Understand Your Finances
Finding out how much you can actually afford to pay and setting a budget for your new home should be the first step when making a property purchase.
The amount money that you can potentially borrow depends on your creditworthiness and the Loan-To-Value limit imposed by the Monetary Authority of Singapore. You can expect to obtain up to 75% of the property price on your first housing loan but this is subjected to the loan tenure. Additionally, there is the Total Debt Servicing Ratio (TDSR) to consider as it allows you to utilize up to 60% of your salary on debt repayment. However, if you are purchasing an Executive Condominium, the TDSR will be limited to up to 30% of your salary.
Therefore, you can apply for an Approval-in-Principle (AIP) from the bank. What an AIP does is that it does not only provide you with a rough gauge of how much the bank will lend you, but it also gives you a glimpse of the monthly mortgages required to service that loan.
You can also tap into your CPF when purchasing your new home. For your first property, your entire Ordinary Account up to the Valuation Limit can be utilized. However, if you are purchasing a second or subsequent property, only the amount in your Ordinary Amount less the Basic Retirement Sum can be utilized.
BSD and ABSD
The Buyer Stamp Duty (BSD) is a tax levied on all property buyers regardless of nationality who purchase any property and it is dependent on the purchase price or market value of the property (the ‘Base’). Generally, the more expensive the purchase price or market value of the property, the higher the BSD Rate.
The BSD can be calculated as follows:
|Purchase Price or Market Value of the Property||BSD Rate (Residential)||BSD Rate (Non-residential)|
The Additional Buyer Stamp Duty (ABSD) is a tax levied on the purchase of residential property and is in addition to the BSD and is only applicable to the following buyers:
– A Singapore citizen who already has ownership of a residential property and wishes to acquire another;
– A Permanent Resident; or
– A foreigner.
Essentially, the ABSD affects everyone except Singapore Citizens who are buying their first property. The ABSD can be calculated as follows:
|Status||1st Residential Property||2nd Residential Property||3rd & Subsequent Residential Property|
|Foreigners & Entities||20%||20%||20%|
A consideration of the miscellaneous fees will also allow you to come up with a more realistic budget. Included in 20% of the property price that you will have to pay using a mix of cash and CPF, are a 5% Option Fee and a 15% Exercise Fee. Additionally, you may want to engage a Property Agent and a Property Lawyer – a small sum to pay to facilitate a seamless property-buying journey.
With the assistance of your property agent, who will provide you with a list of possible property options based on your budget and requirements, you may begin your search for the home of your dreams through show flat visiting.
Show flats present potential buyers with a realistic representation of the property upon completion. Yet, the design of the show flats is merely a prediction of the actual property through the artist’s impression. Therefore, one should focus on solid facts such as the size and layout instead of the design of the unit. Besides visiting the show flat itself, a short walk to the actual site of the property to assess factors not shown to you during the open house, such as traffic, routes to the nearest MRT and etc. is also recommended to help with your decision making.
Submit an Expression of Interest
Once you have made a decision, you will have to complete an Expression of Interest and submit it along with an unsigned, blank cheque for the booking fee of 5%. The actual amount of this booking fee will only be made known to you when the price of the property is revealed. While it may seem risky to hand over a blank cheque before knowing how much the property will cost, you can be assured that the submission of an EOI and cheque does not automatically obligate you to make a purchase and it will be returned to you should you decide not to go ahead with the purchase.
Select Your Unit
On the launch day, you will be able to pick out a unit based on the ballot number assigned to you by the developer. Therefore, it is advisable to have a few units in mind beforehand. Once you have selected a unit, all you have to do is fill up the blank cheque (previously submitted above) with the appropriate amount before you will be made to sign on a set of Property Details Information documents. These documents which set out all the floor plans, rules and regulations, included items and other documentation. Subsequently, you will be granted an Option to Purchase (OTP).
Get a Bank Loan and Sign a Sale & Purchase Agreement
The developer will take up to 2 weeks to deliver the Sales & Purchase Agreement to you. In the meantime, you should secure a bank loan using the OTP so that you will be able to sign the Agreement and exercise the OTP within the 3-week time frame. Once the Agreement has been signed, you will have to pay the remainder of the deposit, referred to as the Exercise Fee, of 15%. This amount will be due at the point of signing the Agreement or within 9 weeks from the date of the OTP, whichever is later. The BSD and ABSD (if applicable) will also be due within 2 weeks of signing the Agreement.
This is also the stage where you will have to engage a lawyer to take on the important burden of carrying out the conveyancing work on your behalf. The bank may recommend a lawyer to you, but you may opt to hire your own.
Start Making Progressive Payments
Payments will have to made in a progressive manner by either cash, CPF or a bank loan each time the developer completes a construction milestone. Construction milestones may include:
|Percentage of Purchase Price||Milestone|
|10%||Upon completion of foundation work|
|10%||Upon completion of concrete framework|
|5%||Upon completion of brick walls of each unit|
|5%||Upon completion of wiring, doors and windows|
|5%||Upon completion of carparks, roads and drains|
|25%||Attainment of Temporary Occupation Permit (TOP)|
|15%||Attainment of Certificate of Statutory Completion (CSC)|
Collect Your Keys
As soon as the TOP is attained, you can finally move into the home that you have been waiting for! However, do not be too quick to rejoice – you should run a thorough check on your new home for defects immediately after obtaining your keys. The reason for this is because developer is obligated to rectify defects that are discovered within the 12-month Defects Liability Period.