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Why do you need a lawyer in the home financing process?

Why do you need a lawyer in the home financing process?

  • 25 April 2018
  • Hin Tat Augustine & Partners

The important role of your lawyers during the home purchase and financing process.

To complete the home purchase process, you will need to consult a lawyer before you commit to any contract and make any payments. There are slight differences in the process depending on whether you’re purchasing a private residential completed property or a residential property under construction. The information here is on the assumption that the buyer is a Singaporean.

Option to Purchase

Once you have decided on the property you wish to purchase, you will usually be given an Option to Purchase (OTP) by the estate agent, or if no estate agent is involved (or in the case of a property still under construction), by the seller of the property, also known as the vendor.

The OTP is a contract that formally sets out the terms and conditions of your purchase, including the determined price of the property.

The Option Fee

Upon receiving the OTP, you will be required to pay an Option Fee, or OTP Fee. This grants you a short window of time, called the Option Period, during which you can make the final decision as to whether or not you wish to finalise the transaction and go ahead with the property purchase. The Option Period usually lasts for about two to three weeks.

The amount payable at this stage differs for completed properties and an under construction property.

In the case of a completed private residential property, you will normally be required to pay about 1% of the Purchase Price as the OTP Fee. During this Option Period, you are not allowed to offer the property for sale to any other person.

For a property under construction, you will normally be provided with a payment schedule in which payments are to be made at various intervals according to the progress of the development. You will be required to immediately pay an amount equivalent to no less than 5% but no more than 10% of the Purchase Price as the Booking Fee.

Paying the deposit

Should you decide to proceed with the purchase of the property within the Option Period, the next step would be to exercise the Option and pay a deposit on the property.

In the case of a completed property, you will be required to pay an additional 4% of the purchase price. This acts as the balance Deposit, which will be held by the law firm as stakeholders.

You should accordingly hand the OTP to your lawyers to enable them to exercise the OTP on your behalf. This must be done before the expiration of the Option Period and you should therefore consult your lawyers in good time.

If you are purchasing an under construction property, you will be provided with a Sales & Purchase Agreement (the SPA) for signing. This is a standard prescribed document and cannot be amended.

In this case, the Option Period lasts 21 days from the receipt of the SPA. To purchase the property, you should return the signed SPA to the vendor’s lawyer. You should accordingly hand the OTP and SPA to your lawyers to enable them to exercise the OTP on your behalf. The vendor’s lawyers will then send you (or your lawyer) the countersigned SPA.

You will then be required to pay an additional 15% of the Purchase Price. Together with the Booking Fee paid earlier, this totals 20% of the Purchase Price and acts as the Deposit. Payment on the Deposit must be made within 8 weeks from the date at which you exercised the OTP.

Completion of Property Purchase

The OTP also states the Completion Date of your purchase of the property, which is normally between 8 to 10 weeks from the date the OTP was exercised by you.

As in the case of a completed property, you will have to make payment on the remaining 95% of the Purchase Price in exchange for the title deed and the transfer of the property to your name.

For a property under construction, the vendor’s lawyers will send various notices to your lawyers to pay the remaining amounts as stated in the payment schedule mentioned earlier. Upon receiving the Notice of Vacant Possession, and making payment within the time specified, you may collect the keys to your property from the Vendor.

A bank loan secured by a mortgage over the property can be taken out to finance your purchase of the property. Your CPF savings can also be used. Your lawyers handling your purchase will typically make arrangements for the Mortgage and CPF documents to be finalised for your execution.

On completion of your purchase, your solicitors will ensure that all remaining funds are released to the relevant parties so that you get a clean title with the transfer of the property in your favour and have all documents registered with the Singapore Land Authority.

Steps your lawyers will adopt on your behalf:
  1. A title search to ensure the title of the property is in order, that there are no encumbrances on the property and that the Vendor is the owner of the property.

  2. Ensure that you pay the required Stamp Duty within the statutory deadlines

  3. If a mortgage loan or CPF savings are intended to be utilised to finance the purchase of your property, your solicitors will liaise with the Bank or their solicitors and the CPF Board or their solicitors


The information provided herein has been provided by third party source(s) and is for general information only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person, and does not constitute an offer or solicitation by OCBC Bank to provide loan or financing to any particular person or to enter into a transaction. You rely on the content herein at your own risk.

No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank. All information presented is subject to change without notice. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein. Any reference to any specific entity, authority, area, figures, property or asset class in whatever way is used for illustrative purposes only and does not constitute a recommendation on the same.