Do you intend to buy a house? Getting a home isn’t cheap, especially in Singapore. But how do you go about it? We’ve summarised the essential criteria and answers for you, whether you’re looking at a BTO, resale flat, or private property.
Understand what you’re eligible to buy
Properties in Singapore fall into one of these 3 types:
- Public housing: HDB flats
- Hybrid of public-private housing: Executive condominiums (ECs)
- Private property: private condominiums, apartments, landed housing
If you’re planning to purchase an HDB flat, to find out if you are eligible for an HDB loan and the maximum amount you can borrow, you will need to apply for an HDB Loan Eligibility (HLE) letter.
The HLE helps you plan for your home purchase by giving you information on how much you can borrow, the monthly repayments, the amount of cash you need and other terms and conditions.
Note: An HDB loan comes with certain eligibility criteria such as an income ceiling. Check if you qualify.
Or you might be most interested in the investment potential of private property. If so, be prepared to have a bigger budget because they are more expensive due to:
- No 5-year minimum occupancy period (MOP)
- No resale levy
- No ethnic quota
- Presence of facilities such as swimming pool, gym, BBQ pits in the condominiums
- Can be sold to non-Singaporeans/PRs – better marketability
- Choose a home based on what you can afford in terms of upfront and ongoing payments.
- If you are buying an HDB flat, you may qualify for an HDB loan.
- How much you can borrow will depend on your lender’s assessment and rules such as the total debt servicing ratio (TDSR) and loan-to-value (LTV) limit.
How much does a home cost in Singapore?
A home in Singapore will vary in price depending on many factors, such as the maturity of the estate, proximity to amenities, type and age of the property, and the condition of the unit.
Because the government subsidises HDB properties, they are the most affordable type of housing available. The average cost of an HDB property listing is S$532,768 or S$507 per square foot. Smaller flats, such as 2 and 3-room flats, typically cost between S$300,000 and S$450,000. Medium-sized 4-room HDB flats are considerably pricier, costing 34% more than 2 and 3-room flats. However, if you want to upgrade to a larger HDB flat like a 5-room or executive flat, you can expect to pay 20-44% more.
The mentioned above are only for HDB flats. Many Singaporeans dream of upgrading or living in a condominium or more luxurious accommodations. Such accommodations are usually much more expensive.
What you need to know about financing your home
Buying a home is a big financial commitment that requires careful planning. It must meet the needs of you and your family now and in the future. With this in mind, consider what’s necessary and what you’d like to have.
Before looking for a home to buy:
What you can afford depends on your income, expenses, debts and savings, as well as the amount you may be eligible to borrow. You’ll need to make some upfront payments and keep up with monthly housing loan instalments and other recurring charges.
Some of the costs you should consider include:
You pay the option fee to reserve the property of your choice. The tables below show the option fees for the various housing types, all payable in cash. If you choose not to exercise the option, you must be prepared to forfeit the option fee paid.
How much downpayment you have to pay in cash or from your CPF savings depends on:
- The value and type of property.
- Whether you have an existing housing loan and the tenure of the new loan (capped at 25 years for HDB flats and 30 years for private properties).
- The loan-to-value (LTV) limit (loan ceiling) of the property.
In order for the bank to release funds for you to purchase the property you are interested in, a valuation must be performed. The fee on this will vary depending on the value of the property. It usually costs a few hundred bucks.
These are legal fees charged by the legal firms for any work done. These often start from S$1,800.
Buyer’s stamp duty
This is a tax that you pay on the Sales and Purchase Agreements (S&P) or Option to Purchase (OTP). The amount you pay is a percentage of the market price of the property, or the price at which you purchase it (whichever is higher).
Additional buyer’s stamp duty (for a second and subsequent property if you’re a Singapore Citizen)
This was introduced for residential properties. It is paid in addition to the existing buyer stamp duty. However, not all property buyers pay this stamp duty. For example, if you are a Singaporean citizen and are buying your first property, you won’t be charged this duty. However, you will be charged 12% on the property purchase price if it is your second property.
