Guide on Buying Your First Home in Singapore

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Researching the Market

Before you decide to buy a home, know how much you can spend on it. You should not only consider the amount that you can afford in terms of mortgage repayments, but you should also consider other costs such as maintenance, taxes and insurance. Make sure that you have enough money for down payments. If you cannot afford sizable down payments, you cannot buy a home. Find out how much money you can afford to borrow. Decide whether you are going to apply for a HDB Concessionary Loan or a HDB’s Housing. You can also choose a HDB’s Loan that carries a floating rate. If you are purchasing an executive condominium that comes with the Half Housing grant. If apply for a Concessionary Loan, ensure that you have a valid letter of appointment as well as the package of Agreement.

Buying a home is a major financial decision. For first-time homebuyers like you, finding the perfect home is easy. Look on property websites, check listings in newspapers and go to show flats. But while you are searching for the perfect home, you should also find the perfect loan. Before you head out to hunt for a home, research the market. Find out about home prices, the best locations and other factors that you should take into consideration. Also, find out about the different types of home loans on the market. Once you have an understanding of these things, it will be easy for you to choose the perfect home. It will also be easy for you to get your home loan.

Understanding Property Types

An HDB flat is similar to a government aircraft, only this time, it is a complete apartment that includes the kitchen and bathroom. Most Singaporeans start building their families, history and financial portfolio through their purchase of their first HDB flat. Many also will leverage on public transport called Mass Rapid Transport (MRT) services to reach their place of work. Every public housing neighborhood has at least one MRT station, with buses ready to connect to the MRT nodes. As the city expands, some areas have several MRT stations to service the big local towns. Typically, each town has its own Hospital, Fire Station, Police Station, Community Center, Public Libraries, Swimming Pool, and some have large-scale shopping malls such as Jurong Point in Jurong West, and North Point in Yishun.

In Singapore, there are primarily 3 types of housing properties available: Public Housing (‘HDB flats’), Private Properties, and Executive Condominiums (‘EC’). The most popular property type for usages is the HDB flats, followed by Condominium. This article touches only on HDB flats and EC. A. Public Housing / HDB Flats Public Housing, also known as HDB flats, can be easily purchased by a Singapore citizen. About 80% of Singaporeans live in public housing. The remaining purchase condominiums, terraces, semi-detached, and bungalows which are designated as private properties.

Budgeting for Your First Home

When purchasing your house, you will need to pay a lot of out-of-pocket expenses. Although there are some concessions and subsidies available, we have to prepare enough savings to be used. Some people took a few years building up their savings. The number 1 person is the downpayment. The minimum is 5% (using bank loan), 10% (using HDB loan), or 20% (using bank loan on a private property). Typically, it starts from $20,000 but can go up to a few hundred thousand. For BTO, you only need $10,000 to $20,000 but for most units, it requires a minimum of $40,000 to $80,000. For quicker sale projects such as balloted flats, you have to pay 2.5% very soon after the flat is selected. These flats are completed and are ready to move in. HDB may sweeten the deal by allowing stamp duty in the same financial year. For HDB house, the downpayment loan allows the amount needed to cap at 28% of monthly income for the 30-year loan. But, if you pay the bank loan, you have to take it from cash. That means out of pocket cash.

If you have read and understand my previous article, you will now know how much you can afford and how much your CPF contribution is. We can roughly calculate the amount you can pay for your house. Now, let’s calculate how much out of pocket cash we need to pay. In budgeting for our home, we have to calculate how much downpayment we have to pay, what are the fees that we have to pay when buying the house, what is the stamp duty we have to pay, and roughly how much renovation and furnishing we may need. Let’s start off with the first part which is downpayment.

Finding a Suitable Location

Take note what happens in recent years to properties as far-flung as District 19 and 20 or Sengkang, Punggol and Woodlands. These locations were once considered ulu and were not anywhere close to where the excitement was in the real estate market. However, with more commercial, transportation and residential projects being planned and developed, they have seen a transformation with some of the areas getting trendy. Thirdly, you should also consider what a future Singapore may look like. Will ageing population mean more resources will be focused on areas that cater to the elderly such as health, education and transport facilities? Do you believe that the development of high-speed rail linking Malaysia to Singapore will enhance property values in areas such as Jurong West and North, where the Malaysian stations are? Will the transformation of Geylang in future lead to a decrease in value of properties in the area/genital district? These are just some ideas you may want to consider.

So, you have crunched your numbers. Your next task is to find a suitable location. This is important as the location can greatly affect the value of your property and your overall living experience. In Singapore, properties near to MRT stations, shopping malls, good schools and other amenities are highly sought after. As is, properties in prime districts normally command a higher price as compared to those in other less popular locations. If budget is a concern, you must also weigh the cost of a well-located property against a unit that is more affordable but located in a far-flung place. Living in or buying a property in a less developed area may mean more future upside should the location be transformed into a more vibrant one.

