Getting a HDB resale flat is a no-brainer for those with an immediate housing need or who want to live in a mature estate with convenient access to basic amenities. However, buying a HDB resale flat could be more complicated than buying a BTO unit – for which you liaise directly with the housing board.
If you are a Singaporean couple or family struggling to buy a resale HDB flat or need guidance through the purchase process, this is a complete guide for your HDB resale journey. So, let’s dive in!
The prices of HDB resale flats climbed straight for the 30th month in December 2022. The continued strong demand for HDB resale flats and unrelenting interest in million-dollar deals have fuelled overall resale price growth. Even when the interest rates were rising, the high-spirited HDB resale market prompted the government to announce another slew of property curbs.
One of the key reasons is that first-time homebuyers with urgent housing needs are unwilling to wait long for the completion of BTO flats. This is why newly-married couples or foreign professionals are more driven towards buying HDB resale flats.
Also, many resale flat buyers are taking a keen interest in buying larger homes. Therefore, older resale flats, due to their larger size, are in demand and command a premium price. It has been one of the main contributing factors to an increased number of headline-grabbing million-dollar HDB flat sales.
In the current rising mortgage interest rate environment, fixed interest rates by HDB are acting as a safe and promotion option. The concessionary interest rate of 2.6% has remained unchanged since 1999. This has also driven more homebuyers to the HDB resale market.
Before looking at other aspects of buying a resale HDB flat, you need to check if you are eligible to purchase a resale flat. Let’s take a look at the eligibility criteria for resale HDB flats:
Citizenship: At least one buyer of the HDB resale flat must be a Singapore Citizen (SC) or Singapore Permanent Resident (SPR). If there are no SCs in the household, then all SPR owners must have permanent residency status for a minimum of three years.
Age: The age of each buyer must be at least 21 years old.
Income ceiling: Unlike a BTO flat, there is no income ceiling you have to abide by for purchasing an HDB resale flat. However, you cannot earn more than a certain amount to qualify for CPF housing grants and HDB home loans.
Ownership of Property: There is no limitation on property ownership except that all currently owned private or HDB properties are to be sold/disposed of within six months of your HDB resale flat purchase.
Family Nucleus: Buyers must qualify for at least one family nucleus scheme with at least one other person listed in the application as an essential occupier. You can create a family nucleus under one of the following HDB schemes:
|You want to buy a flat with a family member, spouse, parent, or children
|You are engaged and looking to buy with your fiancé
|Single Singapore Citizen Scheme
|You are above 35 years old and not married or engaged
|Joint Singles Scheme
|You are single and want to buy a flat with other single friends
|Non-Citizen Spouse Scheme
|You are married and want to buy a flat, but your spouse is not a Singapore Citizen or Permanent Resident
Please note there may be additional criteria depending on a buyer’s specific situation. Therefore, it is advised to check with the HDB or a professional property agent for more information.
Apart from the general eligibility criteria discussed above, HDB resale buyers must fulfil the 5-year MOP, aka Minimum Occupation Period, from the date of purchase.
During this period, the homeowners are not allowed to rent out or sell the whole flat. Also, they are legally required to reside in the HDB flat during this entire MOP period unless there is an exception, which would need HDB approval.
Until December 2021, the HDB downpayment was 10% of the property’s purchase price. From December 16 2021, the Singapore government stealthily increased the downpayment for HDB loans to 15%. But that’s not all. As a part of a new wave of property cooling measures, the HDB loan downpayment was once again increased to 20% from September 30 2022.
Apart from the rise in downpayment, everything else has remained the same, meaning you can still pay the HDB loan amount in cash or from your CPF OA.
Paying a downpayment of 20% of the purchase price is no joke and can be deciding factor for couples trying to get by. For example, if you and your partner only have $40,000 combined in the CPF OA, you should probably look for an HDB flat that costs no more than $200,000. If you choose a more expensive HDB flat, you should be ready to pay the rest of the downpayment in cash.
