HDB QnA: When To Pay Downpayment For HDB Resale?

Edmund Chong

HustleVentureSG

Navigating the process of purchasing a resale flat from the Housing & Development Board (HDB) in Singapore involves understanding when and how to make the downpayment. This crucial step requires careful financial planning and a clear grasp of the various milestones and additional costs associated with the transaction.

If the buyer were to delay the downpayment for HDB resale during the assistance period, the monthly interest would continue to accrue on the outstanding loan balance. It is, therefore, best to revert to the normal installments as soon as your financial position improves.

The following article provides insights into the HDB resale downpayment process, financial considerations, transaction milestones, and the extra expenses to keep in mind to ensure a smooth homebuying experience.

Key Takeaways

• The downpayment for an HDB resale flat is 20% if taking an HDB loan, split into two parts: 10% at the signing of the Lease Agreement and another 10% during key collection.
• Financial prudence is essential when planning for a resale purchase; use tools like the HDB Home Loan calculator to determine affordability and avoid future financial strain.
• Essential documents for the downpayment day include the HDB Loan Eligibility (HLE) letter or bank’s Letter of Offer (LO), NRIC identity cards, and proof of income and residence.
• Additional costs for HDB resale buyers include Buyer’s Stamp Duty, conveyancing fees, and insurance requirements, which need to be factored into the overall budget.
• Eligibility criteria for HDB resale buyers include age, citizenship, income ceiling, and a waiting period if the buyer has owned private property before.

When To Pay Downpayment For HDB Resale?

The downpayment for an HDB resale flat is a significant financial commitment and marks the beginning of your homeownership journey.

Understanding when and how much to pay is crucial for a smooth transaction. For those opting for an HDB loan, the downpayment is 20% of the purchase price, which can be paid using cash or CPF funds. This amount is split into two parts: the first 10% is paid when signing the Lease Agreement, and the remaining 10% is paid upon key collection.

For bank loans, the downpayment increases to 25%, with at least 5% in cash and the rest potentially from CPF savings. In addition to the downpayment, buyers must also budget for other costs such as the Buyer’s Stamp Duty and various fees.

Remember, the downpayment is just one part of the overall financial planning needed when purchasing a resale HDB flat. Consider the wider grants available, potential depreciation, and your investment goals when deciding between a BTO and a resale flat.

Comparing HDB Loan and Bank Loan Downpayment Requirements

When purchasing an HDB resale flat, understanding the differences in downpayment requirements between an HDB loan and a bank loan is crucial.

With an HDB loan, buyers are required to make a downpayment of 20%, which can be paid using cash or CPF funds. This downpayment is split into two parts: 10% during the signing of the Lease Agreement and the remaining 10% at key collection.

In contrast, a bank loan typically requires a 25% downpayment, with at least 5% in cash and the rest potentially from CPF savings. It’s important to note that bank loans may have more flexible eligibility criteria, such as the absence of Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) requirements that are mandatory for HDB loans.

When planning your finances, remember that the type of loan you choose will significantly impact your initial cash outlay and the overall cost of your home.

Here’s a quick comparison of the two loan types:

While HDB loans offer the stability of a fixed interest rate, bank loans may provide lower downpayment options but come with variable interest rates and additional fees such as Buyer’s Stamp Duty (BSD).

Essential Documents for Downpayment Day

When the day arrives to make the initial payment for your HDB resale flat, being prepared with the necessary documents is crucial. Ensure all your paperwork is in order to avoid any delays in the process. Here’s a checklist of what you’ll need:

• NRIC Identity cards for all parties involved
• HDB Loan Eligibility (HLE) Letter or Bank home loan Letter of Offer (LO)
• Receipt of your booking fee
• Proof of income, such as latest pay slips and CPF statements (12 months)
• Bank passbook or statement

Additionally, you will be required to pay certain fees on this day:

• Legal fees
• Stamp duty

Remember, the downpayment for a bank loan is 25% of the purchase price, with at least 5% in cash and the rest potentially from your CPF savings. For an HDB loan, the downpayment is 20%, which can be fully paid using CPF or cash.

It’s essential to have your financial documents reviewed and ready. This includes your bank statements and income verification, which will be critical in securing your loan.