Financing Your Home Purchase

The first thing you will need to consider when you are interested to own a house is how much “equity” you have for that property. The maximum amount of CPF that you can use to help purchase a property depends on the lease left on the property. As a requirement for the housing loan, you will also need to pay at least 5% in cash for the down payment. Moreover, your CPF Ordinary Account savings and the withdrawal of CPF savings for Housing will be subject to a limit known as Total Debt Servicing Ratio (TDSR). When calculating the maximum loan permitted under the TDSR, lenders are required to take into account the purchaser’s other debt payment obligations such as credit card bills, personal and car loans.

If the value of the house is more than $1 million, cash payments can only be up to $540,000, with the rest of the amount payable by CPF or mortgage. As for the property that is less than $1 million, there is no minimum cash payment required. Hurry register at My CPF Online Services today and check if they are able to loan you more money to help pay for the property. HDB offers various types of special housing schemes to help the lower and middle-income CPF members who had smaller funds recovery to buy a new or resale flat. How you can make use of the scheme to help you finance your mortgage loan will discuss in details later. You can also pay your direct labour charges, including the construction cost incurred in building your house, using your CPF money under a few conditions.

Exploring Mortgage Options

Victoria Home Achievement Program (Flat POSB/SB): A frequent option for most first home buyers because almost all of them have an active cost savings account (FEO) with POSB/ SB. The greatest advantage of this home purchase program is that the pertinent government grant and subsidy are levied across the payment. The discount means a higher amount of principal/necessary HUB you can qualify for. You apply to own and HUB through the HDB website and submit the request to the former individual or lender after obtaining the offer letter from HDB. You can apply to the bank(s) that borrow to receive the best housing loan interest rates by comparing a variety of bank housing loans as well as housing finance companies.

In your journey of buying your first Victoria, current residents can tell you that you need to be prepared financially. And in Singapore, it’s probably the most difficult to own property, but it’s also one of the safest places to buy property. You have a tight budget for buying your new home. You may be wondering if you really can buy your own home. The good news is that with a structured plan, you can set out to buy your own home. There are many financial resources in place on our sunny island to help you make your first home a reality. I hope I can give useful information about Victorian homes here. And hopefully you would start to … Exploring the mortgage options provided by various biannual tournaments in Singapore. Here is a list of them:

Viewing and Inspecting Properties

A close inspection of the properties on sale should be done before you offer to purchase any of them. Once a seller has accepted your offer to buy, it becomes legally binding. You should engage a professional property inspector who will go through the property that you are seriously considering buying, from the roof to the floor, to the outside. After view, he provides you with photographs of the areas where upgrades and repair need to be done urgently. Ideally you should also know someone really handy or have a list of good electricians, plumbers, carpenters etc who you could call to obtain quotes for any repairs that need to be done. Armed with this information, you can derive a realistic offer to purchase the property that reflects any much-needed upgrades or repairs that need to be done.

Viewing and Inspecting Properties: Start viewing properties in the residential area where you want to live. You should have had some ideas about where you want to be – near good schools, close to MRT station, ease of getting to work or the entertainment district. Walking around the area will also give you an indication on which specific blocks appeal to you. If the area you want to move into has private houses or apartments and flats, you may find that you like the design of some specific properties. Ask your agent for those properties that are for sale. This is the time to really sit and consider which type of dwelling you want, house, apartment, maisonette, HDB or private. You may change your mind 10 times through the process. That is allowed.

Attending Property Viewings

Bring a list of questions with you for convenience. You will be allowed to discuss your doubts with the property developers or agents who are looking after the show flats professionally and it is their job to answer all doubts you have about the property to convince you to purchase the unit in the property. Do not feel pressurised at any time to purchase the unit. After your first viewing, feel free to leave instead of feeling obliged to continue with the viewing. You can always come back and take a view of the property at a later time if you are interested in making a purchase.

The location of the property Room types Floor plans Facilities in the property Quality of furnishing (which developers might install by default) Cost of maintenance fees and any other fees How the property will look like, visually Details of the property like freehold or leasehold status, the name of the construction company, etc The show flat will not give you an exact idea of the view from your unit (because the view might be blocked by other properties that have not been built yet), but it might give you an approximate idea of this.

The first step on your journey to your first home with most property developers will usually involve attending the property show flats for the property you are interested in. You will usually be able to see during the show flat:

Inspecting the Condition of the Property

You might also want to find out about the history of the condominium and if any major work has been carried out on the property. At the same time, you will also want to be wary if there has not been any major work done on the condo in its history, as this may reveal some underlying problems as well. The last thing you will want is to buy a property and discover down the road that the property is old and decrepit, in dilapidated condition.

