Here's a useful guide for all the Singapore citizens and PRs out there who yearn to have a home you can call your own but have no idea where to start. This guide is especially handy if you're looking to purchase a HDB flat.
Now, I'm not going to lie, buying a flat isn't fuss-free and the information that you have to absorb can be indecently overwhelming. And you have to have sufficient money, of course!
Well, for the purpose of making life easier for those of you who plan to get married and get your first flat soon, GET.com has done the hard work for you by researching the cost breakdown of your flat, the various home loans available, and sussing out key things you ought to know. Yes, you're welcome.
How Much Will Your Flat Cost You?
In this example, we'll be looking at a 4-room BTO flat in a non-mature area with a purchase price of $315,000. Let's say the applicants' median household income is assumed to be $5,000, they have exactly the amount needed for downpayment in their CPF Ordinary Account and they are taking up the HDB housing loan.
Here is a list of the fees and initial costs:
Application fee: $10 || Payable by credit card
Option fee: $2,000 paid when you book the flat; will be reimbursed in cash when there's enough money in your CPF Ordinary Account to pay the downpayment || Payable by NETS/ Cashier's Order
Downpayment: 10% of $315,000 = $31,500 from CPF Ordinary Account/cash savings. If you were taking a bank loan instead of an HDB Housing Loan then the downpayment would be a larger percentage || Payable by Cash/ Cashier's Order/ CPF
Stamp duty for signing of Agreement of Lease: $4,500. This is how it works: the stamp duty sits at 1% for the first $180,000 of the flat's purchase price, 2% for the next $180,000 and 3% for any remaining amount || Payable by Cash/ Cashier's Order/ CPF
Stamp duty and legal fees during key collection: Lease In-Escrow registration fee of $38.30 (fixed amount), which you will need to pay if HDB acts for you in the flat purchase. There is also a survey fee of $275 (before GST) chargeable for a 4-room flat. Note that the survey fee varies depending on the type of flat you're purchasing || Payable by Cash/ Cashier's Order/ CPF
Conveyancing fee (during signing of Agreement of Lease): $201.60. This fee is calculated like this: you'll pay $0.90 per $1000 for the first $30,000 of the flat's purchase price, $0.72 per $1000 for the next $30,000 and $0.60 per $1000 for any remaining amount || Payable by Cash/ Cashier's Order/ CPF
Caveat registration fee (during signing of Agreement of Lease): Fixed amount of $64.45, payable when you sign the Agreement of Lease || Payable by Cash/ Cashier's Order/ CPF
Fire insurance: You will have to take up a fire insurance policy from Etiqa Insurance, the Insurance Agent appointed by HDB, if you're taking up the HDB housing loan. For a 4-room HDB flat, the premium stands at only $5.50 for a 5-year term (it insures a building sum of $69,100). More information can be found on Etiqa's website || Payable by Cash/ Cashier's Order/ CPF
Home Protection Scheme: Annual premium of $173.22 for 22 years (computed based on loan amount of $283,500 and my own birth date) || Payable by Cash/ Cashier's Order/ CPF
Note: HPS is a mortgage-reducing insurance scheme administered by the CPF Board. It insures CPF members and their families against losing their home, should the policyholder become permanently incapacitated or pass away (before 65) before the housing loan is paid up.
You need to be insured under HPS if you want to use your CPF Ordinary Account savings to pay your monthly instalments. Also, the premium is paid annually using your CPF savings or cash. The premium amount depends on factors such as your declared percentage of coverage, loan amount, age, and gender.
You can also apply for grants to help you pay for your HDB flat purchase. Here you can read our full HDB grant guide.
Grants: $5,000 (Additional CPF Housing Grant) + $40,000 (Special CPF Housing Grant) = $45,000.
Image Source: hdb.gov.sg
According to HDB, here's how the Additional CPF Housing Grant and Special CPF Housing Grant are computed for those who are eligible.
Monthly housing loan instalment repayable for 25 years: It is estimated to be $1080 using HDB's current concessionary interest rate of 2.60% per annum (p.a.) || Payable by Cash/ Cashier's Order/ CPF
In this scenario, 23% of the applicants' household income of $5,000 will go to their CPF Ordinary Account, amounting to $1150. Notice that the amount in the applicants' CPF Ordinary Account monthly is higher than the estimated monthly instalment, hence they don't need to fork out any cash at all to service their monthly home loan instalment!
Note: that Mortgage Servicing Ratio is capped at 30% of applicants' gross monthly income! You can use your CPF Ordinary Account savings and/or cash to pay the monthly instalments of your housing loan. The monthly instalments are payable on the first day of each month.
Current Home Loan Rates in Singapore
How Will Costs Differ If You Take Up A 25-Year Bank Home Loan For The Example Above?
Downpayment: 20% of $315,000 = $63,000; 5% of this $63,000 has to be paid in cash while the remaining 95% of this $63,000 can come from your CPF Ordinary Account/cash savings.
Stamp duty and legal fees during key collection: Mortgage In-Escrow registration fee of $38.30 (fixed amount); paid if the bank acts for you in the flat purchase + a survey fee of $275 (depending on the type of flat).
Monthly housing loan instalment repayable: With a loan amounting to $207,000 (after clearing the 20% downpayment and getting the same grants awarded in the example above), the estimated monthly instalment sits at $877 computed with a generic bank interest rate of 2.0% p.a. for the first two years in a bank's fixed rate package.