Therefore, it is always advised to figure out how much downpayment you can afford to pay before choosing a resale flat.
One thing that makes buying an HDB flat less daunting for first-timers is that instead of forking out hard cash for your resale HDB purchase, you can tap into CPF Ordinary Account savings to reduce the hefty cost of financing a resale flat.
Please note that there are some restrictions for HDB resale flat buyers. If the remaining lease of your flat you are looking to purchase can cover the youngest buyer until at least the age of 95, you can use your CPF savings to pay for the property up to the Valuation Limit. If not, you will have to finance your resale flat using cash or a bank loan.
Here is a list of costs and fees you can pay with your CPF Ordinary Account:
Please note that a flat must have at least 20 years left on the lease if you want to use CPF to purchase a flat. Some banks may not approve a loan if the flat purchased has 30 years or less on the lease.
You may use some of your CPF savings for paying the initial downpayment. If you take up a home loan from a private bank or financial institution, at least 5% of the downpayment must be paid in cash. You may use your CPF savings to pay for the balance purchase price.
You can also use cash or CPF to service your instalments on your HDB loan but do also weigh the pros and cons of using CPF for your HDB if you are looking to upgrade in future.
Home affordability is one of the key factors you must consider when planning to buy a new house. This is why some couples and families may choose to wait 3-5 years or more for a new BTO rather than paying higher prices for resale flats in Singapore.
Let’s look at the breakdown of the different types of payments you would need to make when buying a resale HDB flat.
|Deposit to Seller: Option Fee and Deposit Amount
|Up to $5,000 in total, to be paid in 2 stages (up to $1,000 paid as option fee & deposit amount up to $4,999)
|HDB loan: 20% of the purchase price (includes booking fee and balance)
Bank loan: 25% purchase price (loan ceiling 75%)
|Cash or CPF
|Cash over valuation (COV) payment(if applicable)
|Difference between the resale price and market valuation; paid at resale completion appointment
|Resale application admin fee
|$40 (1-room or 2-room) $80 (3-room and bigger)
|Credit or debit card or GIRO
|Processing Fee for Request for Value
|Credit or debit card or GIRO
|Based on the selling price e.g., $4,200 for $300,000 flat Buyer’s Stamp Duty: First $180,000: 1% Next $180,000: 2% Next $640,000: 3%, Remaining amount: 4%
|Cash or CPF
|At least $257, depending on the selling price
|Cash or CPF
|20% or 25% of the purchase price
|Cash or CPF
|Home Protection Scheme annual premium
|Varies depending on the buyer and loan type
|Fire Insurance Scheme 5-year premium
|Up to $7.50, depending on the flat size
Another major factor in buying an HDB resale would be financing the HDB resale flat. You can either choose to take up an HDB concessionary loan or a bank loan.
If you prefer a lower down payment and stability in cash flow, you may wish to consider an HDB Concessionary loan. This is due to the LTV limit being restricted to 80%. Since homebuyers only have to pay 20% as a downpayment either by cash or CPF, HDB loans are preferred by younger couples as they might have less cash in their bank account.
To determine the loan quantum you can borrow, you must pass a stress test qualifying on your current financial situation.
The homebuyer’s Mortgage Servicing Ratio (MSR) must be below 30% of their gross monthly income, and Total Debt Servicing Ratio (TDSR) must be less than 55% of their monthly gross income. Note that these calculations will be based on a 4% stress test rate as per the recently revised guidelines.
In addition to assessing your financial health depending on TDSR and MSR, banks also consider your age.
Unlike HDB loans, bank loans call for a higher downpayment with LTV (Loan-to-Value) ratio capped at 75%. This means bank loans require a higher downpayment of 25%. Note that you may not be able to borrow the full LTV if you have taken up loans previously.
Besides comparing the interest rates when picking a suitable HDB bank loan, you should also consider the monthly instalments and loan tenure.