Financial Planning for Your HDB Resale Purchase

Before diving into the commitment of a resale HDB purchase, it’s crucial to assess your financial capacity. Start by calculating your combined monthly income and deducting any existing obligations, such as student or car loans, insurance premiums, and regular living expenses. This will give you a clear picture of the monthly surplus that can be directed towards your home loan repayments.

Consider the long-term implications of your purchase. A resale HDB flat is not just a home, but also a financial commitment that spans years. Use tools like the HDB Home Loan calculator to gauge what you can afford without compromising your lifestyle or future financial goals.

Be realistic about your financial situation and the lifestyle you wish to maintain. This will influence the size and location of the flat you can realistically target.

Lastly, factor in potential changes to your income, such as career progression or unexpected events. It’s wise to adopt a safe, prudent approach when planning for such a significant investment.

Being Prudent with Future Finances

When planning for an HDB resale purchase, it is crucial to be prudent with future finances. Unexpected events such as illness or job loss can impact your ability to service your loan, making a conservative approach advisable.

Be realistic about your lifestyle expectations and the size or location of the flat you can afford after accounting for all expenses.

Here are some approaches to consider:

• Safe, Prudent Approach: Opt for a smaller BTO or one in a non-mature estate to pay off the loan quickly and become debt-free.
• Go Big or Go Home Approach: Choose a larger BTO in a sought-after location, planning for a long loan tenure and betting on salary increases.

Remember, staying on top of your monthly loan payments is essential to avoid late fees and financial strain.

Staying on Top of Monthly Loan Payments

Once you’ve secured your HDB resale flat, it’s crucial to maintain a consistent payment schedule for your monthly loan instalments. Late or missed payments can lead to unnecessary late fees and could affect your credit score. Planning your finances effectively means considering all potential costs, including monthly loan repayments, which can be made through various methods such as GIRO, online banking, or at HDB branches.

To ensure you’re never caught off guard, keep track of your loan balance and the options available for repayment. Remember, you can use your CPF Ordinary Account balance to cover your HDB mortgage payments, in addition to cash or proceeds from the sale of an existing property. It’s also worth noting that the first monthly installment payment for an HDB housing loan starts on the first day of the second month following loan disbursement.

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Key Milestones in the HDB Resale Transaction

Before diving into the HDB resale transaction, it’s crucial to understand the eligibility criteria that potential buyers must meet. These criteria ensure that HDB flats are allocated to those who genuinely need them and are eligible for public housing.

• Age: Buyers must be at least 21 years old.
• Citizenship: At least one applicant must be a Singapore Citizen, with the other being either a Singapore Citizen or a Permanent Resident (PR).
• Income Ceiling: Couples cannot have a combined monthly income exceeding $14,000.
• Property Ownership: Applicants must not own or be named on any other HDB flat or private property. Previous private property owners must wait 15 months before purchasing an HDB resale flat.

It’s important to note that Permanent Residents (PRs) are also eligible to purchase HDB resale flats, provided they have been PRs for a minimum of 3 years.

Understanding these criteria is the first step in ensuring a smooth HDB resale purchase. Failing to meet any of these conditions could result in ineligibility, which is why prospective buyers should assess their status carefully before proceeding.

Timeline for Applying, Booking, and Signing Lease Agreement

The journey to owning an HDB resale flat involves several critical steps, each with its own timeline. After applying for your flat, you’ll be given a queue number and invited to book your flat, typically within one to three months. Following the booking, there is a significant wait time before the signing of the lease agreement, which can be up to 9 months. It’s crucial to have your financing in order before this stage.

During the booking process, you will need to present essential documents and pay an option fee. This fee ranges from $500 to $2,000, depending on the flat type.

Once you’ve booked your flat, the next milestone is the signing of the Agreement for Lease. This is when the downpayment is typically paid, and it’s important to note that the resale completion is about 8 weeks after HDB’s acceptance of the resale application. Ensure you have all necessary documents and finances ready to avoid any delays.

What to Expect During Key Collection

Key collection is a pivotal moment in the HDB resale transaction, marking the point where you officially become the owner of your new home. Be prepared for this appointment by having all necessary documents and payments ready. The process typically involves a visit to the HDB Hub, where you will sign the final legal documents and receive the keys to your property.

