If you’re lucky enough to have found the perfect someone and things have been going steady, it’s natural to think of taking the relationship to the next step. You know things are serious when your significant other asks, “BTO ai mai?” – it’s a bold statement of love and affirmation that this person sees you in their future.
But what if you’re still a student or someone who has to check their bank balance before dropping a few hundred on a staycation. You’re probably wondering how you’re even going to afford a flat. From loans to financing options, here’s what you need to know about BTO if you’re applying as a student.
1. Steps to apply for BTO
Applying for BTO is not a one-step procedure, and there are specific milestones to hit before moving on to the next step. Here’s a brief overview for your convenience:
2. Costs of financing your BTO
A BTO flat is, after all, a big-ticket item and you will spend at least a few years or even a decade financing it. If this is your first time applying for a BTO, you may want to familiarise yourselves with the costs so you know what you’re actually paying for. Here is a brief breakdown of the different costs involved, assuming the house you’re purchasing is a 4-room HDB flat that costs $253,400:
That’s not all – be prepared to also pay for the Home Protection Scheme (HPS) and Fire Insurance. HPS is not compulsory per se, but you must sign up for it if you’re intending to use CPF to pay your mortgage. How much you pay depends on your home loan’s amount. Assuming you’re getting a $22,000 loan, your premium payable will be around $9.90/year for a payment term of 18 years. For a more accurate estimation, feel free to use the CPF Board’s HPS Premium Calculator.
On the other hand, you’re automatically signed up for FWD Fire Insurance when you take out a HDB loan. In case your cooking stove goes haywire or your neighbour’s zhng-ed electric scooter bursts into flames, fire insurance will cover the cost of reinstating damaged internal structures or fixtures. The cost ranges from $1.62 – $2.71 for a 5-year period, depending on flat type.
These insurance schemes are relatively smaller expenses so you shouldn’t worry too much about it. But at the very least, you should have enough money to cover costs up to signing the lease, be it by saving up or taking on a part-time job.
If you and your future spouse are not confident that you can finance these costs, you may want to consider applying for BTO when you can afford it.
3. Staggered Downpayment Scheme for young couples
The first major expense you’ll face is the down payment which makes up 10% of the flat’s purchase price. This five-figure sum can be hard to save up for especially if you don’t have a lot of cash or money in your CPF savings yet. Here’s where the Staggered Downpayment Scheme comes into play as it allows couples under 30 years old to split your down payment into two – the first payable upon signing the lease agreement, and the second payment upon collection of your keys.
To put things into perspective, the two of you would only need to come up with $12,670 upfront for a $253,400 BTO flat, and save up for the remaining $12,670 later.
4. Deferment of income assessment for HDB Home Loan
Generally, at least one member of a couple is required to show proof of full-time employment when applying for a HDB loan. The good news is that there is some leeway for student couples. If you’re between 21-30 years old, you can apply for the Deferred Income Assessment and have your income assessed only three months after your flat is completed.
Let’s say John and Fay are Year 3 NUS students who applied for a 3-room flat in Bukit Batok that will only be ready in 2027. Upon graduation, both take on an entry-level job with a salary of $3,500 each and agree to chip in 30% of their salary to service the loan. By the time their flat is done, they’ll be able to fulfil the income requirements, and would’ve had the past five years to save $126,000 to pay back the loan.
In a way, deferring your income assessment gives both you and your partner extra time to save up to service the loan.
5. Costs of breaking up during the BTO application process
Let’s be frank – we don’t know what the future holds and – *touch wood* – anything can happen in a relationship. It’s worth asking the hard questions such as the risks of student couples applying too early or breaking up too late in the BTO application process. After all, the emotional turmoil will be hard enough on its own, and you wouldn’t want to add financial repercussions to the list.
The cost of your breakup depends on which stage of the BTO application process you’re at. Breaking up before booking a flat won’t have any huge financial penalties, but you will be considered as having rejected a flat. Do take note that doing so more than once will have your first-timer priority suspended for one year.
Those who break up before signing the Agreement of Lease will have your option fee forfeited, andbe barred from applying for and being considered an essential occupier of other HDB flats for one year.
If the agreement is signed, you will need to forfeit 5% of the purchase price of your flat, as well as your down payment, paid stamp duty, and legal fees; and also be barred from applying for other HDB flats for one year.
TLDR: It’s costlier to break up later in the BTO application process.
BTO Application Guide For Students
Buying a home is a big responsibility, and just like a committed relationship, you should be in it for the long haul. Before deciding to take this big step, weigh the pros and cons as a couple to see if you and your significant other are financially – and emotionally – ready to take on this commitment. Don’t feel pressured to BTO just because everyone is doing it – take your time to decide if it’s the right decision. After all, good things take time!
Cover image adapted from: TheSmartLocal
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