BTO Downpayment And Option Fee Explained Simply

Last updated on July 21st, 2022

The downpayment is the first financial hurdle you’ll face when purchasing a BTO flat.

However, how much do you actually need to pay, and when do you have to pay it by?

Here’s everything you need to know:

How much do I need to pay for my BTO downpayment?

The amount of downpayment that you need to pay depends on the type of loan you are taking. If you are taking an HDB loan, the downpayment is 15% of your purchase price. The downpayment will be 25% if you are taking a bank loan, where at least 5% must be in cash.

UPDATE: the requirement for the downpayment has been increased to 15% if you take a HDB loan after 16 December 2021.

Here is the downpayment that you’ll need to pay, depending on the type of loan that you take:

Type of Loan	Downpayment	Additional Payment During Key Collection
HDB Loan / Not taking any loan	10% of purchase price (Cash or CPF)	5% (Cash or CPF)
Bank Loan (Loan Ceiling of 75%)	20% (minimum 5% Cash, remaining can be Cash or OA)	5% (Cash or CPF)
Bank Loan (Loan Ceiling of 55%)	20% (minimum 10% Cash, remaining can be Cash or OA)	25% (Cash or CPF)

This is slightly different compared to the amounts that you’ll need to pay upfront for a resale flat.

The additional payments when you take a bank loan are to make up for the maximum loan ceiling that you can take.

For example a loan with a ceiling of 75% means you have to pay 25% in cash or CPF.

Since you’ve already paid 20% via the downpayment, you’ll still need to pay 5% to make up to the 25%.

Let’s go through each of these scenarios one by one:

#1 HDB loan / not taking any loan

When you take a HDB loan, you can borrow up to 85% of your flat’s value.

This means that you’ll only need to pay 15% of your flat’s value as downpayment.

This is the most affordable option if you do not have enough savings to buy a flat. Moreover, you can use your CPF OA to pay for your entire downpayment!

However, the higher the loan amount you take, the higher interest you’ll need to pay!

#2 Bank loan (with ceiling of 75%)

When you take this bank loan, you will need to pay 25% of your flat’s value as your downpayment.

These loans have a maximum tenure of 25 years.

You will need to pay 20% when you sign the Agreement for Lease.

Of this 20%, a minimum of 5% of your flat’s value has to be paid in cash. The remaining 15% can be paid in either cash or CPF.

The last 5% that you need to pay when collecting your keys can be paid in either cash or CPF.

#3 Bank loan (with ceiling of 55%)

When you take this loan, you can have a maximum tenure of 30 years. This is 5 years longer compared to a bank loan with a ceiling of 75%.

Due to this longer tenure, the bank requires you to pay at least 45% of your flat’s value as downpayment.

Similar to the bank loan with a ceiling of 75%, you’ll need to pay 20% of your flat’s value when you sign your Agreement for Lease.

With this downpayment, you’ll need to pay at least 10% of your flat value in cash. The remaining 10% can be paid in either cash or CPF.

When you collect your keys, you can pay the remaining 25% in either cash or CPF.

If you take this loan, it is the least flexible as you’ll need to pay at least 10% in cash. Moreover, you’ll need to pay the largest sum (45%) as your downpayment!

Can I pay my BTO downpayment with CPF?

You can use funds entirely from your CPF OA account to pay for your BTO downpayment if you are taking a HDB loan. If you are taking a bank loan, you may have to pay between 25% to 45% of the downpayment in cash. The remainder can be paid using your CPF funds.

When do I need to pay the downpayment for my BTO?

You are required to pay the downpayment when you sign the Agreement for Lease. This usually occurs around 5 months after the BTO application period closes. If you are eligible for the Staggered Downpayment Scheme, you’ll only need to pay half your downpayment when signing the Agreement.

Here is the estimated timeline for each major milestone in your BTO application:

Milestone	Time Period
Flat Sales Launch	Every quarter (i.e. every 3 months)
Application Period	1 week
Outcome of Ballot	3 weeks
Booking of Flat	~ 3 months after Ballot Outcome
Signing Agreement for Lease	6 months
Key Collection	3 years

The flat sales launch occurs every quarter, in these months:

1. February
2. May
3. August
4. November

So depending on the month that you apply for your flat, it will take roughly 9 months before you need to sign the Agreement for Lease.

This is something you’ll need to consider when you are saving up for your downpayment.

However, you may not need to pay the entire downpayment during the signing of the Agreement of Lease!

This is because you can actually space out your downpayment via HDB’s Staggered Downpayment Scheme.

What is the Staggered Downpayment Scheme?

The Staggered Downpayment Scheme allows you to split your downpayment into two periods: when you sign your Agreement for Lease, and when you collect your keys. This helps to reduce the amount that you need to pay upfront when you are signing the Agreement for Lease.