During this visit, you will be required to settle any outstanding payments, such as the survey fee, registration fee, and buyer’s stamp duty. These costs will vary based on your flat type and loan amount. It’s essential to bring along your NRIC identity cards, marriage certificate if applicable, CPF statements, Home Fire Insurance, Home Protection Scheme details, and a GIRO form for monthly payments.

Remember, your new HDB flat is covered by a one-year Defects Liability Period from the date of key collection. This is your safety net for addressing any construction issues that may arise after moving in.

Here’s a checklist of items to bring to your key collection appointment:

• NRIC identity cards
• Marriage certificate (if applicable)
• CPF statements (last 12 months)
• Home Fire Insurance policy
• Home Protection Scheme details (if using CPF for monthly payments)
• GIRO form (if paying by cash monthly)

Additional Costs to Consider When Buying HDB Resale

Unbenounce to many homebuyers, there are many other monetary considerations before buying a property such as the fees and renovation costs. Here are some of them that you might have miss out:

Buyer’s Stamp Duty and Other Fees

When purchasing an HDB resale flat, the Buyer’s Stamp Duty (BSD) is an essential cost that cannot be overlooked. BSD is computed based on the purchase price or market value of the property, whichever is higher. Prior to 20 Feb 2018, the BSD rate was up to 3%. However, with the introduction of new cooling measures, the rates have increased, affecting both local and foreign buyers.

In addition to BSD, buyers must also account for other fees such as the conveyancing fee, caveat registration fee, and legal fees when signing the Agreement for Lease. These costs are mandatory and contribute to the overall financial commitment of acquiring an HDB resale flat.

Insurance Requirements for HDB Resale

Securing your HDB resale flat with the right insurance policies is not just a prudent step, but a mandatory one in certain cases. The Home Protection Scheme (HPS) is mortgage-reducing term insurance that safeguards HDB owners against the inability to pay off their housing loans in the event of terminal illness, total permanent disability, or death. It is particularly crucial for those using their CPF savings to service their loan.

In addition to HPS, the HDB Fire Insurance Policy is a compulsory requirement for homeowners with an outstanding HDB loan. This policy ensures that your home is protected against fire damage, and it must be renewed every five years as long as the loan exists.

Remember, insurance is not just about fulfilling a requirement; it’s about ensuring peace of mind for you and your loved ones. Review your insurance coverage regularly and adjust it as your circumstances change.

Managing the Defects Liability Period

After addressing the Defects Liability Period (DLP), it’s crucial to understand that this is not the end of your responsibilities as a homeowner. During the DLP, you have the opportunity to report any defects in your new home for rectification, typically within a stipulated timeframe. For instance, the HDB requires that defects be reported within seven days of key collection, and rectification is usually expected to be completed within 14 working days.

It’s important to give yourself ample time to identify and report defects. Engaging professional HDB defect checkers can be a wise investment to ensure nothing is overlooked.

Remember, the responsibility for certain repairs may fall on you after the DLP. For example, ceiling leaks between units are a common issue where homeowners are responsible for maintenance. Planning for these eventualities is essential to avoid unexpected costs.

Here’s a quick checklist for managing the DLP effectively:

• Report defects promptly within the specified period.
• Consider hiring professional defect checkers.
• Keep track of the rectification process and deadlines.
• Be aware of what is covered under the DLP and what is not.

By staying vigilant and proactive during the DLP, you can ensure that your home is in the best possible condition before you fully settle in.

Looking to Buy a Property?

Whether you opt for an HDB loan or a bank loan, being prepared with the necessary documents and funds is key. For HDB loans, the downpayment is split into two parts, with 10% due at the signing of the Lease Agreement and the remaining 10% at key collection. Bank loans, on the other hand, require a 25% downpayment, with at least 5% in cash.

Don’t forget additional costs such as the Buyer’s Stamp Duty and various fees. Always ensure you have your financial documents, NRIC, and other required items on hand. By staying informed and planning ahead, you can navigate the payment timeline confidently and make your dream of owning an HDB resale flat a reality.

Aaron Oon is a Senior Associate Director at Propnex and Founder of Real Estate Insider. A consistent Top Producer in the competitive world of real estate, Armed with a Finance degree from NUS, Aaron is more than just a real estate agent; he’s a strategic thinker and a creative problem solver.

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