Our Journey Buying a BTO Flat – Part 1: Why BTO?

2021 is going to be a year we always remember, because.. we finally bought a house! A BTO flat! Woohoo, we are proud first-time home-owners now! Even the prospect of construction delay (due to cvd) couldn’t dampen our joy.

It is such a magical once-in-a-lifetime journey that I wish to document every stages of our journey on this blog, including BTO (Built-to-Order) application, HLE (HDB Loan Eligibility) application, balloting, unit selection, making down payment, collecting keys years later when the BTO is completed, and doing renovation.

Maybe, I can create a new series on this blog called “Our BTO Journey“? Yeah, that sounds great.

To start off this series, I’d like to share about our thought process on why we decided to choose BTO and not other alternatives.

It was not easy coming to this decision, there were visit to bank, meeting with property agent, visit to HDB seminars, hundreds of hours reading through HDB website and property-related websites/blogs, heated arguments as well as fruitful discussions during the process.

Different people have different non-negotiables and financial situation. There is no one rule that fits all. I’m not saying that BTO is the best option for first-time home owners. It’s just that BTO is our best option at this stage of our lives.

And here’s our thought process.


Why BTO? Why not Resale?

The first question everyone has to ask before buying an HDB flat is: BTO or resale?

I think the difference is quite obvious. BTO is a newly-built flat, so the waiting time is longer (more than 3 years), and the price is cheaper.

Meanwhile, resale flats are older flats (aged more than 5 years) and more expensive than BTO. You can get the keys in a few months.

Since my spouse and I are currently renting, the most logical choice is to get a resale flat so that we can stop paying rent immediately and start to build our equities.

But.. we’ve always wanted a newly-built flat, and that is non-negotiable..

We’re aware that a new BTO flat now comes with a 5 to 7 years construction period tag, but it is a trade off we have to make.

If you already knew what you want, why do you want to settle for less just because it’s more logical and convenient to settle for less? We all have only 1 life, so we need to decide if we want to live the life we want, or the life that other people want for us.


Why BTO? Why not SBF?

It also crosses our minds that if we want a newly-built flat, then SBF (Sale of Balance Flats) might be a better choice than BTO. Well, that is if we don’t mind the location and level of the available SBF units.

The truth is, there was no SBF flats that we like, some of them we don’t like the layout, some we don’t like the location, others we don’t like the level. And the competition for SBF flats was really fierce, it’s so much competitive than BTO. Also, SBF is usually launched together with BTO. You can only apply for either BTO or SBF, not both.

In case you don’t know yet, the sale launch usually lasts for 1 week. And during the launch, we can actually see how many people have applied for a particular BTO or SBF. Through this, we knew that it’s almost impossible for us to get a decent SBF unit. We feel that we have a better chance of getting a unit that we like if we apply for BTO. So we didn’t apply for SBF.


Why BTO? Why not EC or Condo?

We also considered the pros and cons of buying EC and Condo. On one hand, we’d obviously love the thought of staying in EC/Condo AND the possibility of handsome capital gain. On the other hand, we didn’t know if our financial situation allow us to buy EC/Condo.

So, we visited bank and met up with property agent to discuss about our loan eligibility and the type of EC/Condo that we can afford based on our financial situation.

Based on these discussions, we learned that ECs in 2020 are no longer as cheap as ECs in 2010s. In 2010s, the average price of an EC was less than S$ 1000 psf. But now, most EC costs more than S$ 1000 psf.

Furthermore, buyers of EC are subjected to Mortgage Servicing Ratio (MSR) of 30%. That means, the monthly mortgage should not exceed 30% of our total household income. Long story short, after running the calculation, it’s really hard for us to meet this criteria. So, EC is out!

Surprisingly, buyers of Condo are NOT subjected to MSR requirement! Condo buyers are only subjected to Total Debt Servicing Ratio (TDSR) of 60%, which means that the monthly mortgage of all of our loans should not exceed 60% of our total household income. Since we don’t have any other loan, we can easily satisfy TDSR requirement.

Based on the preliminary calculations, we can afford a 2-bedder condominium that costs around 900k.


The next question is: do we want a 2-bedder condo with 900k price tag, or do we want a 5-room HDB with 500k price tag?

The 2-bedder condo option comes with the possibility of higher return if we were to sell it after MOP, or if we were to rent it out. It also comes with condo amenities such as security guard, swimming pool, gym, BBQ and tennis court.

Meanwhile, the 5-room HDB BTO flat provides us more living space at a fraction of condo’s cost. The extra space will be very useful when we start a family and when we transition to working from home. And it allows us a very good buffer in case one of us hit a financial roadblock in the future.

In the end, we came to the conclusion that it is not worth going all-in to buy a condo just for the amenities and the prospect of capital gain, and it will derail our goal of reaching FI (financial independence) because we can’t save much as most of our income will go straight to mortgage.

We’d rather get an HDB Flat now and have the peace of mind knowing that even if we were to hit a roadblock (eg: lose our job or any other misfortune), we will still be able to keep our house because we have enough saving to pay off the loan. And we can even rent a room in our house to help with our finances, if necessary. If we were to buy a 2-bedder condo, it’s not possible to rent out a room because there’s no spare room already!

We also realized that we don’t need to buy a condo in order to stay in a condo. If we really want to stay in a condo just for the experience, we can just simply rent a condo unit and enjoy the amenities while waiting for our HDB BTO to compete. Like what we’re already doing. And to be honest, after staying in a condo for 2 years now, there is definitely a point of diminished return.


Lastly, there is also another reason why we decided to get HDB as our first home and not condo. That is because when our HDB reaches MOP (Minimum Occupation Period), we can buy a condo WITHOUT selling our HDB (if our financial situation allows).

We can’t do the reverse, if we buy condo first and then we want to buy HDB, we have to sell the condo. As we (well, I) aspire to own multiple properties in the future, buying HDB first is a move in the right direction. I might have a change of heart in the future, we’ll see how it goes.

Btw, this privilege of keeping HDB and buying a condo is only available for household with at least one SC; for households with 2 SPRs, they need to dispose HDB within 6 months after buying a private property.


Our BTO Journey – Part 2: Application and Balloting

Our BTO Journey – Part 3: Flat Selection

Our BTO Journey – Part 4: EHG, Signing of Lease, Downpayment

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