Surrendering to the embrace of wedlock is a transformative decision in the life of every individual just like buying your first property. Both decisions come with long-term financial implications and test your resolve as an individual and a partner.
Thanks to the Fiance-Fiancee Scheme, there has been a massive jump in Singaporean couples taking the leap of faith by applying for a flat together before even getting married. In lieu of the housing crunch and elevated property costs emerging over the past few years, young couples sure of their future together are willing to take drastic steps to avoid suffering the burden of inflation and an oversaturated property market later on.
It is therefore sensible to be alert to the possible pitfalls you can encounter before you decide to go down the road of property investment with your partner. Let us take an in-depth look at some of the key mistakes many Singaporean couples fall prey to while taking this decision:
Taking Financial Overextension for Granted
Young couples love to dream about new beginnings that will eventually lead to a prosperous future shared by them. However, when it comes to doubling down on a property, you need to be wary of factors like future pay scale, lifespan of low interest rates, post-childbirth financial planning, etc.
The Singapore government has been busy unleashing a spate of cooling measures recently, such as limiting the MSR for HDB flats to 30% and capping the TDSR at 60% for all properties. As a result, people with strained credit scores are finding it more challenging to overextend their debt obligations.
De-coupling Home Ownership
The seventh round of property cooling measures introduced by the government facilitated the option of couples purchasing private matrimonial houses in single names without paying ABSD. Even though this solution offers immense financial flexibility, it is imperative to address the variables involved with absolute clarity before embarking on such a path. You have to consider the financial contributions your spouse will be willing to make and if you can trust them for their word since all legal obligations for the property are under your name.
Remember, the ABSD may be merely a temporary cooling measure that can be curtailed when property prices start heavily depreciating. Luckily, HDB properties have clear cut rules for the CPF entitlements for each spouse upon the sale of their flats.
Not Looking Beyond the Initial Interest Rates
Despite the recent stability of mortgage interest rates hovering around the mid-1% mark, it is foolish to solely bank on the initial interest rates offered by mortgage brokers while negotiating with them.
Refinancing is an inevitability many Singaporeans have to confront sooner or later, and factors like employment rates, property market issues, and overall economic conditions may significantly contribute to volatility in interest rates. Pick the housing loan package that offers competitive rates even after the initial years expire so that you are not at a disadvantage when you try to refinance your loan after its lock-in period has passed.
Banking on En-bloc Sales or SERs for Value Growth
Buying a property in the hopes of it being an en-bloc sale prospect or SER (for HDB flats) is one step away from gambling with your finances. There are too many variables involved in the situation that are completely unpredictable and can lead to a derailment of interest from developers.
In case of HDBs, you must take it for what it really is – a property with a 99-year lease whose value ultimately rounds down to zero when its term expires and reclaimed by the government.
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