BTO-ing is more than just paying a S$10 fee for your desired project and hoping for the best. If it’s your first foray into the property market, your HDB BTO application would be the start of a learning curve. There’s a lot of technical jargon to wrap your head around, considering the mind-boggling array of terms and acronyms such as Option to Purchase, HLE and MSR you’ll come across.
Not to worry though, here’s a crash course to make your BTO journey a smoother one!
Ethnic Integration Policy (EIP)
Commonly referred to as “racial quota”, the Ethnic Integration Policy (EIP) is the government’s way of ensuring that races don’t become segregated in our public housing estates, which might happen if, say, Tampines becomes a mecca for Muslim food.
So, the Housing & Development Board (HDB) has in place a racial quota. The quota specifies the maximum number of units in any given HDB block that can be occupied by a certain race. For example, a block with 100 units might have a racial quota of 76 Chinese, 19 Malay and 15 Indian/Others. (Note that the number (110) is greater than the units available, which indicates a bit of leeway in mix of races for each block.)
Racial quota is strictly enforced, and affects BTO applicants during the flat selection process. For example, if your queue number is within the flat supply of your project, but the racial quota for your race has been filled before it’s your turn to choose your flat, your flat selection appointment with HDB will be cancelled immediately. (Rest assured that this voided HDB BTO application will not be counted as a rejection on your part.)
HDB BTO application balloting system
What’s this queue number thing, you say? Well, HDB manages its applications process through a computerised balloting system which randomly assigns applicants with a queue number. The applicants are then invited to select a flat in the order of the queue number received. As HDB issues queue numbers beyond the flat supply available to account for dropouts during the flat selection process, there are two situations to take note of:
Your queue number is within the flat supply for your project: Congratulations! As long as the racial quota for your race has not been filled, you’re assured of a flat. The lower your queue number, the greater the choice of units.
Your queue number exceeds the flat supply for your project: To get the chance to pick a flat, you’ll have to count on there being enough dropouts. The racial quota still applies.
HDB gives priority to first-time applicants, as well as applicants under certain priority schemes, offering them additional chances to score a low queue number in the balloting process. For instance, a first-timer couple applicant would receive two chances in the ballot compared to one chance for second-timers.
By the way, the majority of BTO flats released are also reserved for first timers. Here are the exact percentages, which differ for mature and non-mature estates:
Non-mature estates
3-room: First-timer applicants are allocated 70% of the flat supply, while second-timer applicants are allocated the remaining 30%.
4-/ 5-room/ 3Gen: First-timer applicants are allocated 85% of the flat supply, while second-timer applicants are allocated the remaining 15%.
*For BTO Projects with shorter waiting time (where applicable)
4-/ 5-room/ 3Gen: First-timer applicants are allocated 95% of the flat supply, while second-timer applicants are allocated the remaining 5%.
If there’s a mix of BTO projects with normal and shorter waiting time in the same estate, the quota for second-timer applicants will be computed based on the weighted average allocation quota of all the projects.
Mature estates
3- to 5-room: First-timer applicants are allocated 95% of the flat supply, while second-timer applicants are allocated the remaining 5%.
(Take note that for both non-mature and mature estates, some flats are also set aside for quota-based priority schemes where HDB does not differentiate between first-timers and second-timers. If there are fewer first-timers than the number of flats set aside for them, the excess flats will be allocated to second-timers. The selection queue positions of all shortlisted applicants are randomly balloted.)
If you’re successful in the ballot and invited to apply for a flat, you might want to think twice before rejecting your invite as there are consequences of not following through with a HDB BTO application. For first-timer families, rejecting two chances to select a flat means your first-timer priority gets suspended for one year. If you reject a two more chances to select a flat in that year, the suspension will be extended for another year.
Sale of Balance Flats (SBF)
Sale of Balance Flats (SBF) launches allow prospective homebuyers to apply for (i) balance flats from previous BTO sales launches, (ii) surplus Selective En bloc Redevelopment Scheme(SERS) replacement flats, and (iii) re-purchased flats. SBF sale exercises are also conducted through a balloting system, similar to the one used for BTOs.
SBF sales exercises coincide with BTO launches, and applicants can only apply for one or the other, not both.
HDB Loan Eligibility (HLE) letter
If you intend to finance your flat with an HDB loan, you’ll need an HLE letter from HDB. It’s best to apply for your HLE letter as soon as you receive your queue number, since you’ll need it for your flat selection appointment.
The HLE letter sets out the following:
(i) maximum loan amount
(ii) maximum monthly instalments
(iii) maximum repayment period
(iv) amount of cash proceeds from disposal of the existing flat or last-owned flat to be used to pay for the next flat (if applying for second HDB housing loan)
(v) other terms and conditions
A HLE letter is valid for six months from its issue (assuming no change in financial position). If you still need a valid HLE letter, you may apply for a new one a week before the first one expires.
Approval-in-Principle (AIP)
You will need an AIP if you intend to take a housing loan from a local bank. Sometimes, it’s called In-Principle Approval (IAP).
An AIP is a guarantee by the bank that it will loan you an agreed sum of money, taking into account your income, debt servicing ratios and financial health. The actual loan doesn’t take place when the AIP is issued; the purpose of it is to help the buyer determine what kind of home they will be able to afford.
