How to save money when buying a resale flat
From choosing between an HDB loan or home loans, and doing proper financial planning for it, here’s your ultimate guide to getting a resale flat in Singapore.
PHOTO: Lianhe Zaobao
PUBLISHED ONNovember 05, 2022 7:00 AMByTan Boon Hun
Given the recent excessive demand for homes in Singapore, even first-time applicants are having a harder time securing a BTO flat for themselves despite the extra balloting chances given to them.
That’s when most couples, especially those who cannot wait any longer to have a home, would turn to resale flats.
Resale flats are pretty much perfect in everything — they are bigger than new BTO flats, already have well-established amenities nearby and incur a much shorter waiting time — except for one: they can be pretty pricey.
Increase in prices of resale flats in Singapore
Property prices in Singapore have always been on the rise due to the limited land space in Singapore, and this includes resale HDB flats.
Prices for resale flats saw a rapid increase from the third quarter of 2020 and they don’t seem to be coming down anytime soon.
On average, the price index for resale flats increased by 2.88 per cent over the past four quarters (2021 Q3 - 2022 Q2).
To illustrate the increase in real prices, the average price of a four-room resale flat in Ang Mo Kio was $458,000 in Q3 2021. In Q2 2022, the average price of a same-sized flat in the same location increased to $515,000.
Yes, we’re talking about a $57,000 increase.
While that does not bode well for your upcoming resale HDB flat purchase, it doesn’t mean that there aren’t any substantial ways to save on your upcoming resale flat purchase.
With adequate research, careful selection of home and renovation loans, as well as adjusting your expectations, you can still save during the purchase process.
Some ways to save when buying a resale flat
Know how long it’ll take to purchase a resale flat
Often, costs are incurred not just from the price tag of resale flats but bad planning as well.
You might be in a rush to get your loan approved because of an unexpected payment so you accept the first offer that comes along instead of the one with the best rates.
Or, you realised that you’ve sold your current residence prematurely and now need to pay more upfront costs to rent a home temporarily.
Whichever it is, the first thing you have to know is the process of purchasing a resale flat, how long it takes and when you’ll need to foot the bill.
Here’s an overview of the steps involved in the purchase of a resale flat.
| Step | Requirement | Associated Cost |
|---|---|---|
| 1 | Register your intent to buy – you will need the particulars of all people who will stay in the flat | N.A. |
| 2 | Search for a suitable flat and obtain your OTP – you will need the details of the sellers | N.A. |
| 3 | Decide on the mode of financing – Housing Loan (HDB or bank) or full payment va CPF
If you’re taking up a HDB loan, you will need to obtain a valid HDB Loan Eligibility (HLE) letter before the seller can grant an OTP |
N.A. |
| 4 | Request for Value | $120 (inclusive of GST) |
| 5 | Submit resale application | N.A. |
| 6 | Acknowledge Resale documents – all buyers and sellers | N.A. |
| 7 | Pay fees | Legal & Stamp-duty |
| 8 | Wait for HDB Approval | N.A. |
| 9 | Attend Completion Appointment (Toa Payoh Hub) | N.A. |
If you’re taking up a HDB loan, you will need to obtain a valid HDB Loan Eligibility (HLE) letter before the seller can grant an OTP
Steps 5 to 9 can be completed in about eight weeks (two months), assuming all required documents are submitted accurately and properly.
For a quick and seamless transition, you can safely assume a three-month period required to complete the resale flat purchase from end-to-end, excluding the time required for renovation.
ALSO READ: Most expensive 4-room resale flat: Pinnacle@Duxton unit sold for $1.37m
Don’t be too aggressive
When purchasing resale flats, there is a component every buyer should be aware of: Cash Over Valuation (COV).
When purchasing a resale flat, the buyer and seller have to come to an agreed-upon price. They will then obtain HDB’s valuation of the property.
Should the agreed-upon price be higher than HDB’s valuation of the property, the excess amount will be the Cash Over Valuation (COV) and cannot be paid for with the HDB Loan or your CPF.
| Here’s an illustration of COV | |
|---|---|
| Price agreed between buyer and seller | $550,000 |
| HDB valuation of the property | $500,000 |
| Cash Over Valuation | $550,000 - $500,000 = $50,000 |
Since 2014, buyers and sellers can only obtain HDB’s valuation after obtaining the Option-to-Purchase (OTP) where the price is agreed upon.
