Home ownership is an extremely time and resource consuming venture and it’s no surprise that many people put it on par with other life decisions such as marriage or childbearing. Therefore, the decision should be made with plenty of forethought and planning.
Many Singaporeans often consider home ownership after marriage. This is because it is easier to handle the financial aspect with a combined income as opposed to a single income. Besides, couples enjoy several tax rebates and the thrills of running a joint project.
Here’s a quick view of how young Singaporean couples can finance their first home.
Before you can figure out how to finance your first home, it is critical to have a reasonable estimate of the cost your first home. Also, you should know the size, location and your eligibility for the target home you intend to purchase.
Financing the new home is mostly a budgeting issue. You should have sufficient cash to pay for at least the minimum 5% in the down payment and necessary cash flow to finance a further 5-15% of the remaining part of the down payment. You should also perform a prequalification for government support programs such as housing grants, which range from $ 5,000 to $ 80,000, and HDB loans.
The Housing Development Board in Singapore is a state agency under Singapore’s Ministry of National Development that overlooks the development of homes and oversees enforcement of housing standards.
They also offer concessionary loans capped at a ceiling of 90% of the home value.
To qualify for a HDB loan, young couples in Singapore will have to apply for a HDB Loan Eligibility letter and submit it during lease signing. Also, couples seeking access to this aid must have at least one partner who is a Singaporean Citizen. Their choices are also limited according to their income, home size or location restrictions of the HDB criteria and have sufficient cash flow and in their CPF ordinary accounts.
If you are not qualified for a HDB loan, another excellent way young couples can finance their first homes is through bank loans. Banking is regulated by the Monetary Authority of Singapore which sets guidelines on loan terms, qualification and eligibility.
Unlike the HDB, each bank determines the interest rate its loans will have. However, most banks limit their loan terms to a maximum of 25 years and cap loan value at 80% of the purchase price. There are instances where banks can stretch the loan term beyond 25 years but don’t exceed 30 years. In such cases, the loan value is capped at 60% of the purchase price.
Bank loans are popular means to finance first homes because banks have more flexible packages which you can take advantage of during favourable market conditions. Comparing housing loan rates in Singapore is a critical step before deciding on a loan from a specific financial body.
Financing the first home is an exciting venture for young couples. Before you take up any of the loans mentioned above, it is crucial to assess your income and expenditure. As a rule of thumb, your expenditure commitments, including personal loans and credit card payments should not exceed 60% of your gross monthly income.