The option fee is small in absolute terms next to the rest of a property transaction, but it is the first real money on the table, and understanding its terms avoids losing it unnecessarily.
Private resale: 1% then 4%
For a private resale purchase, the option fee is 1% of the purchase price, paid by cheque to the seller on the day the OTP is granted. You then have 14 calendar days to exercise the option, paying a further 4%, for a total of 5% before completion. The seller cannot sell to anyone else while your option is live.
HDB resale: capped fees, longer window
For an HDB resale flat, the option fee is negotiated between buyer and seller from as low as $1 up to a maximum of $1,000, and the exercise fee, due when you exercise within 21 calendar days, is negotiated up to a combined cap of $5,000 for both fees together. HDB's process also requires a valid HFE letter before the seller can grant the OTP at all.
What happens if you don't exercise
If you choose not to proceed, you simply let the option lapse at the end of its period. The seller keeps the option fee as compensation for taking the property off the market during the exclusivity window; you cannot recover it. Common reasons buyers let an OTP lapse include financing falling through, a low bank valuation, or a material defect discovered during the option period.
Common mistakes to avoid
Paying the option fee before securing in principle loan approval is the costliest mistake, if the bank later declines, you lose the fee with nothing to show for it. Waiting until late in the option period to engage a lawyer or request a CPF withdrawal, which can take 2 to 5 working days to process, is the second most common way buyers run out of runway.
Frequently asked questions
Do I get my option fee back if my loan is rejected before I exercise?
No. The option fee is non refundable once paid, regardless of the reason you do not exercise, including a rejected loan. This is exactly why securing in principle approval before paying the option fee is worth doing first.
Is the option fee the same as the deposit?
For HDB, the option fee and the deposit paid on exercise are capped together at $5,000; for private resale, the option fee, 1%, and the exercise payment, 4%, together make up the standard 5% deposit before completion.
Can the option period be extended?
For private resale, the buyer and seller can mutually agree to extend the 14 day option period. For HDB resale, the 21 day option period cannot be extended; if it lapses without exercise, the transaction falls through and the fee is forfeited.
About to pay an option fee?
Winfred checks your financing is confirmed before you commit a single dollar, so the option fee is never money paid on a deal that can't complete.
Book a free 30 minute callWinfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is for general information only and does not constitute financial, investment, or legal advice. Rates and rules reflect the position as at 5 Aug 2026; verify current figures with IRAS, HDB, or MAS before making any decision.