This means that if you do not want to pay too much upfront cost, you should do your rese
Go small if location is of utmost importance
When getting a home, location might be of the utmost importance to you.
If you’re thinking of buying a resale flat closer to central Singapore, and it’s a non-negotiable, you might want to consider going small.
In a ValueChampion study conducted in March 2022, it was found that the price of 3-room resale flats have a lower variance in cost across all locations, while bigger flats, especially 5-room units, have a much bigger range.
| 1R | 2R | 3R | 4R | 5R | Exec | Multi-Gen | |
|---|---|---|---|---|---|---|---|
| Ang Mo Kio | N.A. | $233,242 | $339,311 | $494,537 | $685,887 | $913,941 | N.A. |
| Bedok | N.A. | $252,802 | $333,087 | $493,370 | $623,492 | $791,800 | N.A. |
| Bishan | N.A. | N.A. | $382,515 | $589,319 | $824,825 | $979,548 | $895,200 |
| Bukit Batok | N.A. | N.A. | $326,235 | $457,919 | $632,793 | $713,299 | N.A. |
| Bukit Merah | $201,428 | $277.323 | $414,914 | $713,572 | $816,485 | $785,666 | N.A. |
| Bukit Panjang | N.A. | $276,154 | $344,076 | $456,776 | $566,548 | $686,606 | N.A. |
| Bukit Timah | N.A. | N.A. | $412,230 | $636,241 | $863,859 | $1,060,937 | N.A. |
| Central Area | N.A. | $273,518 | $435,283 | $866,802 | $1,053,599 | N.A. | N.A. |
| Choa Chu Kang | N.A. | $270,153 | $365,126 | $456,278 | $543,857 | $632,060 | N.A. |
| Clementi | N.A. | $335,841 | $385,335 | $649,349 | $757,822 | $863,368 | N.A. |
| Geylang | N.A. | $218,965 | $326,560 | $591,006 | $719,225 | $834,455 | N.A. |
| Hougang | N.A. | $264,000 | $349,032 | $476,695 | $606,325 | $757,031 | N.A. |
| Jurong East | N.A. | $273,222 | $337,560 | $446,175 | $567,137 | $758,319 | N.A. |
| Jurong West | N.A. | $267,421 | $316,664 | $446,206 | $519,507 | $619,680 | N.A. |
| Kallang/Whampoa | N.A. | $254,833 | $397,117 | $662,765 | $792,819 | $846,000 | N.A. |
| Marine Parade | N.A. | $240,000 | $393,496 | $498,802 | $810,222 | N.A. | N.A. |
| Pasir Ris | N.A. | $311,750 | $437,803 | $496,580 | $584,898 | $710,523 | N.A. |
| Punggol | N.A. | $283,077 | $396,238 | $501,268 | $585,119 | $610,369 | N.A. |
| Queenstown | N.A. | $276,394 | $405,763 | $762,004 | $925,680 | $1,110,000 | N.A. |
| Sembawang | N.A. | $272,489 | $349,533 | $434,392 | $504,491 | $577,415 | N.A. |
| Sengkang | N.A. | $289,958 | $392,725 | $486,683 | $556,843 | $627,906 | N.A. |
| Serangoon | N.A. | $251,666 | $349,527 | $497,239 | $646,846 | $850,604 | N.A. |
| Tampines | N.A. | $294,416 | $376,470 | $496,012 | $613,820 | $750,791 | $760,861 |
| Toa Payoh | N.A. | $237,568 | $319,987 | $612,014 | $811,606 | $878,432 | N.A. |
| Woodlands | N.A. | $279,750 | $321,468 | $424,074 | $505,115 | $699,713 | N.A. |
| Yishun | N.A. | $264,333 | $340,111 | $436,059 | $562,709 | $694,797 | $827,857 |
| Prices accurate as of March 11, 2022 | |||||||
This means that cost-conscious couples might benefit from going small if they wish to stay in a prime location.
Check out available grants & subsidies
To purchase a resale flat in Singapore, there are a few grants available for you to utilise depending on your status.
For first-timer couples who have not enjoyed housing subsidies or taken up any grants before, they can enjoy up to $50,000 Family Grant.
