Are you thinking of purchasing your second property? Whether you want it as an investment, for your retirement or just a getaway home, careful planning is a must, particularly if you are considering to take a housing loan.
You have to consider several rules of second property ownership as well as compare mortgage rates in Singapore for the best deal.
Here’s what you need to consider before buying your second property.
Re-familiarise with the Housing Rules
Before you take any step in looking for an additional property, it is imperative to acquaint yourself with the latest Monetary Authority of Singapore (MAS) home ownership rules. Multiple property ownership in Singapore is controlled especially for HDB and EC property owners.
You would not want to go through the entire process only to hear that you do not qualify according to the MAS rules at the eleventh hour.
Confirm Your Eligibility to Purchase Private Property
As you check out the MAS rules also keep a keen eye on the eligibility criteria for owning private property. If you already own an HDB flat or a DBSS flat, you must first exhaust the Minimum Occupational Period (MOP) before you are eligible to purchase private property. Currently, the MOP is five years, and if you are a permanent resident in Singapore, you will be required to sell your flat within six months of acquiring private property.
However, if your first home is private property or acquired through the Housing and Urban Development Company (HUDC), these restrictions do not apply. You can start to compare the mortgage rates in Singapore.
Check out How Much You Can Borrow
Now that you want to compare mortgage rates in Singapore, first ascertain your qualification value for in your second housing loan. Banks will take you through the standard evaluation criteria where they assess your total debt servicing ratio (TDSR). However, if you’re purchasing an HDB flat, your TDSR cannot go beyond 30 percent of your gross income. Also, the bank will assess your loan to value (LTV) ratio. LTV for second homes drops to 50 percent for loan tenures that extend to 30 years. If the tenure extends beyond your 65th birthday, the LTV will decline further to 30 percent.
Consider How Much You Will Need to Fork Upfront
You may be clear on the rules, eligibility and how much you can borrow but you are not quite there. You need to consider how much you will to fork out as down payment. Whereas on your first property you paid a 5 percent down payment, on your second property you’ll need to shell out a massive 25 percent of the property’s valuation limit. Fortunately, you can use your CPF to pay for your second home, provided you have met the Basic Retirement Sum (BRS).
Consider the Impact on Your Taxes
In addition to the higher LTV ratio, higher TDS ratio, and large down payment requirement, you will still require paying more taxes. You will pay an extra 7 percent as additional buyer’s stamp duty (ABSD) levied on the property value or purchase price as well as the progressive tax rate.
In conclusion, purchasing your second property can be tricky, especially when you think about the above issues which you must consider. Feel free to contact us and we can help you get through the red tape and compare mortgage rates for the best deal.