How much money should you have before you consider buying a condo?
Buying a condo before 30 begins with understanding the financial requirements. Below is an overview of the costs, assuming you intend to purchase a modest condo of S$1.2 million:
Scenario 1 – Resale Condo –
It will be necessary for you to place a 5% cash down payment (of the purchase price). However this payment will be split in the following manner – 1% for securing the Option to Purchase (OTP), and a further 4% to exercise the OTP later. In this scenario, total cash down payment would be $60,000. The remaining 20% down payment ($240,000) can be paid in cash or CPF (OA), provided you are eligible for a 75% loan to cover the rest of the purchase price.
Singapore citizens are exempted from Additional Buyer’s Stamp Duty (ABSD) if the condo is their only property. However, if you are buying a resale private property, this BSD must be paid by cash first, subsequently this BSD cash paid can be refunded on the completion date of the purchase by deducting any excess CPF OA funds you have (after deducting the CPF downpayment).
Scenario 2 – New Development –
It will be necessary for you to place a 5% cash $60,000 upfront. The remaining 20% down payment ($240,000) can be paid in cash or CPF (OA), provided you are eligible for a 75% loan to cover the rest of the purchase price.
Singapore citizens are exempted from Additional Buyer’s Stamp Duty (ABSD) if the condo is their only property. However, you must pay the Buyer’s Stamp Duty (BSD) of $32,600, which can be deducted from your CPF if you are getting a new development.
Applicable to both Scenarios –
Other small fees, such as valuation fees and legal fees, will add up to about $3,000. In some cases, you can pay legal fees with CPF.
At this point, the amount needed is approximately $60,000 in cash and roughly $275,600 in CPF funds or cash. After you have paid this amount in full, your bank will cover the remaining 75% (assuming your bank offers full financing).
It is required that your income meets the Total Debt Servicing Ratio (TDSR)
It is required that your income meets the Total Debt Servicing Ratio (TDSR). All of your monthly loan repayments (home loans, car loans, student loans, etc.) cannot exceed 55% of your monthly income. This is due to the Total Debt Servicing Ratio (TDSR) framework, which was introduced to reduce overleveraging. Furthermore, if you earn variable income (e.g. through sales commissions), an additional deduction will be applied. TDSR limits are calculated by assuming your income is 30% lower than it actually is.
What are the other costs of owning a condo before 30?
- Living a life of sacrifice. People tend to set aside more money than most because they are afraid that their CPF will deplete more quickly. Then there is the cost of maintenance, taxes, and other expenses that come with owning a condo. By having a smaller house, you will have more money to play with and this money can be used for things like holidays. If you have plans to own a condo by 30, you must be prepared to live a life full of sacrifice and have a future-oriented mindset
- The difficulty of settling down (if you buy a condo purely as an investment) In the event you decide to settle down, a condo you have acquired only for investment purposes may present difficulties. If you decide to settle into your condo, you would have lost the rental income – making it tough for you to cover the loans and other costs. Furthermore, a small condo unit may not be able to accommodate a family. Furthermore, you can’t buy a HDB flat while still owning a private property.
When you decide to buy a condo by 30 it’s important to keep in mind that you will need to begin (and keep paying off) a property loan throughout your lifetime. Interested in buying a condo soon? Get in touch with me today to find out more!