Once you decide whether you prefer a loan from HDB or a private bank, it would be wise to apply for an In-Principle Approval (IPA) or HDB Loan Eligibility (HLE) Letter while you are still searching for the perfect property.
Since a valid IPA or HLE Letter is required before signing an OTP for a resale property, it would be prudent to apply for either or both beforehand. If you don’t apply for an IPA and face any trouble getting a loan after signing the OTP, you will have to forfeit your option fee of $1,000, and the seller will be free to sell his apartment to other interested buyers.
When purchasing a resale flat, you can use some CPF housing grants from the government to further reduce the payable amount on the purchase price. When purchasing a resale HDB flat, here are the three grants you may be eligible for:
Enhanced Housing Grant (EHG). You are eligible to get EHG if you are a first-timer married/engaged couple or family looking to buy an HDB resale flat with a monthly income of $9,000 or less. The total grant amount is inversely proportional to your monthly household income, ranging from $5,000 to a maximum of $80,000.
You will receive the full grant amount according to your income bracket if the flat can cover you and your spouse till the age of 95 years. Otherwise, the grant amount will be pro-rated. Additionally, you must not own or had an interest in a private property in the last 30 months prior to the flat application.
Family Grant. A first-time couple or family looking to buy a resale flat may qualify for the Family Grant if they have not received any housing subsidy before. The couple must have a monthly household income of less than $14,000, up from the previous $12,000. To be eligible for the grant, families must comprise at least two Singapore Citizens (SCs) or one Singaporean Citizen (SC) and one Singapore Permanent Resident (SPR).
Under the revised CPF housing grant, the Family Grant has increased from the previous $50,000 to $80,000 for eligible first-timer families looking to buy a 4-room or smaller resale flat.
Those buying a 5-room or bigger flat may qualify for up to $50,000 in grants, up from the previous $40,000. All eligible homebuyers who submitted their flat resale applications after 3.30pm on February 14 will qualify for this increased grant amount. The additional grant money will be added into their CPF account from April 2023 onwards.
Proximity Housing Grant (PHG). If you purchase a resale flat within 4km of where your parents/child stay or intend to stay with your parents/child in the same flat, you will be eligible for the Proximity Housing Grant (PHG).
If you are looking to live with or close to your parents/child, the grant amounts you may receive:
Only those couples or families who have not taken a proximity grant before are eligible for it. Unlike the Family Grant and EHG, the proximity housing grant has no income ceiling and is not restricted to first-time homebuyers only. This housing grant is also applicable to older couples looking to stay with their married children.
As per the new guidelines from April 1 2023, eligible first-timer families buying a resale flat may be eligible for a maximum housing grant of $190,000 from the previous $160,000.
Note that only a first-time Singapore Citizen or those applying with a first-time Singapore Citizen are eligible for these CPF housing grants. Single applicants are eligible for only half the grant amounts.
The process of purchasing a resale flat is fairly simple. Here is a step-by-step explanation of the resale process. The good news is that you can get most of the administrative work done via the HDB Resale Portal.
If you intend to buy a resale flat, please log in to the HDB Resale Portal and then register an Intent to Buy. Doing this will give you an instant assessment of your eligibility to purchase an HDB resale flat, housing grants, and HDB housing loan. This portal will automatically retrieve and fill in your details from the Government’s MyInfo service.
Once you have registered an Intent to Buy, you may plan your finances and work out your budget before searching for a suitable home. Note that your Intent to Buy is only valid for 12 months.
Once you find a resale flat you would like to purchase, you may proceed to obtain an Option to Purchase (OTP) from the seller. OTP is a legally binding contract between sellers and buyers in a resale transaction to protect the interest of both parties.
After the seller grants you an OTP, a Request for Valuation of the flat will be submitted to HDB. Following the valuation report, you will have to decide whether to exercise the OTP.
