Patience is a virtue. For many Singaporeans, however, playing the built-to-order (BTO) waiting game can be frustrating. This especially applies to soon-to-be-wed or newlywed couples and don’t want to wait for three to four years for their nest to be completed. For couples who do go down the apply-for-BTO route instead of buying a resale flat, living conditions might not be ideal because:
- They would incur additional costs if they decide to rent a place together till their BTO is completed. And with weddings costing an arm and a leg (sometimes all limbs) these days, this option will create a bigger dent on savings
- They would have to endure the scrutiny of their in-laws if one half chooses to move in to the other’s familial home
- They would have to continue living apart after their marriage until after the renovation of their new unit, which can be a real dampener
For singles, their options are limited. For BTOs, singles aged 35 and above are only eligible for 2-Room Flexi flats in non-mature estates. This is a big push factor for buying resale flats.
As such, it is no surprise that couples are increasingly thinking about buying a resale unit as their first home, same with singles. However, when you decide to buy a resale flat, these are the essential questions you must answer for a home purchase with minimal hassle and no regrets.
1. What is our budget and how are we going to finance our resale flat?
First, understand the grants that are available to you for buying a resale flat; here’s a quick guide for couples. Staying within 4km of your parents also entitles you to the Enhanced Proximity Housing Grant. Grants lower your monthly repayment amount for your mortgage. As a rule of thumb, your budget for the resale flat should be not more five times your annual income, plus any grants your eligible for.
Next, determine how much home loan you can take — based on your income — using the Enquiry on Maximum Loan calculator on HDB’s website and/or affordability calculators on the respective websites of local banks, where the interest offered is initially lower until floating rates kick in^.
^Read HDB Loan or Bank Loan – Which one fits you better? to determine which type of loan you should take. Later on, if you decide to, you can convert your HDB loan to a bank loan, but not the other way round. Also note that the HDB loan option is only available if your combined household income does not exceed $12,000.
Then take those indicative home loan amounts and input them into HDB’s Enquiry on Monthly Instalment calculator along with your desired length of lease. Example: for a loan amount of $500k with a tenure of 25 years at the current HDB loan interest rate of 2.6%, the monthly repayment amount is $2,269 plus interest. For the instalment amount that you come up with, determine if you’re comfortable with paying it and if it fits into your overall longer-term budget, which should include things like renovation costs and costs of having a baby.
2. What is the current condition of the unit and its neighborhood, and will we be happy staying here?
Now that you have calculated your budget, it is time to do the actual groundwork. Shortlist a neighbourhood you want to live in and pay the place a visit. Then, using 99.co‘s many location functions (you can even draw your own area of search), find homes are listed for sale in that neighbourhood. The portal lets you filter your search by HDB Sale Quotas so that, for instance, Chinese buyers won’t waste time shortlisting and enquiring on a flat just to find that the Chinese Ethnic Integration Policy (EIP) quota has been filled for Chinese.
Once you’ve arranged for viewings either on your own or via a Buyer’s Agent, the action begins. The fun, and reassuring, part of purchasing a resale unit is that you get to see a finished product rather than an artist impression, drawing plan or scaled model. Your first task is to examine the layout of the house and ask yourself if the room configuration works for you.
Next, check the unit for visible defects. There is a chance these might lead to much more severe problems. For example, watermarks on the ceiling or walls usually point to water leakage — something which is difficult to resolve completely.
You should also make a mental note on how much renovation is needed should you purchase the unit. Make a list of existing fixtures that are still in good condition, such as the air-condition units, kitchen cabinets, flooring, and other build-in wardrobes, and ask yourself if you are satisfied with them.
Likewise, make a list of things that you will definitely need to change, such as bathrooms and rewiring of the house, especially if the house is in a mature estate.
It may be difficult, but do not judge a house simply based on the seller’s lack of taste. Sure, wallpaper with a bad print or walls painted in gaudy colours may be a deal breaker, but do look beyond the ugly and weigh the pros and cons of staying there.
If you are fortunate to come across a tastefully designed house and it suits your personality, you could probably save a considerable amount on renovation. However, such nicely designed houses will usually command a higher asking price. Nevertheless, you should always do your homework and verify that the renovations done justifies the higher asking price (for example, confirm that the wardrobe is indeed built out of solid wood as the seller claims, not plywood).
Lastly, don’t forget to survey the surrounding neighborhood and check out the nearby amenities such as MRT stations, bus stations and supermarkets. Note the distance between the unit and each of these amenities and ask yourself if you are comfortable as this will have a direct impact to your lifestyle. For example, if you and your spouse eat out a lot but the nearest mall or hawker centre is at least a 20-minutes walk away and both do not drive, would living here be enjoyable?
To help you leave no stones unturned during your home viewing, read Home Viewing Checklist: 9 questions buyers forget to ask.
3. Are we making an informed offer?
It is important to note that, under HDB’s resale procedures, a request for valuation by potential resale HDB buyers (or their representatives) can only be submitted after the sellers have granted them the Option to Purchase (OTP). In other words, the buyer will now have to negotiate on the sales price of the resale flat and decide to pay the option fee based on recent transacted prices** alone. If, after the valuation the buyer does not wish to exercise the OTP and complete the purchase, the option fee will be forfeited.
For the option fee to secure the OTP, the buyer pays between $1 to $1000 — decided between buyer and seller. The period to exercise the option (i.e. proceed to buy the house by signing the Sales & Purchase Agreement) is 21 days — inclusive of Saturdays, Sundays and public holidays. If the buyer intends to use CPF for payment, or take up a HDB or bank loan to finance the purchase, the buyer needs to request for the valuation report from HDB during this period. (Do note that it is a requirement for all potential HDB buyers to obtain a valid HDB Home Loan Eligibility (HLE) letter or a bank Letter of Offer before they exercise the OTP.)
**On each 99.co listing, users can see a list of previous transactions of units within the same block as well as the price trend in graph form. Before making an offer for a resale unit, is important to get an indication of the past transaction values. This is not just to avoid buyer’s remorse, but also because lenders (i.e. HDB and banks) will only grant loans based on the lower of sales price or valuation. In other words, if your valuation is lower than the sales price, you will have to fork out the balance in cash.
Happy resale flat hunting and wish you all the best in finding your home!
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If you found this article helpful, 99.co recommends What makes Bishan resale HDB flats perform so well? and 99.co guides: HDB options for singles in Singapore
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