I Lost $19,950 Cancelling My BTO Application, Here’s What Happened

*Correction: November 4 2020
An earlier version of this article misstated the loss of downpayment at 10 per cent, and not 5 per cent, as clarified with HDB. It was something our participant was not aware of, and it should have been properly fact checked by us. We apologise for the mistake and thank all those who have pointed it out to us.

So things were going well, and you thought you met “the one”. Or perhaps they were going well before the pandemic struck, and now you’re not so sure you can commit to a home loan. 

There’s probably a lot of people happy to take the BTO flat you applied for – but that doesn’t mean you’ll get off easy.  You could say HDB doesn’t take rejection well: there could be some painful forfeits involved when you cancel your flat application; and here’s what you should be prepared for:

For this article, we spoke to an actual person who cancelled his BTO flat application; and at a late stage in the process too. 

James (not his real name) initially applied for a flat with his then-partner. He even had to apply twice to secure the first flat:

“My ex-girlfriend and I dated for three years. Naturally after being steady together for that amount of time, getting a BTO flat was the next step in the relationship.  So, we went ahead and applied for a 4-room Sale of Balance Flat in May 2017, and managed to get balloted with a queue position of 179. 

There were only 131 units of flats on offer, so we decided to forgo the application. 

Our next application was for the August 2017 BTO. This time we went for a five-room flat, and managed to score a pretty decent queue number of 292 out of 574 units on offer.

Four months later we signed the agreement for lease, and made out 10 per cent down payment with our combined CPF.”

Signing the lease, however, ensured he could no longer back out without penalties.

There are two stages, before signing the lease, when you can still back out with few penalties. 

This is at the stage of the BTO application, and the stage of securing the Option.

1. BTO application stage

BTO application is the first step in the process. Assuming that all you did was send in the application – you haven’t secured the Option, signed the lease, etc., then your monetary loss is just the application fee of $10. At this stage, that’s usually the worst that can happen.

However, there can be other drawbacks, if you cancel your BTO application a second time round. Unless you can give HDB a good reason, cancelling your application twice will cause them to revoke your First-Timer Applicant priority, for a period of 12 months.

During those 12 months, unlike other first-timers, you won’t get two ballot chances instead of one; nor will you get additional ballot chances if you’re unsuccessful. You may also lose your eligibility for staggered down payment (see below). 

2. Securing the Option

Securing the Option to buy the flat requires a non-refundable fee. The amount is:

• Two-room or smaller flats: $500
• Three-room flats: $1,000
• Any larger flats: $2,000

If you cancel after securing the Option, you will lose the Option fee. In addition, you won’t be allowed to apply for a flat again for the next 12 months. This includes Executive Condominiums (ECs) and resale flats (with CPF housing grants).

So if you back out at stage one, you lose $10 (and first-timer priority if for some reason you did it twice). Back out at stage two, and you’ll lose the Option money, plus you can’t apply again for a year; that’s rough, but not as bad as if you take it further. 

But James had gone past these two stages, and signed the Agreement for Lease.

Signing the Agreement for Lease usually comes within four months of the initial flat booking. 

At this stage, you’ll also make the required down payment. Assuming you get full financing (from an HDB loan), the down payment is 10 per cent of the flat price*. Some flat owners, such as first-timer couples, may be eligible to use a Staggered Downpayment Scheme: this simply means you pay five per cent of the downpayment at this point, and pay the remaining five per cent at key collection. 

In addition, the Buyers Stamp Duty (BSD) is payable within 14 days of signing the agreement also payable at this time, along with any conveyancing fees. The BSD is:

• One per cent of the first $180,000
• Two per cent of the next $180,000
• Three per cent of the next $640,000
• Four per cent of any subsequent amount

So in this case for a $399,000 flat, for example, a BSD of $6,570 is payable. 

As for conveyancing fees, it’s:

• 90 cents per $1000 for the first $30,000
• 72 cents per $1000 for the next $30,000
• 60 cents per $1000 for any subsequent amount

The minimum fee is $20. On average, most buyers will pay between $200 to $300, for the purchase of a BTO flat.

Backing out of the BTO flat purchase at this stage is costly, but sometimes unavoidable:

“Life happened and the relationship died,” James said, “So in mid-2019, we decided the best course of action was to cancel the application and forfeit the down payment we made.”

