers are nearing their 35th birthday and many of them are contemplating diving straight into their bachelor pads when they are of eligible age. Knowing that there will be a handful of users who would have some burning questions regarding the eligibility and qualifying criteria for the Build-To-Order (BTO) application under the Singles Citizen Scheme, i decided to write a short guide, to compile some of the important facts you would need to know before making your purchase!

Image Credit: Space Sense Studio Pte Ltd

Eligibility

There are two main caveats for eligibility to apply for a Singles BTO. Firstly, your average gross monthly salary must not exceed $5,000.00. Secondly, you cannot be a joint owner/owner of another HDB or Private Property. For the case of the latter, you would be given a time frame to dispose of your existing private property after successfully applying for the BTO.

For those who do not even qualify due to the salary ceiling, congratulations to you! As you would be classified in the group of medium - high income earners. Unfortunately, a brand new BTO is out of bounds and your only options are the HDB resale or the private property markets.

Location

Bad news for the singles who are looking to buy a bachelor pad that is located in a convenient and matured district. Aside from the size restriction, which we will discuss in the next section, HDB only allows singles to buy BTOs from non-matured estates.

Based on the definition given by HDB, a matured estate refers to an estate that is in existence for more than 20 years. Examples of non-matured estates are listed as follows (Bukit Batok, Bukit Panjang, Chua Chu Kang, Hougang, Jurong (East/West), Punggol, Sengkang, Sembawang, Woodlands, Yishun). 

Size

There is a size restriction on Singles buying BTOs. HDB currently only allows Singles (at 35) to purchase 2 Room BTO developments. At a measly 45 square meters, you would be pretty much restricted to basically a 1 bedroom, 1 kitchen bachelor pad. 

Take a look at how a typical 2 room BTO flat would look like.

Time

Typically, the time taken from application, to receiving the keys is usually a good three to four years. At 35, most singles would be eager to move out and start living lives on own. Yet, having to wait for the BTO construction to complete for another 3-5 years would not be too enticing. 

If time is of the essence, one could consider going straight into the resale market.

Grants

Singles under SSC, NCS and FT/ST couples
Singapore Citizen (First-timer) Income	AHG (Singles)	SHG (Singles)	Total
Up to $750	$20,000	$10,000	$30,000
$751-1,000	$17,500		$27,500
$1,001-1,250	$15,000		$25,000
$1,251-1,500	$12,500		$22,500
$1,501-1,750	$10,000		$20,000
$1,751-2,000	$7,500		$17,500
$2,001-2,250	$5,000		$15,000
$2,251-2,500	$2,500		$12,500
$2,501-2,750	-	$7,500	$7,500
$2,751-3,000	-	$5,000	$5,000
$3,001-3,250	-	$2,500	$2,500

Selective grants are given by HDB for applicants whose monthly salary does not exceed $3250. The lower your salary, the higher the grants you will be eligible for.  

* You can read more about the HDB housing grants for Singles.

The Application Process

Once you are eligible to qualify for a singles BTO, look out for some of the BTO launches from HDB. When a desired development shows up (Example: SengKang, Sun Breeze, register for the electronic ballot by applying online.

Upon completion of the computerised balloting, you will be informed of the results of your application. If there is a realistic chance of getting a unit, you will be invited to HDB Hub at Toa Payoh for an appointment. 

During your appointment, you will face a nervous wait to select your desired unit and floor. There will be several flat screen monitors displaying the available units, as well as those that have been selected by applicants with a lower ballot number (i.e, those ahead of you). 

After selecting a unit, you will be required to pay the Option-To-Purchase (OTP). This is a non-refundable deposit that will be forfeited in the event you so decide to back out on your decision. For a 2 room flat, the OTP costs 500$ and has to be paid in CASH or NETs. 

Subsequently, you will be asked to pay the down payment of the house (Depending on the type of loan: Bank Vs HDB). Fast forward 3-4 years later, when the construction is completed and just before you receive your keys. You will be required to deplete your CPF ordinary account, which goes to the payment of your BTO flat. This is also when you begin your monthly loan repayments.

