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The ultimate guide to buying an HDB resale flat

· Buying a property

Buying A HDB Resale Flat

What To Do

So, you’re thinking about buying an HDB flat, but you do not wish to wait years for a brand new BTO flat to be built. Your other option is to purchase a resale flat.

What is a resale flat?

Resale flats are HDB flats that are currently owned by someone else. They have already been lived in for at least the Minimum Occupation Period (MOP), which is typically five years.

When you buy a resale flat, you are taking over the property from the previous owner. That also means you can collect your keys as soon as the transaction is completed.

Unlike brand new BTO flats, resale flats do not come with a fresh 99-year lease. The older a flat is, the fewer years will be left on the lease. So, it is important to consider how many years the lease has left when determining if a resale flat is worth the price.

Another thing to note is that the cost of renovating resale flats tends to be higher than that of renovating BTO flats, since you will have to remove or modify renovations carried out by the previous owner.

Pros of a resale flat over a BTO

Despite not receiving a brand new flat, there are some clear advantages to buying a resale flat over a BTO flat:

No waiting time: You can move into a resale flat immediately after the sale is completed. The resale procedure typically takes under three months. By contrast, the waiting time for a BTO flat is typically 2.5 years from the date of application.

No balloting process: Getting a BTO flat is largely a matter of luck. First, you need to successfully ballot for a flat in a development. When you have successfully been selected, your ability to pick a unit you like will depend on your queue number. With resale flats, there is no balloting process. As long as you and the seller come to an agreement, you can buy the unit, provided of course that you satisfy HDB’s eligibility requirements.

No income ceiling: There is no income ceiling for buying an HDB resale flat, although there are income ceilings for CPF Housing Grants and HDB Housing Loans. By contrast, BTO flats typically have an income ceiling of $12,000 per month, $18,000 for extended/multi-generation family flats and $6,000 for singles.

Location: BTO flats tend to be launched in non-mature estates such as Punggol and Sengkang, typically far from the city centre. While there are some BTO launches in mature estates, these are always highly sought-after and therefore difficult to successfully ballot for. Resale flats give you the freedom to get a flat in the location you want.

Size: New BTO flats tend to be smaller than older flats of the same type. Resale flats tend to be more spacious with bigger bedrooms.

Eligibility to buy an HDB resale flat and grants available

•At least one Singapore Citizen or two Singapore Permanent Residents listed in the flat application

•At least 21 years and above

•Buying in an approved family nucleus (fiancé/fiancée; single over 35; widowed/orphan aged 21 and above; Singapore Citizen buying with parents, siblings and/or children)

•Within the Ethnic Integration Policy and Singapore Permanent Resident quota of the block/neighbourhood

•Not own any other residential properties or any houses/buildings/land whether locally or overseas, or have disposed of them in 30 months before resale flat application 

The following grants are available to HDB resale buyers, subject to eligibility:

•CPF Housing Grant – Income ceiling of $12,000, or $6,000 for Single Singapore Citizen Scheme

•Additional CPF Housing Grant – For those with average monthly household income of $2,500 or less 

Regulations when buying a resale flat

Besides the eligibility criteria, the main regulation resale flat buyers need to worry about is the Minimum Occupation Period (MOP), which is typically five years from the key collection date. 

During the MOP, the buyer is expected to live in the flat and is not allowed to rent out the entire unit. Rental of rooms in the unit is permitted so long as the buyer continues to live in the flat. 

Financial options when buying a resale flat

The savings in your CPF Ordinary Account (OA) can be used to pay for your flat, as well as your monthly mortgage installments.

If you are taking an HDB housing loan, you are required to drain your CPF OA balance or opt to retain up to $20,000 savings in your OA. For flats with a balance lease of under 60 years, there might be withdrawal limits on your CPF OA.

The two main loan options for buying a resale flat are as follows:

•HDB loan

•Bank loan 

Check that you are eligible based on the ethnic and PR quota

Before you can buy a resale flat, you will need to ensure that you are within the ethnic quota of that particular block or neighbourhood. If you are a non-Malaysian PR, you will also have to make sure the quota for PRs has not been exceeded. 

The ethnic and PR quotas are updated on the first of every month and affect resale applications in that month. As such, you may have to check the quotas again if you submit your application in a later month. You can check your eligibility on HDB’s website. 

The easiest way to view property units is to use a real estate professional. The realtor will set up an appointment for viewing the property. 

If you hire a realtor in the capacity of a buyer, you will have to pay agents’ fees on the purchase. However, if you liaise with an agent that the seller has hired, you do not have to pay agents’ fees. 

When viewing units with an agent, you should analyse the property to determine if you are getting good value for money and any additional costs you might incur. 

Other than factors like location and direction the unit faces, which apply to all flats, resale flat buyers must also consider the extent to which renovations must be undertaken. Examine the flat closely for wear and tear. In the case of older flats, you should also consider whether the flat has been recently upgraded and ask the owner about the age of wiring and appliances like stoves, which might have to be replaced if they are too old or outdated. 

Negotiate on the price and sign the OTP

The prices indicated on most property listings in Singapore are usually negotiable, so do try to bargain. 

Once you and the seller have come to an agreement, it is time to sign the Option to Purchase (OTP). The OTP should be printed out and provided by the seller. You will also need to pay an option fee, also negotiable, of $1 to $1,000. 

Submit resale application to HDB

The next step is to submit the resale application to HDB. Both buyer and seller must complete their part of the application and submit it to HDB separately. If you are using an agent, the agent should be able to submit the application on your behalf. 

After the submission of your application, you will have to attend two appointments with HDB and arrange for financing. The whole process from the submission of the resale application to collection of keys usually takes about 11 to 13 weeks provided there are no hiccups.

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Should you be thinking of selling, or would simply like an update of where your property sits in today's market, book a non-obligatory discussion with one of our TemasekClass consultants.

 

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