The higher the floor, the costlier the flat, so if budget is a concern, opt for a unit on a lower floor.
Aside from the important decisions you have to make when buying an HDB flat, there is always the risk of unforeseen circumstances that may affect the buying process. Here are a few examples and how to handle them.
By Cheryl Marie Tay
1) Agent or no agent?
The HDB does not require home buyers to hire property agents, but if you are a first-time buyer, you might prefer to engage one to make your buying process easier and more secure. If you are not a first-time buyer but have an agent you trust, sticking with him / her will certainly not hurt.
However, as long as you are willing to handle all the relevant paperwork yourself and peruse them thoroughly, you can do without an agent. If you are buying a resale flat, you should work closely with the seller’s agent to ensure all parties involved are kept informed and happy.
2) Vertical location
We all know location is important, but it’s not just the neighbourhood in which your flat is located that matters. While it is imperative that you pick a flat in an estate with amenities such as public transport, schools (if you are a parent with school-going children), supermarkets, F&B outlets and the like, which floor the flat is on is also important.
The higher the floor, the costlier the flat, so if budget is a concern, opt for a unit on a lower floor. If, however, you’d prefer to minimise the noise from traffic and people, and have a sizeable budget, go ahead and buy a unit on a higher floor.
3) HDB or bank?
If you need a loan, you must choose between an HDB loan and a bank loan. They differ in terms of loan-to-value (LTV) ratio, which is the percentage of the house price you can borrow. The maximum LTV for a bank loan and an HDB loan is 80 percent and 90 percent, respectively.
If you get the maximum loan from your bank, there is still a 20 percent down payment; 15 percent can come from your CPF, and the rest must be paid in cash. For an HDB loan, the remaining amount after the loan can be paid fully using your CPF.
Monthly HDB loan repayments are also unlikely to fluctuate, as the CPF rate is rarely adjusted. For a bank loan, this depends on the interest rate period.
4) Maximum loan versus shorter tenure
While loans help to reduce the amount of cash you have to pay upfront, a larger loan also means a longer loan tenure that can last as long as 30 years. If you would rather have a shorter loan tenure, be prepared to pay more in cash for your flat.
For instance, if you buy a $500,000 resale flat with a bank loan on a 60 percent LTV and use your CPF for 15 percent of the house price, you must pay $125,000 in cash but your loan tenure will be shorter. If the LTV is 80 percent, you must pay $25,000 in cash but face a longer loan tenure.
5) Hidden defects
Many home buyers have moved into their resale flats, only to find defects they had not noticed before. Unfortunately, there is little your agent can do for you if you find yourself in this situation.
Still, as an HDB buyer, you are better equipped than a private home buyer to prevent this: two days prior to the completion of the transaction, there will be a final inspection of the house, and should you spot any defects, you can get the seller to see to the necessary repairs. Of course, you must ensure you are as thorough as possible when inspecting the flat, so as to avoid nasty surprises after you’ve moved into your new home.
6) With or without kids?
The HDB’s age limit for mortgage eligibility is 60. As such, if you are in your 40s or 50s and want to downgrade after your children have married and moved out, you might want to get your adult children to be co-borrowers on your mortgage.
The reason for this is that the HDB calculates your loan tenure based on the average age of all the borrowers, so having younger co-borrowers will help to lengthen your tenure and therefore, lower your monthly repayments.
As long as your children are willing to be co-borrowers and you are able to reach a consensus with them — especially regarding finances and repayments — you can be assured of your own retirement property without worrying about loan tenure.
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