There is also a top-up grant where recipients of the Singles Grant who got married after purchasing their flats can qualify for. The caveat is they must not have enjoyed any other housing subsidies.
You can toggle open the table below for details on the Family and Top-Up Grant.
| Criteria | Family Grant | Top-Up Grant |
|---|---|---|
| Who is it for? |
|
|
| Citizenship |
|
|
| Age | At least 21 years old | N.A. |
| Household status | At least one applicant is a first-timer who hasn’t taken a housing subsidy before |
|
| Monthly household income ceiling |
|
N.A. |
| Ownership/ interest in property in Singapore or overseas other than HDB flat |
|
|
| Flat type | 2-room or bigger | N.A. |
| Remaining lease of flat | More than 20 years | |
| Timeframe | N.A. | Application must be submitted within 6 months of your marriage registration or spouse/ child becoming an SC/ SPR |
| Amount | First Timer Household:
First-Timer and Second-Timer couples:
|
The Top-Up Grant amount is the difference between the prevailing Family Grant and the Singles Grant that you have previously received. |
Other grants available include the Enhanced Housing Grant and the Proximity Housing Grant.
Couples planning to live with or near their parents and purchasing a resale flat can also utilise the Proximity Housing Grant (PHG) where they can enjoy up to $30,000 grant if they are planning to live with their parents, or $20,000 if they are living within 4km of their parents’ home.
First-timer applicants who qualify for the CPF Housing Grants for resale flats can also apply for the Enhanced Housing Grant (EHG). First-timer families can enjoy up to $80,000 grant while first-timer and second-timer couples can enjoy up to $40,000 grant.
All in all, first-timer families/couples who purchase a resale flat can enjoy up to $150,000 in grants.
Get a good home loan
Researching and getting the best home loan have never been as essential as they are now, what with rising mortgage rates.
As interest payments are all increasing, it becomes even more evident and crucial that you pick a suitable home mortgage loan that is suitable for you and your financial needs.
Different housing loans have different requirements and features. For example, fixed interest rate home loans may be fixed for tenures of two years or five years, also known as the lock-in period of the fixed home loan.
This could play an important role when you make a decision on which home loan to choose, as housing loans which have fixed interest rates for a longer lock-in period could ensure that you enjoy more stability and certainty. However, a longer lock-in period may also indicate less flexibility for you.
There are also banks that offer preferential home mortgage loan rates for existing customers, as well as housing loans that have certain features and benefits such as attractive introductory or first-year rates.
For individuals who are looking for the best fixed-rate mortgage home loans, here are a few options you can look at.
ALSO READ: Where to find the cheapest resale flats in Singapore?
Planning ahead and taking into account refinancing options can be a way to get some great savings in the long run.
Minimise renovation
Renovation can be a big ticket purchase. If you’re a first-timer couple with tight pockets, looking for a resale flat that doesn’t require much work might be a good idea.
On average, renovation costs in Singapore range from S$46,000 to S$89,000, depending on the style and how extensive the renovation works are.
By looking for resale units that can be moved into immediately without carrying out extensive renovations, the extra cost of the renovations can be factored into the selling price of the resale flat which can be covered by your home loan.
For individuals who already have a concept in mind and are determined to give your new home a makeover, you can save by choosing the best renovation loan for yourself.
You can check out our specially-curated guides on the various renovation loans in Singapore available for homeowners here.
Compromise on expectations
For many, there are several “must-haves” for a resale flat purchase.
This could include:
- Location
- Amenities nearby
- Schools
- Distance from parents
- Distance from the workplace
- Value Appreciation
- And more
While it’s logical to have all these, it comes with a cost – a higher price tag. For individuals who might not be able to afford all of the must-haves, you can tick less critical factors off the list to shave down on the price tag.
For example, if you’re someone who wants to live close to the CBD because it’s nearer to the workplace, ask yourself if it’s still important given that you’re no longer required to work in the office that often anymore.
ALSO READ: Multi-generation HDB resale flat in Yishun sold for a record $1.063m
Conclusion
While the prices of resale flats have increased, and first-timer families would need to fork out more if they are looking to purchase an open flat on the market, there are still ways to minimise the costs during the purchase process.
With adequate research, careful selection of home and renovation loans, as well as adjusting your expectations, you can still save during the purchase process.
This article was first published in ValueChampion.