3 Things You Must Know When Buying Your First Resale HDB

It does not come as a surprise that the COVID-19 situation has resulted in price hikes for imported materials as well as a delay in construction period. Coupled with the ever-changing global political situation and the scarcity of land in Singapore, Singaporeans are turning to older resale flats that have a shorter waiting time and are lower in quantum as compared to Build-To-Order (BTO) flats for their first home.

Last updated:

July 26, 2022

1. Am I eligible to buy a HDB resale flat?

It is important to first go through the eligibility list and see if any of the schemes are applicable. Although the criteria to purchase a resale flat is not as strict as that of a BTO, not everyone may be eligible. Find out more about the different eligibility schemes here.

2. Can I afford to buy a resale HDB?

Deciding to get a resale flat over a BTO would most likely mean an increase in cost, which statistics have shown to be true. The price of a resale flat can vary anywhere from $300k to over a million dollars depending on the location, type of flat (e.g. 3-room or 4-room HDB vs Executive Apartment or Executive Maisonettes), and whether it is on a high floor or low floor, just to name a few.

There are a few things to factor in when calculating your affordability:

Housing Grant(s) eligibility
Maximum loan amount and loan term you can get
Any other existing loans
Amount of cash/CPF required for the downpayment and monthly mortgage
Renovation costs

Housing Grants

Housing grants are subsidies given by the government to offset some of the costs involved when purchasing a flat from them. These grants will be transferred into the homeowners’ Central Provident Fund (CPF) Ordinary Accounts (OA) to be used for the purchase, and homeowners will have to return this sum plus accrued interest back into their CPF OA upon sale of the unit. If you would like to know which grants you are entitled to / the total sum of the grants, contact us for a non-obligatory consultation!

Maximum Loan Amount and Loan Term, and any Existing Loans

We would highly recommend to start paying down your debts 12 months before making any home loan applications, especially if you decide to go for a bank loan instead of a HDB loan. Reason being that any existing loan(s) will affect the maximum loan amount, as the December 2021 cooling measures lowered the Total Debt Servicing Ratio (TDSR) to 55% as compared to 60% previously. The TDSR limit simply means that your home loan repayment, plus all other debts like credit card or other loans, cannot exceed 55% of your declared income.

The Loan to Value (LTV) limit was also tightened for HDB loans from 90% to 85% on top of the current Mortgage Servicing Ratio (MSR), which limits mortgage repayments to no more than 30% of the borrowers’ income. This means that the total loan amount that one can borrow has been reduced, which may allow buyers who are more cash-rich to purchase higher quantum units while keeping their MSR under 30%.

The homeowners’ age on the date of application determines the loan tenure, which will affect the amount of mortgage to be paid monthly. HDB loans are capped at 25 years, or until the age of 65, whichever is earlier. If you are taking a bank loan, the loan tenure is capped at 30 years, or until the age of 65, whichever is earlier.
Source: HDB

You may consider engaging a mortgage broker to find the cheapest bank for your property loan to save some time and effort (most likely will not cost you anything as the brokers will collect commission from the banks). Our team is here to assist you should you require recommendations for a mortgage broker or simply provide advice in terms of financial planning towards getting a suitable HDB without overstretching.

Renovation Costs

You can get a maximum renovation loan equal to six months of your income, or up to a maximum of $30,000, whichever is lower. Do remember to factor in extra cash required if you intend to do elaborate renovations! We have successfully worked with multiple renovation / interior design companies; if you would like recommendations or advice, do drop us a message here.

Obtaining the In-Principle Approval (IPA), also referred to as an Approval in Principle (AIP) from the preferred bank or your HDB Loan Eligibility (HLE) letter (if taking a HDB loan) will give a better idea of how much you can borrow. To put it into perspective, here is a breakdown of the payments that you would need to make:

Main Payments 

	Payment Mode	HDB Loan	Bank Loan
Option Fee	Cash	Up to $1,000 for Option Fee, up to $4,999 as deposit. Total (Option + Deposit) should not exceed $5,000
Initial Payment	Cash/CPF	15% of purchase price	25% of purchase price (75% loan ceiling) or 45% of purchase price (55% loan ceiling)
Balance purchase price	Cashier’s order	Difference between resale price and market valuation (Cash over Valuation) to be paid in Cash at the Resale Completion Appointment.

3. What is the HDB Resale Process?

Now that we’ve got the nitty gritty details out of the way, the resale process can be fairly simple! You can get most of the administrative work done via the HDB Resale Portal or if you engage an agent (hyperlink to contact us), they will guide/help you through the entire procedure!

Here are the steps to the resale process:

Step 1	Register Intent to Buy	Registration is free via the HDB Resale Portal and allows HDB to instantly assess your eligibility to purchase a resale HDB. The Intent to Buy is valid for 12 months - if the resale application is not submitted within 12 months, you will need to reapply. Guidance to apply for a HLE letter will be provided by HDB if you are eligible.
Step 2	Get Option to Purchase (OTP) from Seller	You’ve chosen the best unit, and would like to make an offer. At this point, the Option Fee to get the OTP (up to $1,000) can be negotiated with the Seller and it is to be paid in cash. The amount will be taken off the total resale price.
Step 3	Choose how you would like to finance your flat (HDB Loan vs Bank Loan	The Initial Payment will differ depending on whether you decide to use a HDB loan (15%) or Bank loan (25%/45%), and you may use either Cash / CPF for this portion. Note that for HDB loans, payment has to be made once you confirm your financial plan through the HDB Resale Portal. For Bank Loans, payment schedule will vary depending on the bank you take a loan from.
Step 4	Request value of flat from HDB	Application for valuation of the flat has to be done by the next working day after the option date, and there will be a processing fee of $120 (including GST) payable to HDB. It typically takes about seven working days to process the valuation report. Once you are comfortable with the value of the flat (take into account Cash over valuation), ensure that you already have a valid HLE letter / Letter of Offer (LO) before deciding to exercise the OTP. You have 21 days from the date of Option to exercise the OTP, and will have to pay an Exercising Fee not exceeding $4,999 to the Seller (total sum paid for Option Fee and Exercising Fee should not exceed $5,000). If you changed your mind and would like to cancel the purchase, inform the Seller that you do not wish to proceed and allow the OTP to lapse. The Option Fee will be forfeited by the Seller.
Step 5	Submit Resale Application and all supporting documents	After the OTP has been exercised (i.e. ‘Acceptance’ in the Option has been signed, delivered to the Seller, and Option Fee has been paid), both you and the seller will have to submit the Resale Application separately. The submission period between seller and buyer should be within 7 days. Both parties should be notified of the application acceptance within 14 working days via SMS/email. You may make a request for a Temporary Extension of Stay during the submission of resale applications if you have previously agreed to allow the Sellers to stay in the unit after the transaction is completed. There will be a non-refundable administrative fee of $20.
Step 6	Endorse Resale Documents	The documents will be ready for endorsement approximately 3 weeks after HDB has accepted the resale application. Documents have to be endorsed within 6 days from receiving the SMS notification to endorse.
Step 7	Pay Resale Fees online	Once the resale documents are endorsed, the sellers/buyers need to make the payment using credit card or NETS QR payment.
Step 8	Receive Approval of Resale Application	An SMS notification will be sent out once HDB’s approval letter is posted on the portal.

Once we have completed the steps above, congratulations on getting your first home! If you have other burning questions, reach out to us! Our agents at Open House Singapore will be more than happy to assist you.