5 Steps Before Exercising the OTP

There’s plenty of things you need to consider before exercising the option to purchase. Here is our handy guide that will ensure you put that 21-day window to good use that covers everything from renovation budgeting to surveying the resale market.
28 Feb 2019 Language: English

This is it! You have found your ideal home, paid the Option Fee to reserve it and now you have 21 days before you exercise the Option to Purchase (OTP).

Have you ever wondered why the HDB doesn’t allow you to make a lightning-fast execution in purchasing a home? The 21 days is actually backed by science as it is the minimum amount of time needed to adapt to a new change and to carefully ponder if you’re making an informed decision.

So what do you do in those crucial 3 weeks?

1. Submit a Valuation Report

Determine the value of your flat by submitting a home valuation request to the HDB. Finding out the value of the buyer’s flat is compulsory for both HDB and bank home loan applications and serves as a basis for the buyer’s CPF usage. Not sure where to start? Refer to the handy Ohmyhome in-app buyer’s journey for a step-by-step guide through the whole home buying process.

2. Lock in an ideal home loan package

Set aside the first week to find the best home loan package that fits your needs. This may depend on your savings, debt, income, etc. Once you’ve found one, that’s when you need to act fast to get that loan approval before the 21 days are up. Other things to keep in consideration: the loan’s downpayment, monthly installments (are they affordable?) and if a fixed rate or variable rate home loan is right for you.

Ohmyhome has a free mortgage advisory service to find you the most suitable home loan package across all banks.

3. Secure your cash for upfront payments

Once the deal goes through, you’re gonna need to make a bunch of payments to secure your dream home and ensure a smooth resale transaction. Some payments to prepare for when you sign your Agreement for Lease are:

  • Buyer’s Stamp Duty
  • Legal Fees
  • Agent Fees
  • Fire Insurance
  • Exercise Fee (cap of $5,000 minus the Option Fee amount)
  • Downpayment (this can be paid off partly using CPF)
  • Renovation Costs

Now, this leads us to the next step!

4. Research on renovation costs and providers

Set aside a realistic renovation budget. Now, this is when need trumps over want. Banks tend to dangle renovation loans right after you’ve signed up for a home loan with them. Be sure to stick to your guns and exercise prudence - even if that marble kitchen island is so pretty. Aside from the monthly installments, is the renovation loan payment feasible?

5. Survey the resale market

You have 3 weeks to carefully consider whether you’ve chosen the right home to invest in. After all, such a hefty chunk of investment warrants a lot of careful consideration and soul searching. Be on the safe side by monitoring the resale market (if you’re looking at buying a resale flat) and see if that flat you’re eyeing on is really the most suitable one for you and your family. Other things to take note of are location, amenities, accessibility, etc.

Buying a home should not be based on impulse, hence, there’s an option period. May these steps enlighten you before making that biggest investment of your life.

Now, what happens should you decide not to proceed with the purchase? If you don’t exercise the OTP before the 21 days are up, your Option Fee goes down the drain. You are required to inform the seller that you do not want to proceed with the purchase of the flat and allow the OTP to lapse. Then, you start over again with your home search .

Need help deciding between a fixed rate or variable home loan package? Ask our Mortgage Specialist for free! Call 9755 9103 now.

Sources: HDB, DBS

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