Be Realistic About The Type Of Home You Can Afford

Created by condolaunchsg May 23, 2020

Be Realistic About The Type Of Home You Can Afford

You’ve already decided on the area and done your primary research. The next thing on the list is to calculate where you stand financially.
When calculating the type of house you can afford, always consider the following:

  • Age
  • Type of residency
  • Income level
  • Cash on hand
  • Amount of Money in CPF Ordinary Account
  • Outstanding debt
  • Loan tenure
  • The choice of property

Of course, the list isn’t complete as there are other fees that you need to include in your computation (which will be discussed later), but it will give you a rough idea of where you currently stand and which housing type you should be looking at.
Save For DownPayment
It is vital to prepare for the downpayment because it is a considerable sum of money you need to pay upfront when purchasing your home.
When you’re purchasing property, there are two options to choose from:

  • Take a housing loan from HDB (Only for BTO or resale HDB flat)
  • Take a housing loan from a Bank

Here’s a table showing the difference in downpayment between an HDB loan and bank loan for the purchase of Penrose condo

Fortunately for HDB buyers, you can get a loan from HDB and pay the downpayment using only your CPF.
However, when you purchase a private property, you’re only eligible to take a housing loan from the bank.
You must pay a minimum of 5% of your purchase price as part of your downpayment.
When you’re considering taking a housing loan from the bank, do be aware that your credit rating will affect your maximum loan amount.
This, in turn, affects the amount of money you have to pay in cash. So, pay your bills on time!
Take Note Of Property Valuation
Property valuation an estimate of how much a property is worth. It determines how much you will pay for the property.
It is important that you take note of the indicative valuation, which are simple estimations of the value of a property. This is because it can limit the amount of housing loan you can get.
When you have found your desired home to buy, you can always use free online valuation tools or simply go to the HDB or URA website to look at the historical transactions data of a particular property if there is any.
If you’re a first-time home buyer applying for a housing loan, take note of these two points:

  • Loan-to-Value limit is 75% – which means that you can only get a loan up to 75% of the property value.
  • Loan-to-Value limit becomes 55% if the loan tenure exceeds 30 years or the loan period exceeds your age of 65.

Research On The Types Of Mortgage That Suits Your Situation
Albert Einstein famously said that compound interest is the most powerful force in the universe. And that is precisely the reason why home buyers have to understand what type of mortgage best serves them given their own set of circumstances.
When you pick the wrong mortgage, the amount of interest you’ll end up paying in the next 25 years is astronomical.
If you’re not sure about which mortgage is the best for you, consider looking for an experienced agent to help you map out your options.
Ask Your Seller About The Property Rental Yield
When purchasing a property, it is advisable to consider your house’s rental yield.
Even if you have no intentions of renting it out in the next ten years or so, you never know how your plans will change in the future.
Nowadays, many homeowners no longer stay in the same place for the rest of their lives.
Therefore, if you need to sell your home in the future, you will have to consider your future potential buyer.
And your future potential buyer might be looking to purchase for rental and will consider your house’s rental yield.
When purchasing a brand-new home, you can always compare the rental prices of the same type of house in the surrounding area.
If you were to rent out your property later in your life, the rental yield helps you cover the mortgage of the rented property and a portion of your monthly expenditure.
Still unsure about how to calculate the rental yield? Ask your property agent to help you derive the final yield number!
Look For A Reliable Property Agent
These days, with over 30,000 registered property agents to pick from in Singapore, it is not easy to find an agent who will be able to meet your needs and provide meaningful insights that will help you make better decisions and avoid costly mistakes.
Here are a few signs that the property agent is right for you:

  • The property agent is registered with CEA on CEA’s Public Register
  • Prioritises your needs and works with your budget
  • Knowledgeable about property financing and the landscape of Singapore’s property market
  • Gives regular updates on their progress
  • Does not hard sell you on the property listings you’re not interested in

Sure, you might be paying a little extra to hire an agent, but you can leverage their expertise to find better deals that you might not have been able to find on your own.
Purchasing your first home in Singapore can be a long and dreadful process.
A good agent can help you cut down the time and effort needed to be spent on tedious paperwork, and give you peace of mind while shopping for a property.
Readmore: What To Consider As A First Time Home Buyer?