4 Mistakes Many Singaporeans Make When Balloting For An HDB
Buying a house is a heavy commitment... Don't make these mistakes.
Balloting for an HDB is a step many young couples take to further their relationship in Singapore. Balloting for that BTO (built-to-order) flat or shopping around for a resale unit is a rite of passage for most Singaporeans.
Since most Singaporeans will have to go through the same processes, it seems like something that requires little thought.
How difficult can it be, they think. They will ballot for something within their affordability range but still meets all their current and future needs. If they get it after their first attempt, they must be really lucky.
But after many unsuccessful attempts, they finally manage to secure a lot, they are incredibly grateful and then they start applying for a loan.
Sounds easy enough, right? WRONG.
During this process, many things can go horribly wrong and many end up with a flat they don’t really want.
To avoid all the regrets, here are four mistakes you should take note of when balloting for an HDB:
1. Balloting for an HDB flat in some ‘ulu’ area, thinking it will increase your chances
Remember, buying your first home (and a BTO to boot) is not something to take lightly. Don’t just rush to whatever estate seems like it would give you the highest chance just because you’re desperate for a home.
Think LONG term. If both you and your spouse work in the west, don’t go looking for a home in the east where it would take you well over an hour to get to work every day.
If you’re not happy in your new place, you can’t just up and move to a new place. Most units will have a minimum occupancy period of 5 years. So that’s 5 miserable years of commuting up and down if you work far away. Think about it.
Another thing to note is the surrounding neighbourhood. If you’re thinking of balloting for an HDB in the area, actually go down to the area to view it for yourself to see if you can imagine living there.
Use the public transport from your potential new home to go to work or commonly visited places so you know what the actual commute will be like.
2. Research the future plans for the area
Okay, so if you DO decide to buy in an ‘ulu’ area now, it doesn’t necessarily mean it will be ‘ulu’ forever. As we all know, Punggol used to be pretty damn ‘ulu’.
Right now, it is a thriving neighbourhood that has somehow become hip. Go figure. You probably wouldn’t have thought so 20 years ago.
Today, its property value has gone up and many couples are flocking to the area to live.
So when you’re buying your BTO flat, think far, far ahead, especially if you plan on living there for a long time. Think of its potential and do your research through the URA Master Plan, which will reveal future plans for the area.
Be sure to check this out before balloting for an HDB.
3. Taking on too heavy of a financial burden
Bigger is not necessarily better when you’re buying a flat, especially if you don’t plan on having many kids (or any at all).
5-room flats are one of the most popular options among balloters. But don’t fall for this same trap, especially if you don’t actually need that much space.
Apart from the fact that you will have to spend more on electricity, water and cleaning the house, you will also be spending more on repaying your loan every month.
You don’t HAVE to ballot for the most expensive flat you can possibly afford. Do not overstretch yourself when it comes to your mortgage.
Find a unit that you are more than comfortable with paying back the monthly mortgage, rather than struggle to make ends meet every month.
You could be saving for other things like your child’s education, your retirement, an emergency fund (should something happen and you end up losing your job) or just enjoying life by going on holidays.
4. Not shopping around for loans
So you’ve got the unit you’ve balloted for and you are confident it is within your affordability range. But there’s one more step you need to take and that is applying for your loan.
A common mistake made by many Singaporeans is that they tend to just head to the banks that they think will easily approve their loan, rather than looking for the best deal.
What you need to be doing is getting a home loan with the lowest possible interest rate! (Sounds like it’s common sense, but really, you need to be doing this!)
Another common mistake is that people just sign up for the HDB home loan because there won’t be a chance of rejection and it seems safer.
BUT! In reality, the HDB loan has higher interest rates than bank loans most of the time.
The plus side of taking on the HDB loan, is that you pay a lower downpayment and you do not have to pay the hefty 1.5% prepayment penalty if you settle your home loan early.
So with all this in mind, you should be ready to start balloting for an HDB with your other half!
What is your experience of balloting for an HDB flat like? Let us know in the comments.
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