What to budget before you ‘BTO’ with would-be spouse

SINGAPORE – Many of us girls are instilled with a specific idea of how a marriage proposal should go: He’ll take us somewhere romantic, get down on one knee, whip out the precious ring and pop the question. It should be magical. 

So, even for the most modern woman among us in Singapore, nothing could be more disappointing if instead of a romantic proposal, he merely utters: “Will you BTO with me?”.

Unromantic as it sounds, “will you BTO with me?” has become a modern symbol of commitment, often doubling as a playful marriage proposal. 

Build-to-Order or BTO flats provide an affordable entry point to property ownership, offering a more accessible option than private properties or resale HDB flats for first-time buyers. 

Government support through programmes like the Enhanced CPF Housing Grant for families have reduced upfront costs and eased financial burdens, making BTO flats particularly attractive to young couples, says Ms Elin Chee, financial services manager at PhillipCapital, an investment and wealth management firm.

Located in well-connected areas with ample amenities, these developments foster vibrant communities ideal for couples and families, she adds.

These considerations led Janice to accept her boyfriend’s proposal to “BTO” with him, even though she was rattled by his practical approach. 

“My friends and I used to roll our eyes when we heard stories of guys who asked their girlfriends to BTO with them in lieu of a marriage proposal. When it happened to me, I didn’t know whether to cry or laugh,” she says.

From a guy’s perspective, a BTO flat is the most affordable option for any young couple looking to start their journey together.

Marcus and Megan met in junior college when they were in their late teens. When Marcus was in his early 20s and during his second year of national service (NS), the couple talked about applying for a BTO flat after hearing their friends share their experience about it. 

“It is more affordable than a resale flat because it is sold directly by the Government and is subsidised,” he notes.

“Seeing how expensive housing is, and how we felt secure in our relationship that we will ultimately get married, we decided to capitalise on it and ‘BTO’ early.” 

By the time the BTO flat is ready next year, Marcus will still be studying and Megan will likely be working, as is often the case for young couples of the same age here due to the mandatory two-year NS for men when they reach 18. 

“This will allow us to qualify for a higher incentive since only one person’s income would be used for assessment,” Marcus says. 

The couple set their eyes on a development in the east, where both their families live. 

“We could capitalise on the Married Child Priority Scheme (MCPS) to get more bidding lots,” Marcus adds. 

The MCPS helps a married child and the parents live with or close to each other for mutual care and support by giving greater assurance when they apply for a flat.

The payment schedule makes it more affordable for the couple based on their financial trajectory, Marcus says. 

Young couples who are still studying or doing NS now fork out even less for the initial down payment for a BTO flat, under changes implemented in June 2024.

They only need to pay an initial down payment equal to 2.5 per cent of the flat’s purchase price, down from 5 per cent under HDB’s Staggered Downpayment Scheme. This applies regardless of whether they take a housing loan from the HDB or a bank. 

So for a couple taking the maximum HDB loan, the full 20 per cent down payment will be split into an initial 2.5 per cent sum – paid on signing the lease agreement – and the remaining 17.5 per cent will be paid when they collect the keys to the flat.

Critical considerations

The waiting period for a BTO flat aligns with engagement and marriage timelines, making it a practical and symbolic choice for couples starting a new chapter together. However, couples should not agree on impulse. 

Preparing for homeownership requires assessing both parties’ financial readiness, including savings, income stability and debt obligations, to ensure they can handle a mortgage.

Ms Chee from Phillip Capital says couples should also consider how rising living costs and homeownership might impact their life­style choices. 

Planning must account for other financial commitments, such as wedding expenses, family support or further education, which can strain budgets. 

Open discussions about balancing these commitments with a mortgage are vital to ensure financial preparedness for a shared future. Long-term compatibility is equally important. 

“Couples should align on financial priorities, lifestyle choices and family planning through clear communication about expectations and responsibilities in homeownership, building a solid foundation for this significant commitment,” says Ms Chee.

While couples are excited about getting married, there are red flags that they may not be ready to BTO together.

A lack of independent financial readiness is a key concern. 

“If both partners rely too heavily on each other’s income and lack sufficient emergency savings, they could struggle to manage a mortgage or cope with unexpected financial setbacks, such as job loss,” Ms Chee notes.

An over-commitment to other financial obligations is another concern. For example, if one or both partners are already heavily burdened by expenses such as student loans or business ventures, it may be difficult to prioritise homeownership. 

Another concern is the absence of a unified and shared timeline. This happens if one partner is eager to purchase a flat quickly while the other prefers to delay.

“It signals mismatched priorities. This can also extend to other life events, such as when to settle down or start a family, which can impact long-term property plans,” Ms Chee says.

Unclear expectations around shared finances can lead to confusion. If the couple have not discussed financial contributions, or how to manage future costs such as home renovations, this lack of clarity can create friction later, she adds.

BTO is a big commitment

If you feel the need to apply for a BTO flat just because of peer pressure or Fomo (fear of missing out), then don’t.

Entering into a commitment to apply for a BTO flat without financial stability poses significant risks. 

One major issue is financial entanglement, as taking on a mortgage before a relationship is fully established can lead to complications later, Ms Chee says. 