In case you're wondering, you may also refinance your bank home loan though you have to keep abreast of market conditions, weigh your pros and cons, and keep a lookout for the right time to get your refinancing game going!
Banks' interest rates fluctuate with the market. So do your math and gauge your risk appetite to see if you'd prefer to stick to the concessionary interest rate the HDB home loan offers, or take advantage of interest rates that vary according to market conditions. There are plenty of different options for you to pick from!.
With the choice of picking either a HDB home loan or a bank home loan, it'll be really useful to find out which type of home loan is cheaper for you!
Things You Ought To Know
Eligibility To Purchase A Flat
Come on, let's be real here. You can't fool the system into letting you own an HDB flat if you don't have what it takes.
Image source: hdb.gov.sg
The above is an overview of the eligibility conditions that you have to fulfil if you want a home you can call your own. You must be working and earning enough, of course.
Current CPF Contribution Rates:
Image source: cpf.gov.sg
The above image shows the current CPF contribution rates according to the employee's age (for private sector employees and public sector non-pensionable employees). Others are available on CPF's website.
Current CPF Allocation Rates:
The above image shows how the CPF allocation rates change according to one's age.
Image source: cpf.gov.sg
Notice that payments that come from your CPF account can only trickle down from your Ordinary Account. The percentage of our wage nestled in CPF that's allocated to the Ordinary Account reduces as we age, so that's something to consider if you're buying your first flat at a later age.
Downpayment: 10% of the flat's purchase price if you're taking up the HDB Housing Loan. This can be paid with your CPF Ordinary Account savings and/or cash. The downpayment will be 20% of the flat's purchase price if you're taking up a bank housing loan. In this case 5% must be paid with cold hard cash while the rest can be paid with your CPF Ordinary Account savings and/or cash if you're borrowing under a loan ceiling of 80%.
First-timer privileges: According to HDB, first-timer privileges include higher proportion of flat supply, more ballot chances, additional ballot chances for unsuccessful attempts and the possibility of staggering your downpayment.
Under the Staggered Downpayment Scheme, you can split your downpayment into 2 separate instalments. Half of the downpayment is paid when you sign the Agreement for Lease while the remaining amount is paid during the key collection for your new flat. Check if you're eligible on HDB's website!
Total Debt Servicing Ratio (TDSR): Capped at 60% of the applicant's gross monthly income, this is the maximum percentage of your total monthly debt obligations (including the monthly repayment for the property loan that you are applying for and all your other repayment obligations such as student loans, credit card debts, car loans, personal loans etc) to gross monthly income.
Mortgage Servicing Ratio (MSR): Capped at 30% of applicant's gross monthly income, this is the maximum amount that can go into home loan repayments.
Grants: If you are applying for a flat as a first-timer household, you may be eligible for the Additional CPF Housing Grant and/or Special CPF Housing Grant. The above 2 grants may apply to other applicants in other categories or schemes, too.
The newly rolled out grant includes the Proximity Housing Grant. The Step-Up CPF Housing Grant is available to eligible second-timers applying for a second subsidised HDB flat to help offset their cost in upgrading from a 2-room flat to a 3-room new flat in a non-mature area. There are many other grants available, so it's always good to know which ones you're eligible for.
For those of us who need to take up a home loan when we purchase a flat, you have the option of taking up HDB's home loan or practically any home loan that banks offer.
HDB's current concessionary interest rate of 2.60% p.a. stands for your entire loan tenure whereas the rates that banks offer are usually more competitive variable and fixed rates.
1. HDB Housing Loan
Eligibility: Besides requiring at least 1 buyer to be a Singaporean and the average gross monthly household income to be not more than $12,000 for families, there are other eligibility criteria that you have to fulfil in order to get an HDB home loan.
Loan amount: Up to 90% of the purchase price of your flat.
Maximum repayment period: Capped at 25 years, or up till the buyer is 65 years old, whichever is shorter.
Interest rate: It is currently 2.60% p.a.; the HDB concessionary housing loan interest rate is pegged at 0.10% above the CPF Ordinary Account interest rate. It is revised in January, April, July and October, in line with the revision of CPF interest rates.
Repayment: It can be done via your CPF Ordinary Account savings and/or cash to pay the monthly instalments of your housing loan. The monthly instalments are payable on the first day of each month.
Using CPF savings: You must use all the available savings in your CPF Ordinary Account for the purchase of the flat, before a housing loan from HDB is granted for the remaining amount. This is subject to the CPF withdrawal limits for properties with less than 60 years of lease remaining.
2. Bank Housing Loan
Eligibility: You can choose to finance your flat with a housing loan from a bank that is regulated by the Monetary Authority of Singapore (MAS).
You may also opt for this if you and/or the essential occupiers are not eligible for an HDB Housing Loan. Also, you will not be allowed to refinance your flat with a housing loan from HDB if you pick this option.
Besides attractive interest rates, home loans offered by banks may come with other value-adds such as legal fee subsidy, free valuation and free fire insurance. Make sure to read through and understand the accompanying T&Cs carefully before you commit to a loan!
Loan amount: Up to 80% of the purchase price of your flat.
Maximum repayment period: Capped at 30 years for HDB flats.
Interest rate: Varies accordingly. Banks offer different types of home loan packages including fixed rate home loans and variable (floating) rate home loans.
**All information is accurate as of 4 January 2016.