Finally, when you have moved in, you will be required to stay for a minimum of 5 years before you can sell or rent out your flat. 

Happy house hunting!

Related Articles: 
5 Things to note when buying your first BTO.

3 Considerations For Your New Home

1) Matured / Non-Matured Estates

In general, there is a relatively huge discrepancy between the prices of HDB flats in matured vs non-matured estates. Based on my opinion, it seems like the government’s plan to attract citizens to ‘populate’ the more sub-urban areas of Singapore (example: Punggol , Seng Kang).  

Eco Estate in Punggol

By offering housing at relatively lower prices and developing the areas into modern, eco-friendly estates (e.g: Punggol Waterway) , it hopes to create more vibrant satellite towns and perhaps ease the human congestion in the matured estates.

For the people thinking of purchasing a new flat, these new estates represent attractive options, both in terms of pricing and being part of a young, dynamic community.

Now let’s take a look at the price comparison of a typical 4-RM (90sqm) Flat, in matured and non-matured estates.

(Reference: JUL-2014 BTO Exercise)

Matures Vs Non-Mature - Price Comparison

All else being equal, there is indeed a premium to pay when choosing a flat in a matured estate. Do seriously consider this point when choosing your BTO!.

HDB's Estate Classification are as follows:

Matured Estates: HDB Estates that are more than 20 years old. E.g: Bishan, Ang Mo Kio, Toa Payoh.

Non-mature estates: Bukit batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sengkang, Sembawang, Woodlands, Yishun. 

2) Loan Amounts & Tenor

Loan Amount 

Buying a big house that is future proof (for kids,etc) is important! But equally important is whether it would take a toll on the couple's finances. Making the right decision will impact your quality of life when the financing your new home.

Here are a list of tools that would be most useful in helping you make the right choice in terms of your housing affordability. 

(Reference: CPF Loan Affordability Calculator , HDB Monthly Installment Calculator , CPF First Home Calculator)

As a general rule of thumb, many people advocate a maximum of 30% (capped by HDB). I would suggest to set a max loan repayment % of about 20%. This will give you ample buffer (Mortgage payments via CPF installments) especially if you intend to have kids soon after marriage.

Case 1:

Combined Income: $10,000 

* Your combined income is key to how much money you can borrow

Percentage Of Income on Loan Replayment: 30%

Max Loan: $759,261

Monthly Installments: $3,000

30% Income on Repayment

Case 2:

Combined Income: $10,000 

Percentage Of Income on Loan Replayment: 20%

Max Loan: $445,815

Monthly Installments: $2,000

20% Income on Repayment

As you can already see from the illustration, it is important to buy a house that you can afford - without spending the rest of your lives being a slave to debt!

Tenor 

Bank
All residential property loans will only allow a maximum loan tenor of 35 years.
* Most banks will allow a repayment period of 30 years. 

HDB
The maximum loan tenor is 65 years minus the buyer’s age or 25 years, whichever is shorter.

The combination of the loan tenor and amount will determine your repayment schedule, as well as your monthly installments. Always live within your means !

3) Bank Or HDB Loan (Should I Repay Early ?)

Choosing between a Bank or HDB Loan is an important financial choice to make when buying a flat. This point is covered in one of my articles here. 

However, I will discuss an equally 'hot' topic on early payment of your mortgage loan.

- Using excess CASH in CPF Ordinary Account

For those intending to use excess CASH in your CPF, I would suggest to maintain at least 20,000$ in your OA before doing any lump sum repayment on your loan.

By maintaining an initial $20,000 in your CPF OA account, you would be able to enjoy an interest of 2.5% plus an extra 1% assuming the combined total CPF (OA +SA + Medisave) is less 60,000$. *Read more about it here

For those who are financially savvy (or can tolerate financial risk), excess CPF savings can also be invested in ETFs or REITs (which can yield in excess of 5%). 

