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When investing for a private property in Singapore, there is always a misconception going around which holds most Singaporean’s decisions when it comes to attaining this aim. For most, purchasing a private property is almost an impossible goal to stick into, but what remains unknown is that it is genuinely a realistic plan to achieve as long as there is accurate information to guide you how it really works.
Cooling measures to be Beneficial for Citizens of Singapore and First-time Buyer of Home Properties
Once you are noted as a citizen of Singapore and you would like to purchase your first new home, the ABSD, also known as Additional Buyers Stamp Duty, is not applicable. The quote is applied at a rate of around 12% for second home purchases and is more likely 15% for the third purchase. It also covers foreign nationals and is considered permanent residents of the country. Cooling measures relatively hold and point to multiple home buyers.
If part of your plans for the future includes selling your first home for a certain upgrade, ABSD remission is something that you may be eligible to have. This details a process in which it also means that you will have to pay an ABSD amount upfront, and you will receive a certain quoted amount of refund from Inland Revenue Authority of Singapore (IRAS) once you are able to sell the home during a 6-months timeframe from the time you purchased the most recent one.
For some people, or for those who have plans of upgrading homes, they intend to start selling their homes and rent for a while during the time when they are trying to buy the new home so the remissible ABSD could be avoided as much as possible.
In any instance, the purpose of ABSD will most likely be advantageous to Singaporeans who intend to purchase private properties, this is in essence to the disposition that they would only keep or own one house. By making sure that permanent residents and foreign nationals are paying premium prices, ABSD ensures local nationals of Singapore that the cost of private housing will remain relatively low and affordable for most.
A low minimum amount of cash payment is truly possible
Some may always think that in order to purchase a house or private property it also requires an excessive amount of cash to start the investment. But have you checked the possibilities of how much may be needed for you to settle a down payment for you to buy a $1 million worth of condo?
Given that you have a good credit standing, the down payment required for you to settle is just for 5% as per the LTV limit. So this is equivalent to $50,000 for the 1 million dollars worth of condos as an example. This amount could be attainable if you will start saving an amount of $833 per month in the span of five years.
When it comes to getting home loans from banks, the amount of the down payment is 25% given that you have not got any current loans. Apart from the 5% amount for cash, the remaining 20% could be paid via CPF Ordinary Account. So given the same example of 1-million worth of a home, 20% is equivalent to $200,000, and this big amount would not be possible for most people until they reach the age of 40 and above.
Given the CPF Investment Scheme, this goal of up to $20,000 could be attainable in your CPF-OA so you could aim for your dream condo as early as possible.
PROPERTY CHECK: Penrose
Private properties available for $600,000 or even lower are also available.
These types of properties are normally ranging from 400-500 square feet, just like the known project development The Jovell, which is located in the suburban areas of Singapore. Though these units are relatively small compared to the others, there are buyers including many professionals who are okay with purchasing a condo unit which gives a good start to the ambiance of owning a condo and feel the exclusivity of securing an independent home regardless of its size.
Believe it or not, but it may be easier to qualify for loans from a bank compared to HDB loans
Most would think that getting an HDB loan is more comprehensive but there is a possibility that you could even get twice the usual amount from the bank when it comes to a loan.
To explain further, getting an HDB loan would require you to pass the qualification for Mortgage Servicing Ratio (MSR), and this would eventually give you the eligibility of a maximum amount of 30% equivalent of your monthly income, and this does not include other loans. When it comes to bank loans, the restriction you would need to meet is the TDSR, also known as Total Debt Servicing Ratio, and gives you an eligible amount of up to 60% of your income per month.
In summary, as long as you do not have any debt, it is relatively easier to get a bank loan compared to meeting the qualifications for HDB loans offered.
Ideal Start Offered by Executive Condominiums when purchasing a private property
Executive condominiums are property units proposed by HDB, arranged and created by private developers similar to the normal condo units. As of this time, this is one of the advantages you would have if you are thinking of investing in a private property. Aside from the more affordable costs available for availing ECs, CPF grants are also given and readily available for purchasers. The only thing you would need to bear in mind is there will be a minimum period for occupancy before it could be sold. Selling it to local Singaporeans and primary residents, the minimum is for 5 years and is also available to be sold to everyone, including foreign nationals, as long as you meet the 10-year minimum period requirement.
Most of you who may read this would think that this is somewhat similar to the scheme of DBSS, but it is not the same. Executive condominiums are full-suite units, created by private property developers. All amenities included in a private condo such as BBQ pits, gym, and others are also part of it. Both ECs and regular condo units would like to offer comfort and relaxation for future owners.
There are a lot of executive condominiums which could also be purchased for the amount lower than $1 million and you already have a two-bedroom unit, it could also be possible that you would get a bigger one. This would be a great opportunity for those who want to start their journey owning their own private home.
More affordable monthly payments are available, especially if you and your spouse are co-borrowers
Given that you have bought a condo unit for the amount of $800,000, given the maximum amount of loan for $600,000. The 2% interest for home loans in the span of 30 years would give a monthly rate of $2,218.
If you and your spouse split the monthly repayments, this is just for $1,100 per month for each of you. Given the average household income in the country, most Singaporeans are roughly earning around $9,000 plus so this is equivalent to mostly 1/4 of the usual household income of a working couple. This would still provide enough funds for savings and other personal stuff, especially for children’s needs.
Splitting the monthly repayment between you and your partner would give you more convenience with the amount.
Deferred Payment Scheme (DPS) is available which helps it to become more affordable for you
PPS (Progressive Payment Scheme) is one advantage you would get when you purchase a recently launched condo unit. For completed property developments, payment through DPS (Deferred Payment Scheme) could also be used.
Given the PPS scheme, you are only required to pay for up to 20% of the amount in cash upfront and would be given an opportunity of up to 2 years before you settle the remaining 80% due amount.
In the span of 2 years given, you could either decide to move into your new property or have it rented out for continuous income. There will be no interest imposed for this 2-year period since the only thing you would need to secure is to have the bank loan going before the remaining amount will be on due.
Under the scheme available, a 20% down payment is relatively more affordable compared to the regular 25% down payment for the usual units offered.
So before thinking that getting a new home is not attainable, make sure to understand different options and loan availability that you could run into. Most Singaporeans think that the amount needed is more than the regular amount really needed to start this goal. Owning an independent unit, including private condos and residential units, is affordable and within the budget for first-time purchases and those upgrading. If there are still thoughts you would like to clarify, speaking to a reliable financial consultant will always be a better option as well before you finally decide into purchasing your new home.
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