Housing Budget Before Buying Property in Singapore
Buying a home is never easy and it is a tough decision to be made in everyone’s life especially when Singapore is one of the places in the world with exorbitant property prices. The costs you will have to bear for your first property acquisition will further rise steeply if you are intending to buy a private property in Singapore. Sprinkled throughout Singapore among the towering HDB’s and Condos in Clementi, landed properties can both inspire and act as a stark reminder of Singapore’s wealth gap. Many people purchase private property with the goal to upgrade from their current homes or as an investment vehicle to collect rental income. But because buying a home is such a huge financial commitment, it is essential that you first consider your housing budget before taking the next step.
1. TDSR & MSR Fulfilment
The Total Debt Servicing Ratio (TDSR) regulation was introduced on June 29, 2013 to help homebuyers to borrow within their incomes. The TDSR limits the home loan quantum by ensuring your monthly repayments for your total debts do not exceed 60% of your monthly income. TSDR is important in order to ensure that you can afford your home loan, or to help you find the maximum amount you can afford for a property. Some of the banks would provide such calculators. You only need to key in some details, such as your annual income as well as outstanding debts to have a clearer idea of the maximum loan amount you can afford, the maximum property purchase price you can look at and the downpayment required. If you are considering buying a HDB flat, you would need to take into consideration the Mortgage Servicing Ratio (MSR), which lids the amount that may be spent on mortgage repayments to 30% of a borrower’s gross monthly income. The TDSR applies to all housing loans, whereas the MSR applies only to loans for HDB flats and Executive Condominiums (ECs).
2. Upfront payment
Other than fulfilling the TDSR and MSR limits, you will need to check the amount of funds you have in your CPF OA and cash to make sure you are able to settle the upfront payments. The 20% upfront payment for private properties is often stated as the main obstacle for those deciding between getting a resale HDB and a private condominium. Many property buyers may also fail to take into account the amount needed for stamp fees and legal fees. Buyer stamp duties work out to be around 4% of your home price. Stamping for mortgage agreement, stamp duty for taking up the home loan as well as some other fees such as bank processing fees and legal disbursement fees are things that you need to take into consideration as they can add extra costs.
3. Renovation & Furnishings
One of the most exciting features of buying property in Singapore is that you get to renovate and decorate it reflect your personality. What most home buyers do not take into consideration is that they can be more expensive than they look like, even if you are going for a simple look. This is considering your bank account might be pretty empty now if you have used up some of your cash for paying down your home’s down payment. Renovation costs are predictable to be substantively higher if you are getting an older apartment or resale, and it is not surprising to hear home-owners spending up to $100,000 to renovate or makeover their place. Therefore, you will need to estimate that most HDB apartments would require an average cost of about $50,000 – $70,000 for renovation work. This is of course excluding the cost of furnishing and designing, which can add up a couple of thousands more. However, it is your choice to always buy the essential furnishing items first and slowly add on as you build up your savings again.
The amazing standard of living you are undergoing now is not guaranteed to last. Bad luck or disasters happen every day, but if you leave some breathing room in your monthly budget, you will be much more prepared to take them in pace. And if something unfortunate happens to you in which money is needed, having a small, manageable payment might mean the difference between keeping your home and losing everything.
