Buying a Private Property
1st Step – Check Your Eligibility
Get In-Principle Loan Approval First
IPA is an agreement between you and the bank that you intend to borrow from. This agreement consists of two main details.
- The loan amount you are eligible for
- The length of your loan tenure
To guard yourself against the risk that you may end up losing your option fee because you are unable to secure the loan required, it’s always prudent to get In-Principle Approval (IPA) first before you make any formal offer.
- IPA doesn’t make a final confirmation that the loan will be approved but it is essential before you start your journey to purchase your dream home.
Use of CPF for private residential properties under the CPF Housing Scheme
All CPF members who are eligible to buy a private property are eligible to use their CPF savings. To be eligible to use CPF, your age plus the remaining lease of the flat must be at least 80 years at the time of purchase.
CPF withdrawal limits
- The use of CPF savings towards the private residential property is subject to the CPF housing limits.
- For private residential property bought:
- before 10 May 2019 with a remaining lease of at least 60 years at the time of purchase; or
- from 10 May 2019 with a remaining lease that can cover the youngest owner using CPF for the property till age 95,
the maximum amount of CPF that can be used towards the private residential property is as follows.
|Date of property purchase||Maximum amount of CPF that can be used|
|Before 1 September 2002||Up to the lower of the purchase price or the valuation price of the property at the time of purchase, if you cannot set aside the Basic Retirement Sum (“BRS“)
Up to the housing loan taken to buy the property, if you can set aside the BRS
|From 1 September 2002||Up to the lower of the purchase price or the valuation price of the property at the time of purchase, if you cannot set aside the BRS
Up to an additional 20% of the lower of the purchase price or the valuation price of the property at the time of purchase, if you can set aside the BRS
2nd Step – Negotiate the Purchase
Before negotiation with the seller, do your homework on what is the transacted price of the surrounding properties using SRX x-value pricing or URA to assist you in making an informed decision on what price to buy.
Prepare yourself what price you want to offer and be mindful of your budget taking into considerations that resale units may have unexpected renovation costs at times.
Always arm yourself with information and alternatives prior to negotiation with the seller. 1 major bargaining chip is to find out about the other listings within the vicinity about other sellers’ asking price and the condition of the unit.
- DO NOT rush in the purchase of the property. Give yourself time to look around and assess your choices.
- Resale units are bound to have fair wear and tear. Take your time to inspect it thoroughly and ask questions before making the offer.
- Arrange to view at different timings to understand weather (west sun etc) and neighbour’s condition.
- Request the sellers to produce evidence of their flat ownership and eligibility to sell the flat before you enter into the option to purchase (OTP).
3rd Step – Option To Purchase
Offer To Purchase
The Offer To Purchase is a legally non-binding document which is a formal letter from you (the buyer) to the seller, expressing a serious interest in the property. This is usually prepared for private properties only.
In this document, the content will state the terms of purchase such as property address, offered price, duration of the option period, date of completion of transaction etc and will usually last for 3 days. Once you accept the Offer, you will then issue the Option To Purchase.
Actually as a buyer, you can choose to skip the Offer To Purchase and sign the Option To Purchase right away. However, by drafting an Offer To Purchase will help to state the terms and conditions into having a mutual agreement between you and the seller. This helps to facilitate the process without any conflicts.
Option To Purchase
An Option to Purchase is the actual, legally binding document for purchasing a property. You will issue a cheque 1% of the purchase price in order to exchange for the OTP from the seller as the Option Fee to the seller. Once the seller have granted the Option to you, he cannot grant another Option to another buyer until the Option granted expires.
Once the seller have granted the Option to you, he cannot grant another Option to another buyer until the Option granted expires.
The Option period is usually 14 calendar days (including Saturday, Sunday and public holidays) from the date of granting the OTP. It expires at 4pm on the 14th calendar day.
Within these 14 days, if you wish to proceed with the purchase of the property, you have to appoint a law firm to act in your purchase and get your bank loan signed.
Exercise the OTP within the Option Period at your law firm to proceed with the purchase.
To exercise the Option, you and your co-buyers must sign on the “ACCEPTANCE” section in the OTP.
When you exercise the OTP at your appointed law firm, you have to pay the Option Exercise Fee (4% of sale price) in cheque, written to the seller’s law firm -CVY.
The Option Fee (1%) and Option Exercise Fee (4%) forms the deposit (5%).
When you have accepted the bank loan, the bank will assign a valuer to visit your purchase property. This is part of the formality of the bank when disbursing loan to buyer. This valuation cost is borne by you.
If you do not wish to proceed with the purchase, your 1% Option Fee will be forfeited.
4th Step – Accept Letter of Offer from Bank & Appoint Law Firm
If you are taking a mortgage loan from a bank, please check with the bank whether the law firm that you are using is under the bank’s panel of lawyers. This is to prevent having to pay 2 sets of legal fee in your purchase of your property.
After you have received the OTP from the seller, you have to appoint a law firm to act for you in the conveyancing of the property and to exercise your OTP at the law firm.
Your appointed lawyer will liaise with your bank to disburse your mortgage loan and act for you throughout your property purchase until completion.
Last Step – Completion
The law firm will make another appointment with you before the Completion date for you to pay the remaining amount (Purchase Price – 5% Deposit – CPF usage – Bank Loan) of your purchase.
Once you’ve completed the final payment and your home loan has been disbursed, it’s time for the moment you’ve been waiting for – collecting the keys to your new home.
The completion date will be approximately 8-12 weeks (depending on your agreement with the seller from the date you exercised the Option). Your lawyer will inform you to collect the keys on this date.