Boren and Xinyi’s First Property Purchase

24 April 2021

In 2019 and 2020, when Boren and Xinyi still had full time jobs and were able to take a decent amount of loan, they went to many showflats: Stirling Residences, Parc Clematis, Whistler Grand, JadeScape, Leedon Green, Florence Residences, Parc Canberra, just to name a few. They did not necessarily have the financial means to purchase either of these developments, but they were unsure of what they wanted, so they just sought information on the offerings in the market. They knew their final choice would be somewhere in the West as their parents wanted to live near them. They also went to view quite a number of resale HDB flats in Clementi, Buona Vista, Commonwealth and Queenstown.

They particularly liked the Dawson resale flats which just reached their Minimum Occupation Period (MOP), especially the 4-room loft units at Sky Terrace. However, prices were sky high at the range of $900k and above, especially for those facing Bukit Timah/Dempsey. Agents told them they will not be making much money and it’s better to buy a new launch private property instead as the holding period was shorter and there was higher potential for appreciation. Furthermore, requirements for taking a loan for a new launch private property were more relaxed than the requirements for taking a loan for HDB. For the former, one is subject to a Total Debt Servicing Ratio (TDSR) of 60% while for the latter, the restriction is a Mortgage Servicing Ratio (MSR) of 30%. Furthermore, for a private property, one has the ability to take a longer-term bank loan of up to 30 years compared to 25 years for HDB. TLDR: Technically for the same household income, one is able to buy a private property of higher value compared to HDB and service the same amount in monthly mortgage payment.

However, the quantum of loan for new launches was still rather intimidating for them as they were also at the point in life where they were thinking about quitting their jobs. Additionally, they wanted something they could call home, so to go for a lower quantum, e.g. One Bedroom or Studio Condominium would compromise on their living standards. Furthermore, there were decent grants HDB was providing to resale purchasers and they wanted to tap on that. They eventually found an attractively priced resale HDB unit at Dawson (HDB valuation matched the price of the house), thus purchasing the unit under the essential occupier and fiancé-fiancée scheme.

What is the Essential Occupier Scheme and why did Boren and Xinyi choose to purchase under this scheme?

An Essential Occupier is a family member who is required to be listed in the Application to form a family nucleus and qualify under an eligibility scheme to purchase a flat. In the purchase of this flat, the Essential Occupier is unable to use their CPF to pay for the flat, or take a loan for the flat. However, they will still be able to use their cash to help pay for the property. The Essential Occupier is also not able to purchase another property during the 5-year MOP period. After the 5-year MOP period, this person is able to purchase a property without paying the Additional Buyers’ Stamp Duty (ABSD) because they were not the “owner” of the HDB flat.

Boren and Xinyi’s longer-term vision was to own more than one property but knew they were not yet at that stage to do so. There are two options, namely:

1. Sell the HDB after the 5-year MOP and purchase two private properties, or

2. Keep the HDB and buy one private property

The Essential Occupier Scheme thus gave them the flexibility of choosing from either option. Furthermore, they were also rather conservative in that they liked the idea of having a HDB flat that cannot be taken away. To them, choosing to purchase a resale HDB under the Essential Occupier Scheme was the most comfortable, as it allowed flexibility for future planning with a place to still call home.

Find out more information here: https://services2.hdb.gov.sg/webapp/BP13EligCheck/BP13PEssentialOcc.jsp