Think you've done enough research to buy your first home? Think again.
You and your partner have made the decision to take a leap of faith and live together. You've seen the average house price in Singapore. You've balloted and got your BTO. You can just hear the keys jangling and feel it land in your hands. You've worked out the budget and everything seems to be going according to plan. Then you see the total initial cost.
Oh crap. That's way higher than I expected.
Sounds like the stuff of nightmares? We wouldn't wish this on anyone. It's not that you were naive, or willingly ignorant. There's just more to it than you might have first imagined.
Let's imagine you wanted to buy a 4 room HDB flat in Bukit Merah for S$550,000. Let's also assume that in your marriage, one of you is a Singaporean citizen and the other holds PR or is a foreigner.
It's ok if you don't know which property you're going for immediately. The Option to Buy allows you to put down an exclusive bid that acts as a security from anyone else bidding. It lasts for 14 days and normally costs 1% of the property's value (for the flat in question, that's S$5,500). This might be necessary if you a bit more time working out final details in your budget or need to conduct further background checks to settle any doubts.
You can choose to forgo the Option to Purchase fee if you're really sure the property is going to be your first choice for your first home. Lawyers or the property agent will prepare the contract with all the important details, like when the property will be completed (if a BTO unit), the start of the contract and length of payment as well as the other pertinent details. This normally costs between 5% and 10% of the property's value - so if we assume 10% for the Bukit Merah flat, that's $55,000.
Note: If you paid the Option To Buy and then committed to purchasing the flat, the 1% you paid will be deducted from the down payment.
As with most large purchases, you need to put down a cash deposit as security. You can choose anywhere from 10% to 20% of the property's value. Most people choose 20% - S$110,000 for your Bukit Merah flat. It might seem like a lot of cash, but the more you pay up front now, the less you pay off in monthly mortgage payments for the residual value.
The Inland Revenue of Singapore's (IRS) Stamp Duty calculator is really useful for this. You always need to pay stamp duty, and how much you pay is split up by different pricing tiers according to the value of the property.
1st S$180,000 = 1%
2nd S$180,000 = 2%
Next S$640,000 = 3%
Next S$1,000,000 = 4%
If we take your flat's value of S$550,000 as the example, we'll break it down like this.
1st S180,000 = S$1,800
2nd S$180,000 = S$3,600
Remaining S$190,000 = S$5,700
Altogether, you're looking at paying S$11,100 for stamp duty.
Since this is your first property, this doesn't affect you. Also, the residency status of your marriage means you aren't liable to pay ABSD.
However, if you're an individual or corporate entity purchasing the property, you own more than one property or the residency status of the couple means neither are Singaporean citizens, you need to pay additional ABSD fees on top of the standard stamp duty fees.
This is payable to IRS and is no more than S$500. It's one of the smallest fees you need to worry about! But it's a necessary fee to secure the mortgage documents.
For the advice and administrative assistance from lawyers from the bank, they normally charge S$2,500-S$3,000. You can find a private lawyer on your own to handle the background checks, but prices will vary. Legal fees can be paid using your CPF funds or in cash.
Again, it's a small fee to pay, but it is unavoidable. You will need the bank to do a valuation of the property in order to qualify your loan. Once they're happy that the loan amount you're asking for roughly matches the property value, you're good. Usually between S$200 and S$500.
Although this isn't compulsory, you might be considering redoing parts of your home. It's not uncommon either, as many Singaporeans are looking to increase their property value. We need to let you know that the prices range massively, depending on what you want to do and the types of material you're ordering.
For a simple, basic renovation involving only the kitchen and living area, it will only cost S$14,000. Which is nothing compared to a full rework from top to bottom to fully kit out your crib so it's lavish - that can easily go up to S$90,000. On average, people spend S$55,000 on renovations.
We'll bring it all home so it's easier to see. Before, you might have only been thinking about preparing for the down payment and some consultation fees, before preparing to fork out monthly wages for your mortgage.
Option to buy - S$5,500
Offer to purchase - S$55,000
Down payment (20%) - S$110,000 (-S$5,500 from Option to buy)
Buyer's Stamp Duty - S$S$11,000
Stamp duty (mortgage) - S$500
Legal Consultation Fees: S$3,000
Valuation fees - S$500
Renovation fees - S$55,000
Total - S$185,500
We hope that prepares you more for the financial commitment of buying a home, whether that's a flat, condo or house.
Whatever the average house price in Singapore is, now you know much to save to cover initial fees! Share and let your friends know or leave a comment!
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