By giving the property you are about to buy a thorough inspection, you will allow yourself to make well-informed decisions about its condition so that you can confidently commit to the property. You should have good knowledge of the two main elements of the structure: columns and beams. Note that column and beam replacement is a costly affair, and usually requires the approval of the entire co-owners via an EGM. In addition, if there is extensive wear and tear of these components, no financier will be willing to extend a loan to prospective purchasers of that property. On that note, it always pays to check the financial condition of the condominium that you are interested in, especially if it is an older one. You will usually want to do that if the property is between 20 and 30 years old.

Making an Offer and Closing the Deal

When you’re happy with the offer price, it’s back to the Option to Purchase or a Sales and Purchase Agreement (if the property is a resale). If you’re making the offer through a salesperson or their firm, they’ll normally draft these documents. Once your property agent has all the required information, you’ll need to go through and sign these documents with him. It’s not absolutely necessary but we recommend that a small sum be paid to secure the offer (with all of the required items) so that any price negotiations can continue without any competing offers lodged by other interested parties.

The Property’s Market Value. Whether you or the seller’s property agent are submitting the offer, it must always be backed by hard data from the recent sale of comparable properties (comps). If the property has been re-sold within the last three months, any improvement profit made must be clearly articulated to justify the higher asking price. This is especially relevant if the developer has re-sold the property at a higher price with no improvements. The advantages to your purchasing the property must come into play, allowing you to take on the risk of increased borrowing cost a few years down the road. Otherwise, you could invest your money in a similar property with a slower payment structure, similar gross yield returns and external levies that were collected by the respective government authorities. Avoid reverse flipping and invest in a property that appreciates on the basis of its intrinsic value, today and in the future.

Let’s assume that you’ve found your dream home and are raring to make an offer. Based on the prices achieved in recent transactions, you should already have a good idea of what you’re willing to pay for the property. Your friendly property agent will guide you through how to make a realistic offer based on the following:

Negotiating the Purchase Price

If the property is bought through an auction or you are buying a resale public housing flat, you will have to skip this stage and proceed directly to signing of the Sales and Purchase Agreement. Upon receiving the buyer’s offer, a seller can either accept it, reject it or issue a counter offer in the form of another OTP. When both parties have come to an agreement, the OTP (with the agreed terms and conditions) will be signed. The buyer will then have to pay the option consideration to the seller’s real estate agent. It is typically between 1% to 5% of the purchase price for private properties. For HDB flats, it is capped at $5,000. Once the property has been decided upon, start negotiating a better price. There are a few things to note when making an offer, i.e. the initial offer, of the property: Do not tell the Seller your Maximum Buying Price. This allows some room for negotiation. Assess the current market condition and make an offer based on what you think is a reasonable price. Don’t make too low an offer as the seller might consider other offers on the table. Do not show too much eagerness in buying the property. The seller might gauge how much you like the house and reject offers with potential discount prices. If the seller responds by asking for a higher price, it simply means that he is unsure about letting go of the property. To avoid making a low offer, find out the fair market value by investing around $20 to get a copy of recent transactions and caveats lodged with the Singapore Land Authority. By doing so, you will know the recent transactions of the similar units and decide the subsequent offer price. In the event that there are salespeople accompanying you, remain silent while the seller gives a response to your offer. Avoid any form of encouragement expression during this instance. If the seller were to give a counter-offer, it would not be practical negotiating with him. Of course, they might be able to yearn you of the ongoing market rate. If your price is too far from his counter-offer, reject the seller’s counter-offers.

After you have found a property, you will have to agree on the terms and conditions with the seller and document it in the Option to Purchase (OTP) agreement. As the seller grants the buyer the exclusive right to purchase the property for an agreed period of time, the buyer will have to pay a fee (also called option consideration). The buyer will forfeit the option consideration if the buyer ultimately decides not to exercise his option to purchase the property. The option is exercised by the buyer by signing the Sales and Purchase Agreement and paying the rest of the down-payment.

Completing the Legal Documentation

What the lawyer will be doing, however, is to begin the process of legal documentation. After the Sale and Purchase Agreement (S&P) has been signed and the 10% payment made, your lawyer’s firm will begin work on your file by sending a letter to the seller’s lawyer which is better known as the notice for the purchase of land. Your lawyer will then liaise with the seller’s appointed lawyer on the arrangements for completion. Information on the completion date as well as on deferring your property tax via the bank will be finalized. Your lawyer will also request from the Lawyer Registration Office a certified document known commonly as the title deed. Your lawyer’s firm will be representing the bank and requesting the bank loan for which you are eligible.

You will be given a Sale and Purchase Agreement (S&P). The S&P is a legally binding contract between you and the property developer/owner. The developer/owner has to go through the S&P with you to make absolutely sure that you understand every clause and contents of the agreement. This is for your protection. However, it is not typical for lawyers to be present during the signing of S&P. Whatever terms that have been agreed informally between you and the seller will be present in the S&P. There will be specific clauses for both buyer’s and seller’s obligations. This will usually include detailed information on payment mechanism and the timelines for carrying out those payments, details of the property, when you can start renovating the house, warranties, remedies, and who will be responsible for what.