Here’s How Much You Need To Earn To Afford A 5-Room BTO Flat

Applying for and buying a BTO flat is a rite of passage most young Singaporean couples go through when they’re ready to marry. While most will go for the commonly-launched 3- and 4-room BTO flats, some seek out the rarer and highly-coveted 5-room BTO flats to enjoy the luxury of space.

So, if you want to apply for a 5-room BTO flat, how much do you need to earn to afford one? The short answer is about $5,450 – yes, we’re talking combined gross household income per month.

The long answer is there are many things to consider before applying for and buying a 5-room BTO flat. We break down where you can find these flats, what you need to earn to afford your potential home comfortably, and how to finance your 5-room BTO flat.

What is the average 5-room BTO size?

A 4-room vs 5-room BTO flat layout.
Image credit: Butter Paper Studio, Houzz

If you’re wondering what’s the difference between 4-room BTO flats and 5-room BTO flats, it’s that the latter has larger dedicated living and dining zones. Both flat types have a living room, kitchen and 3 bedrooms with one ensuite bathroom attached to the master bedroom and another in the common area. Needless to say, 4-room BTO flats are smaller.

The 5-room BTO flats launched in recent years are around 1,185sqft or 110sqm, and their sizes have remained unchanged since 2000. But compared to the 5-room flats built from 1974 to 2000, the modern 5-room BTO flats are slightly smaller.

Older 5-room HDB flats can range from 1,260-1,324sqft, with some units going up to 1,475sqft, making them a great home option as well. The only downside of these older flats is that they have a shorter lease.

How much do 5-room BTO flats cost?

On average, 5-room BTO flats prices start at $366,000 and can go up to $720,000 (excluding grants). Not only are you paying a premium for the space that these flats have, but the location of the BTO project would also factor into how much more it can cost; 5-room flats in mature estates would cost more than those in non-mature estates.

We got these numbers by comparing the launch prices of all 5-room BTO flats from the past 2 years from February 2022 to December 2023.

Source: HDB

When buying a 5-room BTO flat, know that you’re often trading space for location. Of the 20 BTO sites made available during the selected period, only 3 of the 20 projects were in the mature estates of Bedok, Ang Mo Kio, and Tampines. Most of these larger flat types are launched in non-mature estates far from the heart of the city. We’re talking Choa Chu Kang, Tengah, and Jurong West. And there is a good reason for this.

BTO flats are meant to be the first homes of young Singaporean families. For most, they are just starting their careers or fresh out of school and don’t have high earning power. BTO flat prices are pegged against affordability and not the open market. HDB first looks at the prices of resale flats around the area and then applies a market discount to the assessed value. 

That’s why you’ll be hard-pressed to find a 5-room BTO flat launched in Queenstown or Kallang. Aside from the high build cost, the target demographic simply can’t afford it.

How to finance and budget for your 5-room BTO flat

Image credit: TheSmartLocal

Understanding TDSR and MSR

Now that we know how much a 5-room BTO flat costs, we can work backwards to see how much to earn to afford a 5-room BTO flat. To budget, you need to be familiar with the Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR).

Here’s a quick crash course: if you’re taking an HDB loan, you’ll be looking at the MSR. If you’re financing your BTO flat with a bank loan, you’ll have to consider both MSR and TDSR.

Effectively, the 2 serving ratios determine how much you can borrow to finance your flat. When paying off your mortgage, the MSR dictates that you can only use up to 30% of your gross monthly income for monthly repayments. Meanwhile, the TDSR dictates you can only use a maximum of 55% of your gross monthly income to repay all monthly debt obligations.

Choosing an HDB Loan or a Bank Loan

Unless you already have a large amount of cash on hand, you’ll likely be borrowing from a bank/financial institution or taking an HDB-granted loan to finance your flat. Most first-time homeowners will go for an HDB loan in the current interest rate climate – bank loan interest rates are higher than the 2.6% offered by HDB, which has remained unchanged for decades. 

