In every Singaporean’s life, it’s almost impossible not to have the opportunity to invest in a property or be able to purchase your own home.
With the government subsidies and real estate packages being offered left and right, it’s really up to the consumer to pick the right property that’s fit for his or her needs.
And right now, BTO property units are all the rage. With a selection of over 5,000 flats, buyers can definitely choose the best unit for them.
So whether you prefer a 2-room BTO or eyeing for a 3-room BTO, you need to map out the process, review your options, and make proper calculations and preparations before even submitting an HDB BTO application.
We know that for most, it would be difficult to make that decision because you don’t know the first thing to do.
And we won’t even judge you if you’re going to ask what a BTO is. As one of my favorite Chinese proverbs says, “He who asks a question remains a fool for five minutes. He who does not ask remains a fool forever.”
The fact that you’re researching on the how-to’s of purchasing a BTO means you are already way smarter than you were a moment ago. And we won’t disappoint you.
So let’s count down the ways to prepare for purchasing your first BTO flat.
What’s a BTO and why is it advantageous to buy one?
Build-To-Order (BTO) flats are HDB flats that are built based on the percentage of bookings of apartments. If more than 60% of the apartments in the BTO flats have been booked, then construction will begin right away. Otherwise, construction won’t push through.
Because there needs to be a demand first prior to this type of real estate property being constructed, there is a particular wait time for BTO flats. Once HDB receives the sufficient number of qualified applicants, they will then have to wait another three to four years before the building is even constructed.
But this isn’t a mishap in the minds of most investors. In fact, young couples, newlyweds, or young families are eyeing for BTOs simply because these are more advantageous for their situation.
For one, BTOs have larger floor layouts since these are still to be built. As compared to resale flats which were constructed earlier on, BTOs have a bigger area coverage, suitable for young, burgeoning families.
It is also much cheaper to renovate a BTO flat than a resale one. Because they are larger and newly constructed, most of the time there isn’t really any need to knock down the wall of a 3-room BTO. Its furnishings are also up-to-date standard-wise. So less renovation might be required.
BTOs also have a longer lease and a lower price. They come with a 99-year lease and are priced cheaper by HDB itself. This way, you get more value for money for your investment. Shorter leases of older flats will already knock off a few years and a lot of dollars from your property.
Purchasing an HDB BTO opens you up to various government grants to aid you financially in your planned purchase of a property.
There’s an Additional CPF Housing Grant (AHG) of up to $40,000 subsidy for lower to middle-income families with $5,000 monthly income who will be purchasing their first home. A Special CPF Housing Grant (SHG) of up to $40,000 is also available for lower to middle-income families with about $8,500 monthly income to purchase a new flat from HDB.
What to Watch Out For
In purchasing either a 2-room BTO or a 3-room BTO, there are a few things that you have to consider to make sure you are ready and all details are taken care of.
1. Survey the market.
Hold your horses! I know you’re more than excited to submit that HDB BTO application. But have you thoroughly scanned the real estate landscape?
Don’t just settle for what your real estate agent shows you. You have to really do your homework. It’s worth it. You will be heavily rewarded with your dream flat.
Almost 4,000 BTO flats were launched in the areas of Sengkang, Yishun, Toa Payah and Tampines. There’s a wide price range for the units in these, from $76,000 for a non-mature 2-room BTO in Yishun to more than $400,000 for a 5-room flat in the much upper scale Tampines.
The Kim Keat Beacon received the most number of applications when it launched earlier this year. It was the area of choice for more than 2.400 young couples and other would-be buyers who are eager to get their first home. In fact, the number of hopeful buyers who submitted their application were double that of the available units.
The waterfront district of Punggol garnered the most attention in the latest launch. Though a buyer is expected to cough up about $411,000 for a three-generation flat, thousands of applications were still received for a chance to live in the area.
2. Assess your options.
Were you able to review all the options out there? And do they match your needs and requirement for the property you are eyeing for?
Purchasing your first property should not be a whim or afterthought. It should not be done with haste, either.