- Using CASH on hand

There are several schools of thoughts when it comes to using cash on hand to do lump sum repayments. In summary, they are:

1) I want to be debt-free as early as possible

- Generally, these are the people who feel that excess cash on hand should be used to repay outstanding loans, to reduce the additional costs of interest over the remaining loan tenor.

2) I want to make my money work for me (Or even buy a 2nd property to generate rental yield)

- Generally, these are the people who feel that excess cash on hand should be used to generate passive income that will out-strip the costs of the loan’s interest (and even generate a nett positive return in the long run).

There is no cookie cutter, right-or-wrong method here. In my opinion, its best to choose whichever option that suits your long term financial goals. 

Image Credits: cpf.gov.sg, hdb.gov.sg

5 Things To Know When Buying Your First HDB BTO

Alright, i'm guessing that if you are reading this article, that you have decided to settle down and buy a BTO HDB flat with your other half!.

Your First Flat

Please read on for the 5 important things to know before you 

1) Eligibility (Check it here!)

It is important to ensure that you qualify to buy a BTO from HDB to avoid rejections in your application.

Some eligibility criteria are as follows:

• Age (35 Years For Singles)
• Family Nucleus 
• Income Ceiling (10,000$ Combined Income)
• Ownership of other properties

HDB website has a questionnaire that you can use to quickly determine your eligibility.

2) Grants

Grants are offered to help the low-mid income households. Check the table below to see if you qualify for it!.

AHG – Additional Housing Grant. Grants to help Singaporeans buy their first flat. The AHG ranges from $5,000 to $40,000, depending on the total combined* income.

SHG - Special CPF Housing Grant. A housing subsidy which is designed to help middle income families. The amount of the grant ranges from $5,000 to $20,000, depending on the total combined* income. (Applicable only to 2,3,4 Room in non-matured estates.

* Yes, the total for both spouses

SHG & AHG

3) Application & Balloting (Success Rates)

No one knows how the HDB computerised balloting for the Queue Number works.

However, we know that being near your family and being married the chance of getting a "good" number.

In general the chances are as follows:

Applicant Type	1st Time Applicant	2nd Time Applicant
Normal Applicant	2 Chances	1 Chance
Married Child Priority Scheme (2KM / Near parents)	4 Chances	2 Chances

Distribution Criteria

* First timers will have a +1 chances for each unsuccessful attempt.

(First-timer applicants who reject 2 chances to select a flat will have their First-timer priorities removed for a 1-year period in HDB's sales exercises)

4) Deposit And Fees

OTP - Option to Purchase. Basically means an agreement to purchase the flat.

4- Room Flat & Above  – $2,000
3- Room Flat              – $1,000
2- Room Flat              – $500
Studio Apartment        – $250

Note that, the option fee is non-refundable (Payment ONLY by NETS or Cash). But i am sure that HDB will look into your request should there be a legitimate reason to back out on buying the flat.

Stamp Duties - Just some misc. tax payment to the govt.  :))

First $180,000 – 1%
Next $180,000 – 2%

$181,000 and above – 3%

Downpayment - The cash component of the flat. (Also see Pt5: Loan) 

5) Loan

AIP - Approval in Principle is an agreement with a bank. Depending on your financial health, the bank will decide whether to approve your home loan. *This is just an approval process. No loans are granted at this stage. The HDB equivalent is called the HLE - Housing Loan Eligibility.

There is basically 2 options here. HDB or Bank Loans.

The main big differences are the down-payment amounts and the interest rates.

The 20% down-payments of Bank Loans must be fulfilled in cash (5%) and CPF (15%). 

Whereas, the 10% downpayment for HDB loans can fully be fulfilled using CPF.

Bank Vs HDB

On collection of keys, do note that ALL* of your CPF - OA (and your spouse's CPF) will be used to offset the cost for the flat.  :((

*Unless you move them to the SRS Account, but there is another story for another time.

Now that you are well informed about buying your BTO. 

I wish you all the best in the selection of your BTO!

Image Credits: HDB Website