Guide to buying a new home?

Buying a home is big financial commitment that needs careful planning. What you can afford depends on your income, expenses, debts and savings as well as the amount you will be eligible to borrow.

CPF Usage for Buying Your Home

You can use OA savings in your CPF for buying your home, subject to several conditions. CPF Savings can be used for different payments for your home.

Down Payment

If you do not have any existing property financed with CPF, you can use all your OA savings upto the lower of the purchase price or the valuation price at the time of purchase.

Repayments

You can use CPF to pay the EMIs for your loan. The maximum amount you can use from your CPF for your property is lower of the purchase price, or the valuation price at the time of purchase. You can use an additional 20% after you've reserved aside the BRS sum in your CPF. These sums change if the remaining lease of the property will run out before you turn 95 years old.

Stamp Duty, Legal Fees and other related costs

CPF savings can be used to pay the stamp duty and survey fees. However, monthly service and conservancy charges, and other charges related to the use of the property, including taxes, cannot be paid with your CPF savings. As stamp duty is payable within 14 days from the date of the sale and purchase agreement or the date of acceptance of the option to purchase, you may need to use cash to pay the stamp duty first. Subsequently, you can apply for a one-time reimbursement from your CPF account together with your application to use your CPF savings to buy a property.

Maximum Home Loan & Total Debt Servicing Ratio (TDSR)

Total Debt Servicing Ratio or TDSR governs the maximum home loan amount.

Use TDSR Calculator open_in_new to check your affordability.

Maximum Home Loan Percentage

The maximum home loan percentage you get

Stamp Duty

You will need to pay Stamp Duty when you buy a house. The amount of stamp duty payable depends on the purchase price or market value of the property, whichever is higher. There are two components of duty - Buyer's Stamp Duty (BSD) and Additional Buyer's Stamp Duty (ABSD).

Use Stamp Calculator Calculator open_in_new to determine the stamp duty for your new home.

Buyer's Stamp Duty (BSD)

The stamp duty rates for residential properties are as follows:

• 1% on the first $180,000
• 2% on the next $180,000
• 3% on the next $640,000
• 4% on the next $500,000
• 5% on the next $1,500,000
• 6% on amounts exceeding $3,000,000

Additional Buyer's Stamp Duty (ABSD)

ABSD is an additional stamp duty payable by certain categories of buyers, such as foreigners, entities, and Singaporeans purchasing second or subsequent residential properties. The ABSD rates range from 5% to 35% depending on the buyer's profile and the number of properties owned. Use Stamp Calculator Calculator open_in_new to check your stamp duty obligation.

In-Principle Approval

An In-Principle Approval (IPA, sometimes referred to as AIP or Approval In-Principle) is an agreement with a bank. Based on your credit history and financial health, a bank will assess your eligibility and pre-approve your home loan.

There’s no actual loan that takes place when you get an IPA; rather, it’s a guarantee that the bank will extend you the loan when you need it. An IPA is NOT a commitment that you’ll take up a loan from that bank, so if the interest rate is revised upwards and/or you find a better rate etc, you can let the IPA lapse or apply for your home loan from another bank.

It works the other way as well. If your financial situation suddenly changes, the bank reserves the right to reject or cancel your loan application or IPA.

It’s easier and faster to find your dream home and you already know what you can afford (and you won’t end up disappointed that you cannot afford a certain property). An IPA typically lasts for 30 days.

Apply for IPA open_in_new at zero cost for you, while you research to get the right home for yourself.

Now that you have done your financial planning, and even secured your IPA you can start looking for a home that meets your budget and preferences. There are several portals like Property Guru and 99 Group which offer an enormous inventory of homes to shortlist.

You can also work with reputated Estate Agenets from companies like PropNex, ERA, Huttons to help you find tha right property. While it's not compulsory for you to have a agent, the property agent will look out for your interests. Typically, in Singapore market, the property agent will not charge any money from you, but will secure the commission for their services from the seller after the deal is confirmed.

This is the most exciting part where you visit the showflats with your agent, view the resale units, and negotiate!

Secure You Home Loan

In case you've already secured your IPA and happy with it, provide them with the copy of Option-To-Purchase and formalize the loan for your chosen property.

Apply for Loan open_in_new at zero cost for you, while you research to get the right home for yourself.

Interest Rate for Loan

Home buyers who believe that interest rates will continue to rise want to opt for fixed rate loans. Others believe that the rates have gone up substantially and have little runway to go much higher. For them, it makes sense to go with the floating rates. Those who prefer predictable cash flow will should also go for a fixed rate loan.

SORA Rate

SORA (which is the Singapore Overnight Rate Average) is the volume-weighted average rate of actual borrowing transactions in the unsecured overnight interbank SGD cash market in Singapore. It is administered by the Monetary Authority of Singapore (MAS), and published at 9am on the next business day in Singapore.

The phrase “volume-weighted average” simply means that the calculations consider the actual amount being lent. Think of it this way: when calculating SORA, the interest rate for a S$100 million transaction is 5 times more important than the interest rate on a S$20 million transaction. SORA is the new benchmark interest rate introduced by the MAS that will replace the Singapore Interbank Offer Rate (SIBOR) and Swap Offer Rate (SOR) when they are phased out by 2024. Even if you have an existing home loan that is pegged to the SIBOR or SOR, you will have to switch over to a SORA-based one if your loan period ends after that.

Payment Schedule for a Resale Home

Stage 1

• 1% - Option fee - Day 1 - Cash
• 4% - Exercise fee - 14 Days - Cash
• Legal fee - 14 Days - Cash or CPF OA
• Buyer's Stamp Duty (BSD + ABSD) - 14 Days - Cash or CPF OA

Stage 2

• 95% - Completion at Law Firm - About 10 weeks - Loan or Cash or CPF OA

Payment Schedule for a New Home

Stage 1

• 5% - Option fee - Day 1 - Cash
• Legal fee - 14 Days - Cash
• Buyer's Stamp Duty (BSD + ABSD) - 14 Days - Cash or CPF OA
• 15% - Down payment - Within 8 weeks - Cash

Stage 2

• 5% - Completion of Foundation work - Cash or CPF OA
• 5% - Completion of Foundation work - Cash or CPF OA or Bank Loan

Stage 3

• 10% - Completion of Reinforced Concrete - Cash or CPF OA or Bank Loan

Stage 4

• 5% - Completion of Brick Wall - Cash or CPF OA or Bank Loan

Stage 5

• 5% - Completion of Ceiling / Roofing - Cash or CPF OA or Bank Loan

Stage 6

• 5% - Completion of Doors & Windows Frames, the Electrical Wiring & Plumbing & Internal Plastering - Cash or CPF OA or Bank Loan

Stage 7

• 5% - Completion of Car Park, Roads and Drains - Cash or CPF OA or Bank Loan

Stage 8

• 25% - Obtaining Temporary Occupation Permit (TOP) - Cash or CPF OA or Bank Loan

Stage 9

• 15% - Upon Production of the Certificate of Statutory Completion (CSC) - Cash or CPF OA or Bank Loan

Legal

You will need to engage the services of a conveyancing law firm while taking out the loan. They will represent you and communicate with multiple parties and make sure the paper work is done as per the process.