How much can you afford?
This is a common step that most buyers forgot about it. Before you go to popular property sites like property guru and other portals advertising your property, you need to know what is a suitable or comfortable housing budget based on your income or family household income and current financial commitments. It is important step to know how much is your monthly mortgage repayment cost so that you will not feel stretched in the long term worrying if you have sufficient money for your kids or even for holiday plans.
Many buyers think also think that they could afford more based on their income without considering other expenses. Therefore, some buyers will feel the pain during rainy days or during emergency.
Other than your flat purchase price, you also need to know other fees that relates to the purchase of your property such as stamp duty, legal fee, renovation expenses which are incurred one time off and other monthly recurring expenses relating to the property such as mortgage repayment cost, utility bills, carpark fee and maintenance fee(if any).
In order to take a housing loan to finance your flat purchase, your monthly loan instalment must not exceed 30% of your gross monthly income. This is a term called Mortgage servicing ratio (MSR) which refers to the portion of a borrower’s gross monthly income that goes towards repaying all property loans, including the loan being applied for.
MSR is capped at 30% of a borrower's gross monthly income.
These limits are in place so that you can have sufficient savings and spending for personal and future needs. It is therefore important to find a balance of having liquid and non-liquidity assets.
Are there grants available for us ?
Yes! There is Enhanced CPF Housing Grant (EHG) of up to $80,000 if you are eligible. The eligibility is determined based on your average gross monthly household income. Both applicant must be working continuously during the 12-month period before and at the time of the flat application and their average gross household income must not exceed $9,000.
Complete the questionnaire for a preliminary assessment of your eligibility for the purchase a new or resale flat, housing grant(s) and an HDB housing loan.
What type of housing loan should we pick?
There are two types of housing loan you can choose, HDB Housing Loan or the Financial Institutions(FI).
If you are planning to take a loan from FI, you will have to pay 25% of the flat’s purchase price as a down-payment when you sign the agreement. 5% is payable in cash while the remaining 20% can be paid in cash or CPF savings. FI can only grant a maximum loan quantum of up to 75% of the purchase price since 2018.
Interest rates also vary depending on the FI. It depends on the loan package (lock in or no lock in), and market conditions. There is no restriction in a bank loan, as you have the freedom to choose any amount in your Ordinary Account (OA) savings as balance and can allow your OA account to continue to grow your savings for retirement.
However, if you choose HDB housing loan, you can use your OA savings to fully pay for your 15% down-payment. The balance of the CPF will use to lower down the Housing loan. The interest rate of an HDB housing loan is currently 2.6% p.a., pegged at 0.1% above the prevailing OA interest rate. You also have the option to set aside a maximum amount of $20,000 in your CPF OA, allowing you to grow your savings at an attractive interest rate of up to 3.5% p.a.
When you have decided on a suitable housing loan, check the terms and conditions and ensure that you have obtained sufficient financing for your intended flat purchase.
How to pay monthly housing loan instalments?