Buying a HDB Flat
3 Key Factors to Consider Before
1. Location and Amenities
Singapore has three different regions -- Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR). Due to locality and prestige, each region has different housing prices.
For example, with a S$500,000 budget, you could purchase a 5-room flat in Woodlands. However, you would probably get an old 3-room flat with the same budget at a more prestigious location like Balestier or Tiong Bahru instead.
Apart from home districts, there are two other factors that can help narrow down your options -- HDB's proximity grant and the Prime Location Housing (PLH) model.
Firstly, if you intend to buy a resale flat, you might want to pick a location within 4 km of your parents' house. You will be entitled to a S$20,000 HDB proximity grant. Secondly, if you plan to purchase a BTO flat in a prime location, the latest announcement of the PLH Model will affect you. Some key features of this new model include a longer minimum occupation period, tighter rental conditions, priority allocation quota for Married Child Priority Scheme (MCPS) and more.
Therefore, these two factors are worth considering when deciding which location to purchase your HDB flat as they have a significant impact on the value and cost of your house. After you have narrowed down a few locations, you should also survey the neighbourhoods before making your final decision.
If public transport is your regular mode of transport, you might want to find a flat close to a bus stop or MRT station. On the other hand, finding a flat near an expressway would be more convenient if you drive daily. You should also consider amenities such as coffee shops, supermarkets, malls, hospitals, playgrounds, schools and hawkers.
2. Financing Your Flat in Singapore (HDB Loan vs Bank Loan)
You can either opt for a HDB loan or a bank loan when you buy a HDB flat.
If you opt for a HDB loan, you are looking at an interest rate of 2.6%. The Housing & Development Board offers housing loans with a concessionary interest rate pegged at 0.1% above the CPF Ordinary Account (OA) interest rate. This rate, however, is not as competitive as many other bank loans. Despite the high-interest rate, there are still some noteworthy features of HDB loans. Firstly, HDB loans have a higher loan-to-value (LTV) limit of 90%. Secondly, the required down payment can be paid using CPF, housing grants or cash. Lastly, if you want to repay your HDB loan sooner, you can do so without a penalty fee.
Bank loans are a more affordable and flexible option. What are some key features that make bank loans stand out? Firstly, there are fewer eligibility requirements. While HDB loans require one buyer to be a Singaporean, bank loans do not. Secondly, bank loans offer a more competitive rate. This means that borrowing is cheaper for buyers. In Singapore, the average rate for a bank loan is between 1.2% to 1.5%. Moreover, borrowers can also refinance their loans at more competitive rates every few years.
3. Renovating Your Flat (Renovation Loans)
The best part of owning a home is that you can renovate it to your liking. However, renovations can be pricey. To ease your financial burden, you might want to opt for a home renovation loan.
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