Buying a property in Singapore whether HDB or private, almost always begins with an Option to Purchase (OTP). It is one of the most important documents in the buying process, yet many buyers misunderstand how it works, what the option fee really means, and under what circumstances the OTP can be forfeited. Every year, countless would-be homeowners end up losing their OTP fees simply because they exercised the option too late, failed to secure financing, or misunderstood their obligations.

In 2026, with competitive bank loan packages and stricter stress-test rules, buyers must be even more vigilant. This guide explains everything you need to know about the OTP, how to avoid costly mistakes, and the steps you must take the moment an OTP is issued to protect your interest and your money.

1. What Is an Option to Purchase (OTP)?

An OTP is a legal contract between a seller and a buyer that gives the buyer the exclusive right to purchase the property within a fixed time frame. Once issued, the seller cannot sell the property to anyone else until the OTP expires. The buyer, however, is not obliged to proceed unless they choose to exercise it.

The OTP essentially functions as a reservation right: for a small fee, the buyer “locks in” the property price for a limited window. But with this right comes a risk, if the buyer fails to exercise the OTP within the stipulated deadline, the OTP lapses and the option fee is forfeited.

Because of this, understanding how OTP rules differ between HDB and private properties is crucial.

2. HDB OTP Explained: Fees, Deadlines & Common Pitfalls

HDB resale transactions use a standard OTP form, and the rules surrounding the option fee are tightly regulated, unlike private transactions where terms can be negotiated.

A. HDB OTP Option Fee (Usually $1,000)

When a buyer wants to secure an HDB resale flat, they pay an Option Fee to the seller. This is usually:

• $1,000, although some sellers may accept a token $1
  
• The fee is paid in cash only (CPF cannot be used for paying option and exercise fee)
  
  

This Option Fee is part of the total $5,000 cash downpayment cap allowed under HDB rules. HDB limits how much cash sellers can collect upfront:

• Option Fee: up to $1,000
  
• Exercise Fee: up to $4,000
  
• Total cash collected upfront: capped at $5,000
  
  

This $5,000 forms part of the minimum cash downpayment for buyers taking a bank loan.

B. HDB OTP Validity Period: Usually 21 Days

HDB OTPs generally expire 3 weeks (21 days) from the date of issue. The buyer must exercise the option before 4pm on the expiry date.

If the OTP is not exercised, it lapses automatically, and the buyer forfeits the Option Fee.

C. Exercising the HDB OTP

To exercise the OTP, the buyer signs the acceptance section and pays the Exercise Fee (up to $4,000). Combined with the Option Fee, this brings the maximum upfront payment to $5,000.

Once exercised, both parties are legally committed to completing the transaction.

D. Why Buyers Lose Their HDB OTP Fee

The most common reason for forfeiture is simple:
The buyer paid the Option Fee without checking loan eligibility first.

Many buyers assume their loan will be approved because of previous estimates or online calculators. But bank loan approvals depend on:

• TDSR/MSR
  
• 4% stress test
  
• Existing liabilities
  
• Age and tenure
  
• Credit Bureau records
  
• Variable income discounts
  
  

If the bank rejects the loan, the buyer cannot proceed and the Option Fee is lost.

Another common issue is buyers needing more time to gather documents, select a law firm, or decide on loan packages, resulting in unnecessary delays near the expiry date.

3. Private Property OTP: Higher Stakes & Negotiable Terms

Private properties do not use the HDB OTP format. Developers and sellers follow contractual templates, but the terms can be adjusted based on negotiation.

A. Standard OTP Terms for Private Properties

• 1% Option Fee payable upfront (cash only)
  
• 14-day OTP validity period (standard for resale condos)
  
• Upon exercising, buyer pays another 4% exercise fee
  
• Standard completion is 8 to 10 weeks after exercise
  
  

This means that buyers typically pay 5% of the purchase price (1% + 4%) by the time the OTP is exercised.

This 5% forms part of the total 25% minimum downpayment for bank loans.

B. When Sellers Demand a Higher OTP Fee (“Extended OTP”)

Although 1% is standard, sellers may sometimes request a higher option fee, especially when buyers ask for:

• Longer OTP validity (e.g., 1 month, 3 months, or even 1 year)
  
• Delayed completion
  
• Complex timeline coordination (e.g., tied to another purchase or sale)
  
  

Extended OTPs expose sellers to higher risk, if the buyer backs out months later, the seller loses time and market opportunity. To protect themselves, sellers may request:

• Up to 5% OTP fee
• Non-refundable terms
  
  

This is entirely legal and based on mutual agreement.