In this stage, you must decide how you would like to finance your flat. To finance your flat purchase, you will need to choose between an HDB housing loan and a bank loan after considering the pros and cons, according to your financial situation. You should account for the amount you need to pay in cash and the amount you can use from your CPF savings.
When working out your financial plan for your resale flat purchase, you will also need to find out if you are eligible for any CPF housing subsidies given by the government to home buyers.
From the date of granting the OTP by the sellers, there will be a 21-day Option Period. During this period, you must confirm your mode of financing on the HDB Resale Portal and make a Request for Value.
The Request for Value determines the flat’s value and forms the basis for your CPF usage and the housing loan amount. Once you get the outcome of the Request for Value, you must validate whether or not you want to buy the resale flat.
If you decide to exercise the OTP, both you and your seller must submit their respective portions of the resale application separately on the HDB Resale Portal – within seven days of submission by the other party.
After submitting the exercised OTP to HDB for approval, HDB may contact both parties to come down to HDB Hub to attend a resale completion appointment to endorse documents which require ‘wet-ink’ signatures. Don’t worry, HDB will notify you via SMS within six days.
Both you and the seller would then need to pay the conveyancing fees, including the Buyers’ Stamp Duty.
It takes around two weeks for the HDB to approve your resale application. During this period, HDB will carry out technical inspections on the property to ensure no illegal alterations have been made to the flat by the seller. You may also want to inspect the flat for any damages or other structural problems since HDB is not responsible for certifying the resale flat’s condition. It is your responsibility to do so.
Almost eight weeks after HDB approves your resale application, your name would reflect as the legal owner of the HDB flat.
That is the entire HDB resale home-buying process, from deciding what you want to buy a resale flat to moving into your new home.
If you want to reduce the wait time before moving in, you can begin exploring renovation options before receiving your keys.
A 4-room BTO flat in Sengkang can cost as little as $400,000, while a 4-room resale HDB flat in or around the same area can be around $850,000. And if you look at the difference in downpayment, that is pretty significant: $80,000 (for BTO) vs $170,000 (for resale flat).
On the other hand, even if you are lucky to get a BTO flat, you will have to wait for three to five years before moving in. If you are in a rush to move in, you should consider looking at the available resale flats to see what fits your housing budget.
There are several factors that you must consider when choosing between a BTO flat or a resale HDB flat. The below table shows a comparison between new and resale HDB flats:
|Significantly cheaper; sold at a subsidised price
|More expensive; price is negotiated between the buyer and the seller
|At least one of the applicants must be an SC
|SPRs are also allowed to buy resale flats
|Waiting time of 3-5 years
|Short waiting time
|Chances of obtaining a unit
|Need to ballot; based on luck
|Very high; depends on reaching an agreement with the seller
|Max. household income is $14,000 for couples, $21,000 for extended/multi-generation families
|No income ceiling limit
|Limited, dependent on the launch
|No restriction on location
|Most 4-room BTO units are 92 sqm, and 5-room units are 110 sqm
|Some older 4-room HDB units are 100 sqm, and 5-room units are 130 sqm.
|First-time BTO flat buyers can receive up to $80,000 under the EHG
|Resale flat buyers are eligible to apply for Family Grant and Proximity Grant, on top of the EHG
According to property analysts, the pace of growth in HDB resale prices has slowed down and is expected to moderate further in 2024 in the wake of the latest cooling measures.
The slower price growth in the last quarter of 2023 shows the impact of rising interest rates and inflation on homebuyers. It has eroded buyers’ affordability to an extent, pushing a lot of middle- and lower-income Singaporean buyers out of the housing market.
Under the new property curbs, private property owners are required to sell off their property and wait for 15 months before buying an HDB resale flat. This will effectively cut off the demand from these buyers.
If you are considering purchasing a resale HDB flat and would like personalised advice regarding the different stages of a typical sale, reach out to our team of expert mortgage consultants at Dollarback Mortgage.
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