You have been together with your partner for some years now and you have decided that he/she is the one whom you want to settle down with. The next thing to do is to get married and start a family together. Buying a house together for the first time could be, by far the most important decision, and the most expensive one that a couple may make in their lifetime. There are many factors to consider and many information that a couple should know when they are buying their first HDB flat. The list of things in this week’s post are non-exhaustive but should offer young couples an idea of what to consider and look out for.
Properties in Singapore are not cheap and the first thing that comes to everyone’s mind when purchasing a property is the price. Young couples would be concerned if they could afford to buy a house after working for a few years and how much budget would be enough. The price tagged to a property may be high, but knowing the breakdown of payment would certainly ease the worry and help couples plan their savings and decide on a house that they could afford.
For example, if a couple decides to buy a 5-Room HDB flat for $500,000, a 10% down payment of $50,000 would need to be paid upfront (for HDB loans). The maximum years of loan are up to 25 years. Assuming their combined CPF has $100,000, it must be fully emptied before HDB will loan the remaining amount. After CPF deduction, the total loan is $400,000 and based on HDB loan interest rate of 2.6%, the monthly housing loan instalment payable is $1,815 (based on HDB monthly instalment calculator).
Factors to take note for payment of housing loan are Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR). MSR states that a maximum of only 30% of your gross monthly income can be used for payment of housing loan. This means that if your monthly salary is $4,000, only $1,200 can go to repayment of loans. In addition to the MSR is the TDSR, where the total loans, including housing, credit cards and cars etc., cannot exceed 60% of your monthly income.
After setting aside the necessary budget for your house, it would be useful to know the various grants that you may be eligible for. This would greatly lighten the load off your shoulders. For first time applicants, you may be eligible for the Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG) with up to $40,000 each.
Take the example from our previous blog post, if a couple with a combined monthly income of $4500, decides to purchase a 4-room flat in Punggol, they will receive a total grant of $50,000 ($10,000 AHG + $40,000 SHG). If the flat costs $300,000, they would only need to pay $250,000 for it. That’s a lot of savings! You can refer to the table below for more info on eligibility.
The next thing to consider is whether you should be getting your loan from HDB or the bank. Below is a detailed infographic to outline the key differences.
For a more detailed comparison between an HDB loan and a bank loan, you can refer to our previous blog post here: HDB Loan Vs Bank Loan.
4. Minimum Occupation Period (MOP)
Couples should also note that there is a regulation on Minimum Occupation Period (MOP) which states that you must occupy the flat for a minimum period of 5 years before you can sell the flat in the open market, sublet the whole flat or invest in overseas or local private properties. The period starts from the moment you collect your keys to your apartment.
You should also take note that MOP still stands even if you were to buy a resale flat from the open market with the CPF Housing Grant.
5. Resale Levy Payable
If you have plans to upgrade your home in the future, you should find out how much resale levy you may have to pay when you sell your first subsidised home. This would give you better financial planning if you have plans to upgrade or downsize your apartment. Generally, you would have to pay a resale levy if you are selling your first subsidised flat in order to purchase a second subsidised flat from HDB.
6. Parenthood Priority Scheme (PPS) & Third-Child Priority Scheme (TCP)
There is a rising trend of couples applying for Build-To-Order (BTO) before they get married. However, there are still some couples who have already started a family and are looking to apply for their first home. If you belong to this category, you should consider these schemes to help you increase your chances of getting an apartment during the balloting process.
You are eligible to apply for the PPS if you are expecting a child during the time of application or already have at least 1 Singapore Citizen child aged below 16 years old. In this case, 30% of the BTO units and 50% of Sale of Balanced Flats (SBF) are reserved for these applicants.
If you happen to have at least 3 children (the third child being a Singapore Citizen and the first two are Singapore Citizens or Permanent Residents), you can apply for the TCP together with the PPS. In this scheme, you will be able to join the first round of balloting and if unsuccessful, you will still be able to take part in the subsequent round under the PPS. This would greatly enhance your chances of getting your family your first home!
These are the 6 important things to consider for you and your partner when buying your first HDB flat. Stay tuned next week as we will be touching on some of the key elements of wedding planning for young couples to prepare them for their big day!