6 things first-time buyer should know before buying a resale flat

Read this if you are a first timer buying a resale HDB flat,

You must be excited and anxious to reach another milestones of your life to buy your first property. But before you start your house hunting, it is very important for buyer to understand the resale processes and procedures. Here are the 6 important things you should read and understand before committing into one.

Budget

Before you determine your budget, you will need to apply for your housing loan, either HDB Loan or Bank loan, unless or otherwise, be prepared to top up in cash

Basically, how HDB or the Bank assessed your loan are based on your household income. Therefore, the higher your income, they higher your maximum loan could potentially be. However, it is best to get your HLE or IPA ready.

If you are taking a HDB Loan, you are required to make a minimum down payment of 10% of the valuation price and can be paid by CPF. You can utilize your loan for the remaining 90% of the valuation price, subject to your maximum loan amount granted. To apply, you may visit the HDB website to get your Housing Loan Eligibility (HLE).

For Bank Loan, You are required to make a minimum down payment of 5% in Cash and 20% by CPF. Remaining 75% by loan, subject to loan granted and valuation. To apply, you should seek advice from the banker for your In-principle Approval (IPA).

Do note, any shortfall of CPF or Loan will be in cash upon completion. Therefore, it is always important to plan your finance.

Fees Involves (CASH)

Most buyers would want to know what are the fees involved especially when it comes in a form of Cash involved. The amount varies on the seller, the price, type of flat and etc.

Here’s a guide for you:

· Option Fee ($1-$1,000)

· Exercise Fee ($1-$4000)

· Resale Application ($80)

· Valuation Fee ($120)

· Caveat/HDB Admin/Misc (Est. $200)

· Agent Fee (If Any)

· 5% Cash Downpayment (For Bank Loan)

· Cash Over Valuation (If Any)

Timeline

Yes! The advantage of buying a resale flat is definitely the short period of time from the day you make your first deposit or Option to Purchase to the day of its completion and handover of unit. However, It is very important to understand the process and procedures of buying a resale flat so that you will not miss or overlook on any stage of the processes.

An average timeline, will last about 3 to 6 months depending on the conditions such as extension, submission of resale application and HDB approval.

Valuation

Once both buyers and sellers has agreed on the price, buyer are required to place the Option Fee and apply the valuation through HDB by the next working day as long as they are using CPF and Loan for the purchase. Do note that your CPF usage and Loan will be based on the Valuation amount or the Price agreed whichever is lower. Therefore if your valuation came to be lower than your buying price, the difference has to be made in cash by completion. That is called Cash Over Valuation (COV), and this is the last thing that every buyer wants to see.

Valuation of the unit will be based on the recent transacted of the unit, floor level, Size and etc. It is important to do your research before making an offer to the Seller, or otherwise chances you might forfeit your deposit is high unless you are cash prepared.

Grants

For first timer Singaporean buyers looking to buy a resale flat, you may be eligible for the CPF housing grants, consisting of the first timer grants of up to $50,000, Proximity Housing Grant (PHG) or also known as near/live with Parents grant of up to $30,000 and the Enhanced Housing Grants (EHG) of up to $80,000, subject to approval and requirements provided. You may wish to refer to my BTO vs Resale post to know more on the grants.

These grants will definitely help first time buyers out there in their finance however it is best to confirm with the HDB for your grants eligibility.

Remaining Lease of the flat

The allowable usage of CPF savings and HDB Housing loan will depend on the extent the remaining lease of the property can cover the youngest buyer to the age of 95. If the remaining lease of the property covers the buyers up to the age of 95, the CPF usage is subject to the applicable Valuation and/ or Withdrawal Limits, and the Loan-to-Value (LTV) for the HDB loan is 90%.

Otherwise, the maximum amount of CPF that can be used and HDB housing loan limit will be pro-rated depending on the extent the remaining lease of the property can cover the youngest buyer to the age of 95. For first time buyers who are applying for the Enhanced Housing Grants, it will also be pro-rated.

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