It should be based on what you need, where you want to take your life, and how can you accommodate the needs of the people you love the most in life.
Even if a property opens up in an area that’s nearby but it doesn’t offer enough space to house your family, would you still go for it? Sure, proximity is important. But so is convenience and of course the living capacity.
3. Check your capacity/eligibility.
Even if you are sold out in taking this real estate journey, it won’t do you any good if you aren’t really qualified to buy a home or property.
What then are the eligibility requirements prior to purchasing real estate?
That’s one of the best questions to ask yourself because you wouldn’t want to be trapped in an ugly situation. It’s not worth it to get your hopes up and then have it destroyed by the simple fact that you’re just not qualified.
HDB enlists the eligibility requirements for you to buy a new or resale flat. So if you’re eyeing that 2-room BTO in Toa Payah, make sure everything in your application and purchase process checks out.
Keying in your details will give you indicative results. However, this is not the actual approval from HDB. Only after you submit your full application will HDB be able to approve or deny it.
4. Apply/avail of government grants.
As mentioned earlier, you can avail of AHG or SHG, depending on your income and what property you are possibly purchasing.
In availing of the CPF grant for BTO flats, either you or your spouse (or both) should be employed at the time of the submission of your application and in the succeeding 12 months thereafter.
Also, to avail of this grant, you shouldn’t own any property either, both locally or abroad. This is just practical since grants are to be given to families who might have a harder time financing the purchase of their BTO flat.
You can receive up to $80,000 in total, provided that you meet all the necessary conditions set forth by HDB.
5. Be aware of the limitations.
Of course, there are certain limitations to your loan application, depending on the Total Debt Servicing Ratio (TDSR) or the Mortgage Servicing Ratio (MSR).
The first one is aimed to prevent needless or irresponsible borrowing by limiting your loan amount to only 60% of your monthly income. This way, borrowers are assured that they won’t have too much debt and won’t have enough income left for day-to-day living.
The second one limits the amount that you can borrow from your home loan to only 30% of your gross monthly income.
Remember that these are preventive measures to ensure that borrowers do not go under or live in debt. Responsible borrowing and financial decision-making is the priority at all cost.
And of course, we cannot forget the Loan-To-Value ratio, which indicates how much the bank or lender will offer you based on the value of your property.
It’s important to be aware of these in order to ensure that you know how much you need to prepare since you know that the amount you can loan is limited.
6. Design your home!
And finally, the most exciting part! Getting a glimpse of what your home may look like.
HDB provides two options: the Optional Component Scheme (OCS) and the Universal Design (UD).
The OCS includes many options that the buyer can add into the flat. Finishings, moldings, and flooring can be improved to your liking.
On the other hand, UDs are offered by HDB and enjoy features that are friendly for the more elderly buyers.
Facilities such as ramps, seats, drop-off porches, and handicap lots are a must in this layout.
Before You Hand Over That HDB BTO application…
You’ve got to make sure that all bases are covered. Purchasing your first flat is one of or if not the most important financial decision you will ever make in your life.
This is not to put pressure on you, but to encourage you to go through the six steps we enumerated above. Be properly informed about the market options, and the loans and grants that you can avail.
In this portion of your decision, it would be helpful for you to Evaluate. What are you supposed to evaluate, you may ask? Well for starters, you can evaluate how the BTO market has performed in the past. By doing so, you get to appreciate the trends and the offerings that you can take advantage of.
Evaluating also allows you to look at the present circumstances. Are there any government policy changes affecting your move to buy your HDB BTO flat? Are there any helpful updates that you need to be aware of?
And by Evaluating, you can also predict future outcomes. As earlier stated, HDB BTO flats are more beneficial since they have a longer lease life than rentals. By applying careful evaluation, you can see into the future to help you make current decisions.
Whether you choose a BTO flat in Yishun, Tampines, or Punggol, make sure to carefully evaluate your options and the steps you need to take to make your first purchase as full-proof as possible.
