HDB Buying Guide for Future Reference

This will be an extension of an earlier post directed at financal planning. I will list down 6 tips which The New Paper ( Monday, 4th September 2006, Page 26 ) columnist Larry Haverkamp gives. I will not endorse it as an irrefutable guide to purchasing a HDB appartment but this article does have it's merits so it is worth looking.

1. If you qualify, take the HDB home loan as opposed to bank loans. HDB home loans (currently) has a 2.6% interest rate. Banks generally charge more than 3% for housing loans.
2. Limit your downpayment. For HDB loans, the Housing Board will consume all of your CPF Ordinary Account (OA) and apply it to your downpayment. Avoid this by transferring the money, in excess of the 10% downpayment, out of your OA and into an investment of fixed deposit. Do this before the first appointment. You can transfer it back after the transaction is done. This will act as a cushion because HDB will take the monthly out of your OA so it is more prudent for one to have funds in your OA in case you hit onhard times and are unable to make CPF contributions.
3. Option fee. If you like a flat, you can reserve it for 14 days by paying an option fee. During that time, the seller cannot sell it to anyone else. You will have to forfeit the option fee is you decide not to buy. The fee is priced at up to S$1000 but you can choose to put up ANY amount. If your property agent insists you pay the full amount. Fire that person. An agent may even pressure you to sign a purchase agreement immediately. They may even fail to mention the 14 day wait-out period. Don't! The LAW entitles you to 2 weeks so take it!
4. Option exercise fee. You have exercised the option to purchase once you pay this fee. It is a binging contract. So do not pay and do not sign a Option to Purchase if you have the slightest doubt about buying the flat or about financing.
5. There is no requirement to use an agent to purchase a flat. To independantly verify that you are getting a good deal, compare home loan rates at www.AskDrMoney.com If you do engage an agent, there is no rule that you must pay the agent 1% as a buyer's commission. Some will work for nothing because they can also make good money from bank referral fees and splitting the seller's commission.
6. If you decide to take a bank loan instead. You'll have to choose between Variable or Fixed intrest rates. Do your homework on these 2 options. They have different advantages. In a nutshell, variable interest rates are an interest rate that moves up and down based on the changes of an underlying interest rate index and fixed interest rates are a loan or mortgage with an interest rate that will remain at a predetermined rate for the entire term of the loan.