The cancellation process, at least, was quick:

 “If anything, alcohol and drowning myself in work helped. But really, the cancellation was pretty simple. We co-signed the cancellation form that HDB provided and that was it. Eat Drink Man Woman (EDMW) gave some helpful tips too, although most of it was outdated information.”

HDB policies do change over time; whether it’s buying, selling, or cancelling your flat application, the process is probably quite different from a few years ago. Drop us a message on Facebook, we can provide the latest details to help.

James sent in the cancellation form on October 2019, and just one week later, the sales representative of the BTO project called to confirm the cancellation.

*For bank loans, the down payment is 25 per cent. Note that HDB is not obliged to give you the full loan amount; factors such as bad credit can result in a higher down payment being required.

Had James received any grants, such as the Family Grant or Proximity Housing Grant, these would also need to be refunded. 

Had James received any grants, such as the Enhanced Housing Grant, these would also need to be refunded.

HDB will inform you of the amount to be returned. Note that the refunded amount will be slightly higher than the actual grant received, to account for interest. 

Backing out after signing the Agreement for Lease, but before key collection, means you’ll forfeit five per cent of the flats’s price. In the case of James, this means surrendering $19,950.

Had he taken any grants, he would also have had to repay them with interest.

Transferring ownership to try and salvage the transaction 

“I did try requesting for a transfer / change of co-applicant to my mother,” James says, “Ultimately my request was denied, because we initially applied for the flat under the Fiancé / Fiancée scheme. Boo to HDB!”

It was a good idea though. Property agents we consulted said such transfers are indeed possible with HDB’s approval – and it is one way to salvage the flat purchase. Had James applied for the flat under the Public scheme, there’s a better chance it could have been approved. However, James’ request was denied in this case.

Recovering as much of the costs as possible

HDB isn’t totally unsympathetic to your life’s changes. If you explain your situation, they can help minimise the financial damage of backing out. 

“I lost the down payment, obviously,” James said, “But the stamp duties and Option fees were returned through HDB’s help.”

(Note that for stamp duty refunds, you have to apply to IRAS)

The stamp duties (paid with CPF) and Option fee (paid in cash) were refunded accordingly. While overshadowed by the loss of the down payment, it’s at least better than nothing. 

James lost two other things besides this: 

The first was what he considered to be a good BTO flat location. If you happen to get a flat in a “hot” mature estate and reject it, chances are good you won’t have a second shot (time to look at the resale market).

Second, he would have lost his first-timer priority for a period of 12 months. This would make it harder to successfully ballot for HDB properties in that time (including ECs, resale flats, and so forth). James cannot apply or be included as an essential occupier for a:

• New HDB flat
• DBSS flat from developers
• Executive Condominium unit from the developers
• Resale flat with CPF Housing Grant
• Resale flat that has been announced for SERS

for a period of 12 months.

*HDB has clarified that the forfeiture is five per cent of the flat’s price.

**The Option fee is refunded once the down payment is made, so there’s no need to appeal for it specifically

James feels there are some areas where HDB could improve the BTO application process.

“There should be more flexibility when it comes to transfer of flat ownership,” he notes, “Between the time of the BTO launch to completion, lots of things could happen; such as break-ups or even deaths.

HDB should try and accommodate change from applicants, or at least offer support on a case-by-case basis.”

As such, James advises that:

“Three or four years is usually the minimum waiting period for a BTO project to be completed. If your relationship has been rock steady from the start, and you both feel like nothing’s gonna change, good for you – start planning for a baby and the cash bonuses. Otherwise, don’t be pressured by your peers into applying for a BTO just because they’re doing it.

Ps. To university kids applying for BTO even before they graduate, sometimes with their parents’ money…stop stealing spots from us poor peasants!” 

As backing out can be costly and time-consuming, do pay attention to your finances as well as your relationship. 

It can be easy to lose sight of the mortgage, especially if you pay nothing upfront (the full down payment is covered by CPF), and you also service the flat loan with your CPF. 

However, it’s ideal to have an emergency fund, which can pay the mortgage for at least six months if something goes wrong. Do work out the impact on your cash flow and budget, before going ahead. 

Illustrations by: Xiu Ying