Here are the rates that you’ll need to pay, depending on the type of loan that you take:

	Signing of Agreement for Lease	Collection of Keys
HDB Loan / Not taking any loan	5% (Cash or OA)	10% (Cash or OA)
Bank Loan (Loan Ceiling of 75%)	10% (minimum 5% Cash, the remaining can be Cash or OA)	15% (Cash or OA)
Bank Loan (Loan Ceiling of 55%)	10% (Cash only)	35% (Cash or OA)

Let’s go through each of these scenarios one by one:

#1 HDB loan / not taking any loan

When you are taking a HDB loan, you only need to pay 5% of your flat’s value as downpayment when signing your Agreement of Lease.

Moreover, this amount can either be in cash or from your OA.

This is great if you do not have enough funds at hand to pay for your downpayment!

#2 Bank loan (loan ceiling of 75%)

When you take a bank loan with a loan ceiling of 75%, you are required to pay 25% as downpayment.

When you sign your Agreement for Lease, you will need to pay 10% of your flat’s value.

However, you are required to pay a minimum of 5% in cash.

This gives you less flexibility compared to a HDB loan, which allows you to use either cash or OA for your entire amount!

The remaining 5%, as well as the 15% that you need to pay when you collect your keys can be either paid in cash or CPF.

The downpayment that you need to pay for a bank loan is higher compared to a HDB loan (25% vs 10%). Moreover, at least 5% needs to be in cash!

This 5% in cash needs to be something that you plan for when purchasing your BTO.

#3 Bank loan (Loan ceiling of 55%)

When you take this loan, you are required to pay 45% of your flat’s value as the downpayment.

Moreover during the signing of your Agreement for Lease, you will need to pay the entire 10% in cash!

This is stricter compared to the loan with a ceiling of 75%, where you can pay a minimum of 5% with your CPF.

The remaining 35% that you pay when you collect your keys can be either cash or CPF.

As such, planning for this is really important. You’ll need to see if it’s feasible for you to have at least 10% of your flat value in cash, 5 months after you apply for your BTO!

The Staggered Downpayment Scheme reduces the financial stress for you

With this scheme, the initial downpayment (10% or 20%) that you’ll need to pay when you sign the Agreement for Lease is split into half.

This means that you’ll only need to pay 5% or 10% of your flat’s value, depending on the type of loan that you take.

The remaining amount of your downpayment will only need to be paid when you collect your keys.

This is roughly 3 years later, and should give you more than enough time to save up for the rest of your downpayment!

As such, this scheme really reduces the stress of having to save a lot of money for your downpayment!

You should stagger your downpayment even if you can afford to pay it in full

I would encourage you to stagger your downpayment if you are eligible for it. Even if you are able to pay the entire downpayment in full, you should still stagger it out.

This is because it is possible for you to earn some returns during the 3 year period.

For example, you can put your funds in ‘safe’ investments that help to give you rather stable returns.

Some examples include Syfe Cash+ or Endowus Cash Smart.

While these investments are slightly riskier than leaving it in your bank account, the returns are higher as well.

These cash management portfolios will be able to earn you some returns before you pay the remaining downpayment!

How can I be eligible for the Staggered Downpayment Scheme?

There are 2 ways that you can be eligible for the Staggered Downpayment Scheme:

1. First-timer couples
2. Flat owners who right-size to a 3-room or smaller flat in non-mature estates

#1 First-timer couples

You are considered to be a first-timer couple, if you are either:

1. A married couple
2. Applying under the Fiancé / Fiancée Scheme

Moreover, you’ll need to meet these 3 criteria:

1. Booking an uncompleted 5-room flat (or smaller)
2. Both are either first-timer applicants, or a couple consisting of a first-timer and a second-timer applicant
3. The flat application has to be submitted on or before the younger applicant reaches 30 years old

The definition of ‘first-timer applicant‘ means that you have not purchased a subsidised HDB flat before.

#2 Flat owners who right-size to a 3-room or smaller flat in non-mature estates

This mainly applies if you are currently owning a HDB flat, and are looking to shift to a smaller sized home.

You’ll also have to meet these criteria:

1. Book an uncompleted 3-room flat (or smaller) in a non-mature estate
2. You have not sold or completed the sale of their existing flat at the point of new flat application

You’ll need to pay an option fee too

Another cost you’ll need to pay is the option fee when you book your flat!

When you make the appointment to book your flat, you’ll need to produce your income documents for HDB to calculate your income ceiling too.

However, this is actually a part of your downpayment.

Here is an explanation of how this fee works:

What is the BTO option fee?

The option fee is paid when you book your flat. The amount ranges between $500 to $2,000, depending on the flat that you buy. This option fee is part of your downpayment and can only be paid for in cash.