C. Common Reasons Private OTPs Are Forfeited

• Buyer cannot secure loan approval
  
• Buyer attempts to renegotiate price
  
• Buyer changes mind near the deadline
  
• Buyer’s credit situation changes (e.g., late payment reflected in CBS)
  
• Buyer delays due to miscommunication with lawyers or agents
  
  

Because the OTP fee for private property is much larger (1% of property price), forfeiture can be devastating.

Example:
A $1.5M property = $15,000 OTP forfeited.

4. Key Differences Between HDB OTP and Private Property OTP

Because of the higher sums involved, buyers must be extremely careful before paying the private OTP fee.

5. How to Avoid Losing Your OTP Fee (HDB or Private)

Losing an OTP fee is 100% avoidable if buyers take the right steps early.

A. Always Get Loan Approval or IPA BEFORE Paying OTP

This is the #1 rule and the most frequently ignored.

An IPA (In-Principle Approval) is not just a guess; it:

• Confirms the maximum loan you can borrow
  
• Accounts for your credit history
  
• Includes stress test calculations
  
• Gives buyers peace of mind to commit safely
  
  

Fairloan routinely handles IPA checks for buyers before they commit to any OTP.

B. Check Your Credit Bureau Report (CBS) First

Loan approvals depend heavily on your CBS report. Issues such as:

• Recent late payments
  
• High utilisation of credit
  
• New credit facilities
  
• Short credit history
  
  

All these can reduce your loan amount or cause rejection.

C. Arrange Conveyancing Lawyer in Advance

Many buyers scramble to find a law firm after receiving OTP, wasting precious time. Secure a law firm early so they can:

• Verify OTP terms
  
• Advise on completion timeline
  
• Prepare exercise documents
  
• Coordinate with the bank for the Letter of Offer (LO)
  
  

D. Review Loan Packages Quickly

During OTP validity, the buyer must:

• Compare fixed vs floating rates
  
• Obtain Loan Letter of Offer
  
• Confirm bank valuation
  
• Lock in rates and terms
  
  

Banks need time to prepare LO documentation. Leaving it too late risks missing the OTP exercise deadline.

E. Avoid Making Big Credit Moves During OTP Period

Do NOT:

• Buy a car
  
• Take new credit lines
  
• Miss any bills
  
• Make large, unexplained transactions
  
  

Banks may re-evaluate your profile before final approval.

F. If You Need More Time, Ask for an Extension (Before Expiry)

Extensions are:

• Common for private property
  
• Rare but possible for HDB (seller must agree, but new OTP is issued)
  
  

Once the OTP expires, nothing can be done.

6. What You Must Do Immediately After OTP Is Issued

The countdown begins the moment the seller signs the OTP.

Day 0 or before paying Option Fee: Confirm Financing

• Finalise IPA
  
• Confirm maximum loan

Day 1-2: Confirm Interest rates 

• Compare and choose bank with best rates
• Compare fixed, floating, hybrid SORA rates
  
• Request for valuation if needed
  
  

Day 2-5: Choose Law Firm

• Provide OTP copy
  
• Lawyer reviews terms
  
• Lawyer contacts bank for LO coordination
  

Day 5-10: Accepting Loan Package

• Loan acceptance
  
• Review T&Cs
  
  

Day 10 -13: Prepare for Exercise

• Lawyer prepares acceptance
  
• Confirm cash/CPF for exercise fee
  
• Fix dates for completion
  
  

Day 14 (Private) or Day 21 (HDB): Exercise OTP

Once exercised, the sale is locked in.
Do not wait until the last day.

7. Special Situations Buyers Should Know

A. Buyers Upgrading or Selling Their Existing Property

If your sale timeline is uncertain, avoid committing to short OTP periods.

Longer OTP = higher OTP fee requested by seller.

B. Buyers Using Complex Income (Commission, Self-Employed, Bonus)

Banks vary widely in approving such profiles.

Getting the loan wrong increases forfeiture risk.

C. Buyers With High Liabilities

Car loans, credit cards, or BNPL instalments can affect MSR/TDSR.

Always declare liabilities truthfully.

Conclusion: OTP Is Simple. But Losing It Is Costly and Preventable

The Option to Purchase is meant to protect buyers, not trap them. But when buyers rush into paying OTP fees without securing financing or legal advice, they expose themselves to unnecessary financial losses. HDB OTP forfeitures are small, usually $1,000 but private property OTP losses can exceed tens of thousands of dollars.

The safest strategy is straightforward:
Never commit to an OTP without first securing loan approval and legal clarity.

At Fairloan, we will assist client to oversee the whole process, ensuring all steps are followed.

We review your loan eligibility, explain the OTP timeline, compare rates across all major banks and help coordinate with your lawyers, ensuring that buyers never lose their OTP due to avoidable mistakes.