Affording a house in Singapore can be a significant financial undertaking, given the high cost of real estate in the city-state. Here are some tips to help you plan and save for a home purchase:
1. Set a Budget:
- Determine how much you can afford to spend on a home. Consider your current income, existing expenses, and potential future financial obligations.
2. Save for a Down Payment:
- Singapore has regulations in place that require homebuyers to make a substantial down payment. Currently, it's typically 5-25% of the property's purchase price. Start saving early to meet this requirement.
3. CPF (Central Provident Fund) Usage:
- Singaporeans and Permanent Residents can use their CPF savings to fund the purchase of a home. Understand the CPF rules and how much you can withdraw for this purpose.
4. Explore Housing Grants:
- The Singapore government offers various housing grants, such as the Enhanced CPF Housing Grant (EHG) and the Additional CPF Housing Grant (AHG). Check your eligibility and apply for these grants to reduce the financial burden.
5. Consider HDB Flats:
- Housing Development Board (HDB) flats are more affordable compared to private properties. Explore the various HDB options available, keeping in mind the eligibility criteria and resale restrictions.
6. Financial Planning:
- Work with a financial advisor to plan your finances and investments. This can help you maximize your savings, manage debts effectively, and make informed decisions about your property purchase.
7. Explore Loan Options:
- Research and compare mortgage loan options from different banks. Consider factors such as interest rates, loan tenure, and repayment terms to find the most suitable loan for your situation.
8. Increase Income:
- Explore opportunities to increase your income, such as career advancement, side hustles, or investments. A higher income can contribute to a faster accumulation of savings.
9. Invest Wisely:
- Consider making strategic investments to grow your wealth over time. However, be cautious and seek professional advice to ensure that your investment strategy aligns with your financial goals and risk tolerance.
10. Plan for Additional Costs:
- Factor in additional costs associated with home buying, such as legal fees, stamp duties, renovation expenses, and ongoing maintenance costs. Planning for these expenses will prevent financial surprises.
Take for example myself. Myself and my wife bought a HDB 4 room flat back in Aug 2011. We got our hdb flat in Dec 2015. Around 4+ years before we got our Flat. I recall we got a mortgage from HDB at the concessionary rate of 2.6%. At that point of time i was tempted by the low interest rate of 1.0+ interest as compared to hdb loan of fixed 2.6% which is 0.1 % higher than the prevailing of Ordinary rates 2.5%. However considering that we can do top up or partial capital repayment, we did not take up any bank loan. Instead we opt for the hdb loan. We loan about $185k from HDB in year Dec 2015. Take note that HDB will empty out whatever CPF ordinary that you have before granting you the loan amount. Our monthly payment comes up to $800 per month for 27 years. After which every year from 2016, 2017, 2018, 2019, we do partial capital repayment on the excess ordinary that we accumulate. We can see the loan amount is automatically recalculated with years of interest saved. And our repayment period was also shorten drastically. We only stop the partial capital repayment when we find that we can earn more interest by transferring the ordinary to special account (the first 60k of combined balances will earn 1% extra) Fast forward in year 2024, our mortgage is 45k+ which i estimate we will be able to clear our mortgage in year 2025 as we focus on maximizing our special account for year 2024.
Although we could have save interest back in 2015 obtaining bank loan at interest rate of 1.5%+. We will lose the flexibility of partial capital repayment, as bank loans have fixed term of 3 years. And housing loan interest rate may not stay low forever. Take for example US fed rate increase interest rate in year 2022 to 2023. The loan of housing has gone up as per below table. Extracting the table from Singsaver. My recommendation will be to take the hdb loan if you are going for hdb flat. Stretch to the longest period and do partial capital repayment for every year. The first few years doing partial capital repayment will enable you to shed years of interest payment.
| Bank | First year Interest rate | Lock-in period |
| Citibank 3M SORA | 2.67% + 0.65% p.a. | 2 years |
| Citibank 3M SORA | 2.67% + 0.95% p.a. | 2 years |
| DBS CPF Home Rate (CHR) | 2.50% + 0.10% p.a. | 3 years |
| DBS 3M SORA | 2.67% + 1.00% p.a. | 2 years |
| DBS Bridging Loan (no lock-in) | 4.25% p.a. | NA |
| Maybank 1M SORA | 3.00% + 0.80% p.a. | 1 year |
| Maybank 3M SORA | 2.67% + 0.80% p.a. | 1 year |
| OCBC Eco-Care Home Loan (3M SORA) | 2.67% + 0.98% p.a. | 1 year |
| Standard Chartered HDB Bridging Loan (3M SIBOR) | 3.92% + 2.00% p.a. | Not specified |
| UOB 3M SORA | 2.67% + 0.70% p.a. | 2 years |
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