An AIP is usually valid for 30 to 90 days, depending on the bank’s policy.
Loan-to-Value (LTV) ratio
The LTV ratio of a property reflects the size of a home loan as a proportion to its actual worth.
Let’s say your home is worth S$500,000, and you’ve taken out a S$300,000 loan to finance its purchase. Your LTV would be 60% (S$300,000/S$500,000 x 100%).
If it’s your first loan, banks will usually be willing to loan up to 75% of the property’s value. The maximum LTV ratio that a bank is allowed to loan decreases in accordance with the number of existing loans a borrower has (e.g. car loan).
Currently, the LTV for bank loans is 75%, while the LTV for HDB loans is 90%.
Total Debt Servicing Ratio (TDSR)
TDSR is a computation of a person’s total monthly debt obligations, as a percentage of their total monthly income.
Under the current rules, a borrower is only allowed to use 60% of their income salary to pay off any monthly debt obligations they may have, including home loans. This threshold does not apply if the borrower’s LTV ratio is 50% or below.
Mortgage Servicing Ratio (MSR)
MSR is a computation of a person’s monthly mortgage repayments, as a percentage of their total monthly income.
Under the current rules, if the borrower is purchasing an HDB flat or Executive Condominium (EC) and taking a home loan, the MSR cannot exceed 30%.
Option to Purchase (OTP) for HDB BTO application
An OTP is a document granting a buyer the exclusive right to purchase a particular property. It’s granted by HDB upon the buyer’s payment of an option fee (the exact amount varies according to the type of flat). For BTO applicants, the option fee is paid on the flat selection appointment.
The option fee works as a buyer guarantees to pay the downpayment of the property, and is forfeited if the buyer decides not to go through with the purchase (i.e. not pay the downpayment).
Downpayment (for HDB BTO application)
The downpayment is the portion of the purchase price a buyer has to pay in cash or CPF. It cannot be paid as part of your home loan. So the minimum downpayment required varies according to the type of loan taken. For example, with a bank loan, the minimum downpayment is 25% (minimum 5% in cash, with the remainder with CPF and/or cash). On the other hand, for an HDB loan, the minimum downpayment is 10% (payable in cash and/or CPF).
Buyers eligible for the Staggered Downpayment Scheme are entitled to split their downpayment obligations over two payments (instead of one). The two payments occur at the second appointment (to sign the Agreement for Lease) and during key collection.
Stamp duty
Stamp duty is a lump sum of tax payable on the buying or selling of a property. The exact amount varies according to the value of the property in question. A Buyer’s Stamp Duty (BSD) is to be paid for any property purchase, including a BTO.
| Purchase price or market value of the property | Stamp duty rates |
| First S$180,000 | 1% |
| Next S$180,000 | 2% |
| Next S$640,000 | 3% |
| Remaining amount | 4% |
If like me, math makes your head hurt, use IRAS’s stamp duty calculator to do some of the heavy lifting!
Conveyancing or legal fees
Conveyancing fees are the legal costs charged by HDB for preparing the paperwork for a sale.
The conveyancing fees are calculated as follows:
| Purchase price of the property | Rates |
| First S$30,000 | S$0.90 per S$1,000 |
| Next S$30,000 | S$0.72 per S$1,000 |
| Remaining amount | S$0.60 per S$1,000 |
If you’re going with a bank loan, you would hire external lawyers to act for you in the purchase (your bank will help you with this). Instead of paying the conveyancing fees above, you’d just need to pay your solicitors their legal fees, which is on average about S$2,500 for a BTO purchase.
Estimated Completion Date (ECD)
The Estimated Completion Date (ECD) is the day the contractors finish construction of the property and surrender it to HDB.
HDB will usually provide buyers with an ECD, but the actual completion date of the property tends to be about six to nine months earlier than what’s predicted.
Delivery possession date
The delivery possession date is the date by which HDB is required to deliver the keys and legal possession of the flats to the homeowners.
Fire insurance
If you’re taking an HDB loan, you must take out a fire insurance policy with FWD, HDB’s appointed insurance agent. The cost of insurance varies according to the flat type, and their rates can be found via HDB’s portal here.
Home Protection Scheme (HPS)
HPS is a mortgage-reducing insurance scheme offered by the CPF Board that’s meant to pay out any outstanding home loan amount should the insured person suffer from a permanent disability, or pass away, before the loan has been repaid.
Coverage under HPS is required only where a buyer intends to use their CPF to service the monthly instalments on their home. The premium is paid annually using the buyer’s CPF savings or cash, and the amount payable varies depending on factors such as your declared percentage of coverage, loan amount, age and gender.
Check out the CPF Board’s HPS Premium Calculator if you want to get an estimate on the premium you’d have to pay.
Collection of keys
As the name suggests, the collection of keys refers to the appointment with HDB where you finally collect the keys to your new home!
You will be required to bring originals of the following documents of everyone listed in the HDB BTO application:
- Identity cards
- Certificate of fire insurance
- Latest CPF statement(s) if you’re presently a CPF Board employee
- Power of Attorney if you’re unable to attend the appointment personally (if you‘re overseas, the attorney representing you must bring one certified true copy by the solicitors and two photocopies)
- Completed GIRO form (if you’re paying monthly loan instalments partially or fully in cash)
We wish you a smooth BTO journey!
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