The option fee has to be paid during the stage when you book your flat. This occurs roughly one month after the application period for the BTO has closed.

Here are the fees that you’ll have to pay, depending on the flat type that you choose:

Type of Flat	Option Fee
4- / 5-Room and Executive	$2,000
3-Room	$1,000
2-Room Flexi	$500

If you are buying at least a 4-room flat, you’ll need to have $2k in cash upfront in one month’s time after you apply for a BTO!

This fee can only be paid in cash, and you can’t use your CPF funds.

As such, do make sure that you have enough cash in hand for this fee!

Although it may be a big sum for you, the option fee is forms a part of your downpayment. This means that you’ll have to pay less for your downpayment during the signing of your Agreement for Lease!

Is the option fee part of my downpayment?

The option fee that you pay when booking your flat is considered as part of your downpayment for your BTO flat. If you are taking a HDB loan and are using CPF to pay for your downpayment, the option fee will be reimbursed in cash. If not, it can be used to offset your cash portion of the downpayment.

Still confused? Here are some examples which may make things clearer for you:

#1 You are taking a HDB loan and are using all of your OA funds to pay for it

Let’s say that you buy a 4-room flat which costs $400,000. If you choose to take a HDB loan, your downpayment will be $40,000.

If you choose to pay the entire $40,000 from your OA, the option fee will be refunded to you in cash!

House Value	$400,000
Type of Loan	HDB
Downpayment	$40,000
Type of Funds Used	CPF OA (100%)
Fate of Option Fee	Refunded in cash

This is because you can use your OA funds to pay for your entire downpayment if you take a HDB loan.

#2 You are taking a HDB loan and only pay a part of it using your OA funds

Using the same example, you are taking a HDB loan with a downpayment of $40,000.

However, you decide to keep some of your CPF OA funds to continue earning the high interest rates.

This is because you are able to leave up to $20,000 in your CPF OA when you take a HDB loan.

Let’s say you pay $20,000 of the downpayment with your OA funds. This means that you’ll need to pay $20,000 in cash.

The option fee will be used to offset the $20,000 remaining that you need to pay. As such, you’ll only need to pay $18,000 for your downpayment!

House Value	$400,000
Type of Loan	HDB
Downpayment	$40,000
Type of Funds Used	CPF OA (50%), Cash (50%)
Fate of Option Fee	Offset cash portion by $2,000
Remaining Amount to Pay in Cash	$18,000

#3 You are taking a bank loan

Using the same example, you decide to take a bank loan. For a loan ceiling of 75%, you’ll need to pay $100,000 as your downpayment (25% of flat value).

At least 5% of the total flat value has to be paid in cash. In this case, you’ll need to pay $20,000 minimally in cash!

The remaining $80,000 can be paid in either cash or CPF.

Since you have already paid $2,000 for your option fee, this will be used to offset your cash portion of the downpayment.

As such, you’ll need to pay at least $18,000 in cash.

House Value	$400,000
Type of Loan	Bank
Downpayment	$100,000
Type of Funds Used	CPF OA ($80k), Cash ($20k)
Fate of Option Fee	Offset cash portion by $2,000
Remaining Amount to Pay in Cash	$18,000

The option fee forms a part of your downpayment

The option fee is included in your downpayment. In the event you can’t use the option fee to offset your cost (1st example), it will be refunded to you.

Can I receive a refund for my BTO option fee?

You will receive a refund for your option fee if you use a HDB loan and are paying your entire downpayment with your CPF OA. In all other cases, the option fee will be used to offset the amount of downpayment you’ll need to pay.

However, one thing you’ll need to note is this option fee is non-refundable if you cancel your BTO application!

If you cancel your BTO application after paying the option fee, but before signing the Lease of Agreement, here’s what you’ll forfeit:

1. Application fee ($10)
2. Option fee ($500 – $2,000)
3. Being unable to apply or be included as an essential occupier for HDB flats

However if you cancel your BTO application after signing the Agreement for Lease, the penalty will be much heftier!

Since you have already paid a part of your downpayment when you sign for the Agreement for Lease, you will forfeit at least 5% of the flat’s purchase price.

Conclusion

The option fee and downpayment are the first of many financial hurdles you’ll face when purchasing a new flat.

Moreover, you’ll need to pay both of these fees in the early parts of your BTO application process:

Fee	Estimated Payment Date After End Of BTO Application Period
Option Fee	~ 1 month (booking of flat)
Downpayment (1st part)	~ 9months (signing Agreement for Lease)
Downpayment (2nd part)	~ 3 years and 9 months (collection of key)

As such, you’ll need to plan carefully to see if you are able to afford these fees!

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