Another risk is uneven financial contribution. If one partner bears more financial responsibility due to differing capabilities and unclear agreements, it can cause resentment and long-term tension in the relationship.

Should the relationship end, untangling financial ties can be challenging. Legal processes to divide the property often require one partner to buy out the other or sell the flat, leading to potential financial losses. 

If one partner cannot afford to retain the property, the situation becomes even more complex.

Take a young couple who applied for a BTO flat while both were still studying, hoping to maximise government grants. Without stable jobs, they struggled to manage the down payment and mortgage, leading to stress and eventually having to give up the flat, thus incurring losses.

The case underscores the importance of being financially and emotionally prepared before committing to a BTO application. 

Understanding the process

Once the decision to apply for a BTO flat has been made, the next step is to navigate the purchase process. This entails understanding housing grants and eligibility. 

Couples must ensure they meet the criteria for available housing grants and keep track of application deadlines to maximise financial support.

They should familiarise themselves with terms and conditions like the minimum occupancy period (MOP) to avoid surprises. 

HDB rules stipulate that flat owners cannot sell their flat, rent out the whole unit, apply for another BTO flat or buy private residential property locally or overseas within the flat’s MOP. A breach can result in hefty financial penalties.

The length of the MOP depends on the purchase mode, flat type and date of flat application. For example, the MOP for BTO flats launched from October 2024 ranges from five to 10 years, depending on whether the flat is classified as standard, plus or prime.

Budget planning is also crucial. 

Create a clear budget that includes the down payment, monthly mortgage and additional costs like renovations. 

Joint savings goals can ensure consistent contributions and strengthen financial management. A joint financial plan helps streamline the process. 

Ms Chee says: “Agree on shared responsibilities, such as monthly payments and maintenance costs, to prevent misunderstandings. Opening a joint account for BTO-related expenses can simplify contributions and enhance transparency. 

“Lastly, prepare for potential resale or rental scenarios. Understand relevant policies for changing circumstances, such as relocation or upgrading. Stay updated on market trends to assess resale value and develop exit strategies if needed.” 

Grants and tools

Couples planning to buy an HDB flat can tap various government housing grants and schemes including the Enhanced CPF Housing Grant to reduce financial strain.

Familiarity with HDB schemes and their eligibility criteria is key to maximising these benefits, Ms Chee notes. 

Financial planning tools are also invaluable for assessing affordability and budgeting. Online calculators from HDB, CPF or banks can help couples estimate monthly payments and align budgets. Tools for total debt servicing ratio and mortgage servicing ratio provide insights into financial limits for informed decision-making. 

Consulting financial advisers can further support the process. Services like those offered by PhillipCapital include financial planning to assess financial health and set goals, investment advisory to optimise savings and portfolio management services for long-term wealth building.

Optimising CPF savings is also critical. CPF Ordinary Account savings can reduce cash outflows for housing payments, while the CPF Home Protection Scheme provides insurance coverage for unforeseen income loss, offering financial security throughout homeownership, Ms Chee says.

Risks 

Like in any investment, there are potential risks and long-term financial implications associated with purchasing a home in Singapore’s dynamic real estate market.

A key factor is property value fluctuations.

Economic changes and government policies can cause price volatility, leading to potential losses if home owners need to sell during a downturn or low-demand period. 

Interest rate variability is another concern, especially for floating-rate mortgages. Rising interest rates can increase monthly payments, straining household finances. Buyers should plan for potential rate hikes and maintain a financial buffer to manage additional costs. 

Real estate’s illiquidity is also a challenge. Capital tied up in property cannot be easily accessed without selling, and HDB flats are subject to an MOP, limiting resale options in the initial years and reducing financial flexibility for emergencies. 

Finally, opportunity costs should be considered. Funds invested in property could be directed towards other investments, such as stocks or mutual funds, which might yield higher returns.

“Buyers should weigh the trade-offs between home ownership and alternative wealth-building strategies to align with their financial goals,” Ms Chee says. 

Rent or buy?

Deciding whether to rent or buy a home depends on individual priorities, financial readiness and life­style needs, as both options have benefits suiting different stages of life. 

Buying a home offers stability and long-term financial advantages. Home owners build equity and may benefit from property appreciation over time. 

Ownership also eliminates rental price fluctuations and allows for personalisation through renovations. 

Government grants for first-time HDB flat buyers help to ease the financial burden. 

Owning a property also creates opportunities for future resale or rental income, making it an attractive choice for those with long-term goals. 

Renting, however, provides flexibility and lower upfront costs, and is ideal for individuals prioritising mobility or building savings. 

Renters avoid maintenance responsibilities and are shielded from market risks, offering them financial freedom and adaptability, especially for those not ready for long-term commitments. 

Priorities can evolve over time, Ms Chee notes.

One of her clients chose renting in his 30s for its flexibility, moving between upscale properties that suited his lifestyle and career focus. However, after starting a family, his priorities shifted towards stability and legacy building. By his 50s, he had purchased an HDB flat, securing a permanent home for his family’s future. 

Ultimately, understanding personal needs is key to making the right decision. Here’s wishing all couples a beautiful love story that continues to unfold as they embark on their BTO journey!