Taking the average starting price of the recent BTO launches, let’s assume your 5-room BTO flat costs $450,000.

For HDB loans, there is a loan-to-value (LTV) limit of 80%. What this means is you can only borrow up to 80% of the value of your BTO flat. So if your BTO flat costs $450,000, you can only obtain a loan of up to $360,000 in the best-case scenario. You can use your CPF OA entirely to cover the remaining $90,000 downpayment.

If you’re choosing to go for a bank loan, your LTV limit is 75%. Applying the same numbers and assuming you have no other debt obligations, you can get a maximum loan of $337,500. 5% of the remaining 25% downpayment will need to be paid for in cash. That means you need to cough up $22,500; the rest of the downpayment can be covered with your CPF OA monies.

Tip: You can refinance your home loan from an HDB loan to a bank loan exactly once. However, you cannot refinance from a bank loan back to an HDB loan. So you should consider your options and finances thoroughly before you choose either option.

How much do you need to earn to afford a 5-room BTO flat?

Finally, we have arrived at the million-dollar question: how much do you need to earn to afford a 5-room BTO flat? If we’re taking the average starting price, you’ll need a combined gross household income of about $5,450. 

Assuming the 5-room flat is $450,000 (without grants), the maximum LTV limit for each loan type and a 25-year loan tenure, here’s the breakdown:

Split between you and your spouse, that’s having to earn $2,725 each before taxes. But before you jump into buying a 5-room BTO flat, ask yourself these few questions.

1. How picky are you when choosing where your BTO flat is located?

Image credit: TheSmartLocal

For starters, we used the average starting prices for a 5-room BTO flat. Want to live on higher floors? You will have to pay more. Not okay with living in the Western and Northern regions of Singapore? The starting prices of BTO flats in mature estates are much higher. If you have a stringent list for your new home and are unwilling to compromise, we’ll encourage you to set a higher budget.  

2. Do you have high daily living expenses?

$5,450 is the absolute minimum gross household income requirement you’ll need. With CPF deductions, you’re looking at a combined take-home pay of $4,360 to cover everything else. You’re giving yourselves an extremely tight budget to work with.

Image credit: @senconcept.id

For couples who have serious bubble tea addictions and enjoy having HaiDiLao on the regular, you’ll probably have to give up these indulgences. Ask yourself if it’s worth giving up these treats for the foreseeable future and pour all your money into financing your future home.

Don’t forget, you might still want to renovate and furnish your flat. So unless you’re okay with having your house having zero furniture, an air mattress and maybe two cans of Coke, you might have to reconsider applying for a 5-room BTO flat.

3. Can you comfortably afford this flat?

You don’t want to overextend yourself when financing a property and be able to save for a rainy day. If you or your partner lose your job, the last thing you want is to stress out over being potentially homeless if the bank’s going to foreclose your home. 

It’s the same principle when budgeting for a rental property: avoid spending more than 30% of your disposable income on your home’s monthly repayment. This is especially true for those who earn an average wage. If not, you might find yourself panicking whenever it’s time to pay the mortgage and your other bills.

When financing your home, it’s best to under-budget. For example, use only one person’s income to budget for your flat. Or, pick a home the person who earns less is comfortable paying for. This way, you could potentially avoid the lifestyle inflation trap.

Affording a 5-room BTO flat in Singapore

The adage “just because you can do something, doesn’t mean you should” absolutely applies when considering buying a 5-room BTO flat. 

Just because you pass the minimum eligibility criteria to purchase one, doesn’t mean you should. As always, consider your lifestyle and commitments before making what is likely to be the biggest financial commitment in your life.

Read other housing guides:

• 10 affordable neighbourhoods where you can buy a 5-room HDB flat
• High floor vs low floor HDB flats
• 9 ways to increase the resale value of your HDB flat

Cover image adapted from: Dall-e.

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