Agent’s commission and fees
You will have to factor the agent’s fee into the purchase price if you hired a property agent to help you purchase the property. This commission is usually 1% of the price you purchased the property at. 1% is going to cost quite a bit as it is based on the price of your property.
In addition to your monthly home loan repayments, you’ll also want to budget for other recurring costs that come with owning a home. These include:
Maintenance, conservancy charges and utilities
HDB homeowners pay monthly service and conservancy charges to their town councils for maintaining their housing estates. You pay a higher fee for a larger flat. Owners of private properties such as condominiums and apartments typically pay monthly maintenance fees. Utility charges (power, water and gas) depend on their usage.
The property tax payable annually is computed based on a percentage of the annual value of the property. The annual value is the estimated annual rent that your property can fetch, regardless of whether you rent it out or not. Find out more about property tax from the IRAS website. You pay lower property tax if you live in the property you own, compared to if you rent out your property.
For HDB flats
If you’re buying an HDB flat and using your CPF savings to pay your monthly instalments, you must be insured under the CPF’s Home Protection Scheme.
This insurance scheme protects you and your family against losing your home should you become permanently disabled, or pass away before the housing loan is paid up.
Even if you’re not using your CPF monto pay for your monthly instalments, you’re still encouraged to be insured under the Home Protection Scheme. You can use your CPF monies to pay for this.
For private properties
A mortgage reducing term insurance protects your dependants if you (the borrower) should pass away or become permanently disabled and can no longer service the loan.
If your property is mortgaged to a bank, you may be required to take up a mortgagee interest policy.
For peace of mind, it’s a good idea to insure your home against fire and other perils. The cost of such insurance is generally low relative to the potential loss. Some policies, like fire insurance and mortgagee interest policies, may be required by your bank. Here’s a comparison of the different types of home insurance and what they are for:
Finally, work out the cost of renovations and furnishing
Many contractors or interior designers will quote you around $65,000 to renovate a resale HDB flat. The cost of renovating a resale flat is typically more expensive than renovating a BTO. If you want to take out a loan for renovations, the interest rate is usually in the range of 5% per annum – you should compare between banks for the lowest rate.
Do you think you’re ready to buy a home? Here are some key takeaways:
Have an emergency fund
Do you have insurance or investments? Great! But that’s not going to help if you need immediately accessible cash. Having an emergency fund means putting aside 3 – 6 months worth of income for such emergencies. It’s also a sign that you’re ready to buy your home.
Have Approval in Principle
Be sure to have Approval in Principle (AIP). That’s because if you can’t find a bank to loan you money to buy the home within 14 – 30 days, your booking fee is forfeit. That means you could stand to lose thousands of dollars! Here are examples of how much you can lose from forfeiting your booking fee:
- For ECs and DBSS flats, the fee is 5% – 10% of the purchase price.
(Example: The 5% booking fee for a $500,000 DBSS flat will be $25,000)
- For resale HBDs and landed properties, the fee is 1% of the purchase price.
(Example: The 1% booking fee for a $500,000 resale HDB flat will be $5,000)
That’s why it’s smart to speak to a bank and get an AIP before you book a flat. It’s a free document you can get at any bank that states how much the bank promises to lend you.
Don’t use credit for your downpayment
The downpayment on your home can range from 10% for an HDB loan, to 20% for a bank loan. If you don’t have the cash (or CPF) on hand to make the down payment, either wait till you do or find a more affordable home.
Don’t buy a home that’ll wipe out your CPF
It’s very tempting to use your CPF whenever you get the opportunity. But before you think about dumping all of your CPF into your home purchase, think about your retirement. Can you afford to put all of your eggs into one basket?
So before you cash in your chips to buy a home, think about the following:
• Will you eventually sell your home and downgrade to a smaller one?
• Are you parking your money in any investments with higher returns than CPF?
If your answer is no, you should rethink using ALL of your CPF towards your home. Remember, you still have retirement to think about!
Know what’s going on in the property market
If you buy your home at the peak of a property bubble, you’re buying high at a point where prices can only go one way – down. Instead, wait for the market to bottom out because that’s when property agents and developers will lower their prices to find buyers.
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