Buying a home is a milestone of adulthood in Singapore. It means that you are finally moving out from your parents’ home, and into a place you can call your own. But how do you go about doing this? We’ve summarised the key criteria and answers for you, whether you’re looking at a BTO, resale flat, or private property.
1. 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
Your eligibility depends on a few things, including your age and whether you’re purchasing the flat with someone else.
2. Plan your budget wisely by working out the math
A house is a huge financial commitment. There is the downpayment, and 360 monthly repayments if you get a 30-year loan as most other Singaporeans do. Here’s how to figure out how much you can afford comfortably.
The math of working out your budget
One quick way is to get an estimate of the loan that HDB or the banks will grant to you. This amount is based on your (and your spouse’s) savings, current income, and age.
The best time to get this estimate is before your search begins. It helps you filter for the properties that you can afford, which saves you from spending unnecessary time searching among properties that are beyond your budget.
Then, get in-principle approval (IPA), which is a guarantee that the lender will lend you the S$X amount when you need it.
Armed with these, you can browse the catalog of HDB and private properties, confident that you can pay for what you choose.
Tip: If you can raise sufficient cash, consider using that instead of your CPF, as your CPF monies earn higher interest rates of 2.5% each year.
Government subsidies and grants
If you’re interested in an HDB property, there are government subsidies and grants that can make a property more affordable. There are schemes for:
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:
- Couples,
- Singles, and
- If you stay within 4km of your parents’ or in-law’s place.
Investment potential
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
3. Consider your priorities before deciding where should your first home be
Location is the biggest factor in choosing a house. These are some considerations that’ll help you pinpoint the areas that you’d be happy to call home.
Distance from your workplace: Choose somewhere that isn’t too far you’re your workplace. Singapore is a small city, but the commute between Ang Mo Kio and Changi Business Park can still take up to 2 hours. And adding just 20 minutes to your daily commute feels as bad as if you’d received a 19% pay cut1.
Distance from the MRT station: Buying a house near an MRT station saves time, but properties within walking distance cost more. Also note that a house along the East-West line is typically more expensive than along the North-South line (e.g. Tiong Bahru vs Ang Mo Kio), because of its proximity to the CBD.
Distance from your parents: Staying within 4km of your parents qualifies you for the Proximity Housing Grant (PHG). But chances are, our parents stay in mature estates – where new BTOs and resale flats could be pricier.
Here’s how some first-time homeowners have gotten the most out of the accessibility vs affordability trade-off:
- Buy smaller units, and then upgrade as their family expands.
- Purchase properties in non-mature estates.
4. Watch out for the hidden costs
One thing that often slips buyers’ minds is the whole range of fees and charges that apply. If you’re getting a BTO or flat directly from HDB, watch out for these:
- Property valuation reports,
- Buyer stamp duty fees,
- Property taxes,
- Home or fire insurance fees.
And if you’re thinking about resale flats, add these to your list of costs:
- Property agent commissions,
- The fee to process the option to purchase (OTP)
- Higher renovation costs.
5. HDB loans aren’t always cheaper
It’s a common misconception that HDB loans are always cheaper. HDB pegs their interest rates at 0.1% above the CPF interest rate, which means paying 2.6% p.a. of interest each year.
If you come across a bank loan with a lower interest rate, the difference in interest rates could save you thousands. (When doing your research, don’t forget to check for current promos too!)
But interest rates aren’t the only thing. Here’s what else you should look out for when comparing the loan packages:
- Differences in fees
- Charges for early repayment
- Interest rate type (fixed rate or floating rate)
- Loan tenure
- Extras such as free legal and valuation subsidies, and in-built home loan insurance
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