Food, water and shelter are the three cornerstones of the holy trinity of sustenance; however, one can say without a shadow of a doubt that shelter is the supreme entity we all choose to bow before the rest. Because let’s be honest, if you have the bankroll to finance your home purchase, then it’s not likely that you will be dealing with food and water scarcity for a long, long time.
Singapore has one of the steepest cost of living rates despite its flourishing economy, which is why buying a home is almost as big of a commitment as starting a family. In fact, these two commitments go hand in hand for any individual to comfortably transition to the next exciting phase of their life.
The young urban professionals in Singapore kick-starting their career are dazed and confused with the lack of affordable property options in the real estate market and have to extensively assess factors like location, budget, proximity to the business district, present debt obligations, overall savings, etc. before even thinking about locking into one. However, the million dollar question that crosses everyone’s mind is, “What is the right time to jump in and officially make the down payment for your dream home?”
Despite a host of complex factors that affect your decision making, the truthful answer to that question is – “When you’re financially mature enough to do so”. In case you’re still contemplating the ambiguity of this statement, we’ll clear that out for you in a moment. In the meantime, a more pragmatic suggestion for Singaporean property chasers would be to try purchase their new home right after marriage rather than in their single days, especially if it’s private property and not an HDB flat.
Now let us guide you through the essential requisites that can fast-track your journey to making the downpayment for your dream home.
Stay Frugal, Stay Ahead
In this consumerism-obsessed world, a natural taste for frugality in living expenses can be one of the strongest assets for a young Singaporean professional. People tend to be more complaisant when they start their career with minimal debt obligations and no family expenses to take care of.
However, it’s the ideal period to maximise your savings and be as credit-free as possible before you apply for a home loan. It helps improve your credit history and open up more attractive loan repayment schemes for you to choose from once they observe that you have a healthy TSDR and LTV ratio.
Pick a Downpayment Rate that Suits YOU
Picking the perfect home loan is subjective to your financial status, which encompasses a plethora of variables that are unique to each person. Luckily, Singaporeans have the power to finance their home loan downpayment and repayment costs with their personal savings as well as their CPF Ordinary Account savings.
Housing loan downpayment rates depend on whether you have opted to buy an HDB flat or a private property. Here’s a more elaborate breakdown of downpayment rates for different cases:
- For an HDB loan from HDB – 10%
- With no outstanding loan, for an HDB flat/private property for a term less than 25 years – 20%
- With no outstanding loan, for an HDB flat/private property for a term greater than 25 years – 40%
- With 1 outstanding loan, for an HDB flat/private property for a term less than 25 years – 50%, 70% for private property.
- With 1 outstanding loan, for an HDB flat for a term greater than 25 years – 60%, 80% for private property.
Investing to Secure Your Downpayment
Once your loan repayment cycle kicks in and family expenses spike up, it becomes almost impossible to proactively set aside savings when you’re too busy manoeuvring through a heavy credit-dependent lifestyle. This is where Singaporean banking schemes come to your rescue by offering you a Save As You Earn account that automatically diverts a fixed portion of your monthly salary to your savings account.
Certain share building plans that utilise the Dollar Cost Averaging strategy are also highly advantageous to financially inexperienced investors who want to earn healthy profits without requiring. It can help you maximise your savings enough to pay off a significant chunk off your home down payment. Since stock markets conventionally lead the property market by 3-7 months, it’s a safe bet that you can buy your house at cheaper rates if you were able to properly sell high during the stock market’s boom period.
For more financial insights and economic optimisation strategies, visit imoney.sg and learn how to treat your money right.
This article was first published on http://business.asiaone.com/
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