BTO Season Is Here: 5 Factors You Might Overlook When Buying Your First Home

Applying for an HDB BTO flat has become almost a rite of passage for young couples in Singapore. All the romance and grand gestures can wait. Nowadays, it’s more practical to seal the deal with a BTO proposal. First and foremost, we’re Singaporeans. *Cue TikTok CEO meme*

With BTO season right around the corner this May, perhaps you’re considering balloting for a flat with your partner. Regardless of which stage of life you’re at, buying a property is a huge decision. If you're not prepared, you could end up with something that doesn't work for you - or worse, find yourself in over your head financially.

As a first-time homebuyer, there are a few things that you might miss when it comes to the BTO application process. Here are 5 factors you should take into account when it comes to choosing your first home.

1. Financing your flat

Now that you’ve decided on balloting for a BTO flat, how do you know if you can afford one? This is where you’ll have to obtain the newly-introduced HDB Flat Eligibility (HFE) letter.

The HFE letter lets you know if you can qualify to buy a new flat from HDB, what CPF Housing Grants are available, and what the loan amount is if you’re taking up an HDB loan. From there, you can work out how much of a downpayment you’ll have to fork out using either cash or CPF, plus your monthly mortgage repayment for your new flat.

If all of these property terms sound foreign to you, you are not alone. It can be damn sian, but don’t be overwhelmed. You can always refer to HDB’s official website or other property-related channels for guidance.

But in general, aim for an HDB flat unit that’s within your budget. Don’t be so ambitious and aim for a 5-room BTO flat and stress yourself out when you realise you won’t be able to service the home loan.

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2. Location, location, location

The location of your home is one of the most important things to consider when buying a new HDB BTO flat in Singapore. A good location will mean easy access to amenities like schools and shopping centres, as well as bus interchanges and MRT stations.

The upcoming May BTO exercise will see a number of units made available in both mature (Bedok) and non-mature (Tengah) estates. There are pros and cons in both areas. While BTO flats in non-mature estates are usually more ulu and have fewer amenities, they tend to be more affordable. In contrast, BTO flats in more mature neighbourhoods tend to be pricier but have the advantage of having more amenities and connectivity.

Beyond that, there are other factors to consider. Will your new BTO flat be facing a major expressway or multi-storey car park? Is your unit located on a higher or lower floor? That could affect the noise level and privacy of your unit.

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3. Renovating and furnishing your home

So here’s the thing about buying a BTO flat. While you might be getting a brand new apartment with a fresh 99-year lease, it is essentially a blank canvas with no furnishings or furniture to speak of.

While most people are focused on having the funds to pay for the BTO flat, they might forget to set aside the cash for renovation as well. Yes, it is possible to take up a renovation loan from the bank, but do you really want to saddle yourself with more debt right off the bat?

It makes much more sense to build up the liquid cash needed and clear the payment one-shot. You also have the option of paying for the renovation in tranches as your contractor completes certain milestones.

Ultimately, the best part of owning a home is that you can renovate it to your liking. However, be sure to be prudent with how you go about it. Don’t go down the Pinterest interior design rabbit hole and regret it later.

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4. Consider the potential resale value of your BTO flat

This isn't always top-of-mind when buying your first HDB BTO flat in Singapore, but eventually, your unit will hit the HDB Minimum Occupation Period (MOP). After staying in your BTO flat for at least five years, you’ll have the option of either renting out or selling your HDB flat. You can also buy another private property.

As the neighbourhood where your BTO flat is located continues to develop and mature, it’s only natural that the resale value of your home will increase as well. Don’t be surprised when property agents start knocking on your door, asking you to upgrade.

Ultimately, the HDB MOP was implemented to prevent homeowners from using public housing as an investment vehicle. It all boils down to your long-term family plans. Do you intend to have more kids in the future, which then necessitates moving into a bigger flat? Perhaps you would like to move closer to your parents. It’s important to ask yourself these questions before you plot your next move with regard to your BTO flat. Owning a property is an asset, but it’s what you do with it that matters. There’s a reason why they call it a nest egg.😅

5. What happens if you give up your HDB BTO flat?

Like any other big-ticket item, applying for a BTO flat is a huge financial commitment. Once you have paid the down payment for your unit, you cannot back out of the purchase without forfeiting your deposit. But what happens when circumstances change and you need to cancel your BTO application?

There can be a variety of reasons why you are unable to complete the purchase. It might not even necessarily be something that’s within your control. For example, you or your fiancee may eventually decide not to get married, or you may encounter unforeseen cash flow issues.

Which stage you are at in your BTO application will determine the penalty you will have to incur. It could be after you’ve received your queue number, which means you would have only forfeited the application fee. However, if this happens after you’ve signed the lease agreement for your unit… then jialat. Be sure to check the HDB website to find out more information and the next action steps to consider. HDB will look into the matter on a case-by-case basis.

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