The past year has been one of madness in the real estate world. Besides the ever growing prices of properties and the purchase of larger units for WFH (Work From Home) craze, there is also the issue of Covid affecting construction progress of new BTOs. As a result, many young Singaporeans are turning to buying the good old resale HDB flat. They are also looking to buy HDB flats that are in mature estates that are older in terms of the remaining leasehold.
So what are the 5 checks I suggest you do before buying an old HDB flat ?
Check 1 : Check the the remaining lease can cover the youngest buyer until the age of 95
Most important formula before buying an old HDB flat. The most important formula, mentioned many times in this blog, has been this one. Not just me but many very good property agents.
To do so, first find out the age of the HDB flat. You can find it from the HDB Map Services (Google : hdb map services) and you can then enter the HDB flat address to get this.
Can see ?
Then you find the age of the youngest buyer (owner, not essential occupier, the one who is paying for the flat using his/her CPF and/or name in the lease).
Then you take the age of the young buyer + the remaining lease (in the above example, that’s 55 years) and then check the TOTAL.
Check if it is more than 95.
Example. Age of youngest buyer is 32 years old. Add 55 years of lease hold remaining. Total = 87 years. That is less than 95 years.
HO SEH Liao !
Check 2 : Check the amount of CPF you can use
As a young couple who are using CPF to finance the purchase of the old HDB flat, it is CRITICAL you check how much CPF you can use for your purchase of an older HDB flat.
This is because CPF states that “you may use the full CPF amount if the remaining lease can cover the youngest buyer until the age of 95 and a prorated amount if the remaining lease does not”. You can read about this in very great details in this article on “Changes in CPF rules on older HDB leasehold flats and how it affects young couples“. It is a damn good article. I know, I wrote it.. kidding 🙂
You can use the very good CPF Housing Usage Calculator to do so too.
Check 3 : How much CPF Housing Grants can you get
Next, check how much housing grants you can get before buying an old HDB flat. As a refresher, buying a resale flat entitles you to 3 (THREE !!) housing grants.
They are :
CPF Housing Grant
Enhanced Housing Grant
The Enhanced Housing Grant is subjected to this rule….
“Eligible first-timer families will be able to enjoy an EHG of up to $80,000 when they buy a flat that can cover them and their spouses to the age of 95. This is to ensure that all Singaporeans will be able to live comfortably in a home that can last them for life”.
So you need to check if how much EHG you can get if your youngest buyer + age of the remaining lease does not add up to 95 years.
Read about this in details in this article, “Enhanced Housing Grant and young couples buying old HDB flats“. Ya lo. Don’t know who wrote that article too.
Check 4 : Amount of HDB or Bank Loan you can get
It is important to get your HDB HLE (HDB Loan Eligibility (HLE)) or your private bank loan amount checked carefully before you make any offer. This is because the amount of downpayment may also be affected by the eligibility check of the “youngest buyer + remaining lease > 95 years”.
This is because “If the remaining lease of the flat cannot cover the youngest buyer to the age of 95, buyers can still take an HDB loan but the LTV limit will be pro-rated from 90 per cent, based on the extent that the remaining lease can cover the youngest buyer to the age of 95.” (Source : CEA)
So do have your amount of downpayment needed (cash or CPF) and the amount of loan HDB or banks are willing to lend to you ready.
Check 5 : Cash on Hand for COV and Renovations
And yes, COV is back (“Around one in three buyers of a Housing Board resale flat paid above market valuation in 2021, an increase from one in five in 2020”).
COV is above valuation. COV is above HDB loan or bank loan. COV is cold hard cash.
And because you are buying an old HDB flat, do not forget the cost of renovations. The floor might not be what you liked. The toilets always need a major refreshing. The air con systems really need to be replaced. And oh maybe you want a completely new set of kitchen set up……
Cost of Renovation is above HDB loan or bank loan. Renovation is cold hard cash too.
Conclusion on the checks before buying an old HDB flat
So it is important to do your 5 checks when buying an old HDB flat.
This is especially so if you are buying an old HDB flat on your own and without the help of an agent. Remember that the agent representing the seller of the HDB flat has NO obligations to help you. Please do your own due diligence.
Do you have other checks you like to do before buying an old HDB flat ? Let me know in the comments below !
Stay safe !