Buying property would probably be one of the most expensive item you going to own in your life. Hence, it is inevitable that the journey of purchasing your first property may seem to be a daunting task.
The following tips that I am going to share will assist you to navigate the process and avoid common mistakes.
1. Pay off all the Debts
2. Determine your affordability
3. Get In Principal Approval for a Loan
4. Save up for down payment
5. Save up for closing cost
6. Deciding what you want
7. Home finding
1. Pay Off ALL the Debts
Under the rule of Monetary Authority of Singapore (MAS), all financial institutions (FIs) are require to ensure all borrowers are within their thresholds for Total Debts Servicing Ratio (TDSR) and Mortgage Service Ratio (MSR).
As such, in order to get a housing loan, your financial standing will be reviewed by these two systems in Singapore.
Total Debts Servicing Ratio (TDSR)
TDSR refers to the percentage of borrower’s monthly gross income that is used to service borrower’s all monthly debts liability.
The formula of TDSR is: Borrower’s monthly debt obligation / Borrower’s monthly gross income X 100%
The highest allowable TDSR is 60%.
Monetary Authority of Singapore (MAS) implemented TDSR to ensure borrowers are not over over-stretching themselves by borrowing too much to finance their property.
Nonetheless, TDSR is used to curb property speculation where investors borrow a crazy huge amount to buy multiple properties.
Therefore, it is advisable that you repay all your debts if you have credit card debts, personal loans or student loans. Likewise, if you do not own a car yet, it is advisable that you only decide to own a car after you made your purchase of the house so that the car loan will not be calculated in your TDSR.
For more information on TDSR, you may visit here
· Mortgage Service Ratio (MSR)
Unlike TDSR, MSR is another stringent system that applies only to housing loans for purchase of HDB flats or executive condominium (EC) bought directly from developer.
MSR refers to the percentage of borrower’s monthly gross income that is used to service borrower’s all property loans as well as the loan being applied for.
Currently, the maximum MSR is capped at 30% of borrower’s gross monthly income.
The formula of MSR is: Borrower’s monthly repayment instalments of all property loan/ Borrower’s monthly gross income X 100%
Do note that if you are a guarantor, you will be subjected to at least 20% of the monthly debt obligation for any property loan.
Therefore, before you own your own property, do not be a guarantor of other’s property loan.
For more information on MSR, you may visit here:
2. Determine Your Affordability
This is one of the most important steps!
Approach a financial institution to determine how much you can loan. It can be a private banker, a broker or to submit a HDB Loan Eligibility (HLE) application here:
My humble advice to first time buyer is never to over stretch your budget. It is true that price are increasing and cooling measure may continue to set in to cool the market, however, over-stretching your budget may result to many undesirable consequences
You should always plan for the worse scenario of a financial downturn. During a financial downturn, the bank may call owner to top up the valuation limit. Therefore, It is advisable to plan to have a buffer in their CPF to make the instalment in the event they lost their job
3. Get In Principal Approval for a Loan
Getting a verbal approval from the banker is not good enough as private banker may not have fully access your financial status.
Thus, provide the entire necessary document to the banker and get a In-Principal Approval (IPA) from the bank on the eligibility of the loan. The validity of the IPA is approximately 3months.
If you are taking a HDB concessionary loan (HLE), it is valid for 6months.
Either way, it is important to have the IPA from bank or the HLE approval from HDB loan before you proceed with your house hunting or to place a deposit.
4. Save up for down payment
Many of us are CPF rich but cash poor. However, in order to purchase a house, it is important to build up our cash for the down payment.
Many first time home buyers may be caught off-guard by the fees incurred by the properties. Thus it is important to keep our cash flow management on track by being equipped with all the information of all the costs and be ready to finance it.
How much cash do you need for your down payment?
For more information about the HDB loan, you may click here:
5. Save Up For Completion
As important as you can initiate an offer to purchase, you need to be able to complete the entire transaction by being able to pay for the cost of completion.
Thus, you need to time the completion date well if you are buying a resale property or you need to get ready of the fund prior to the key collection of your new flat.
The following are the cost you may need to prepare during completion date:
Valuation Fee
HDB Submission Fee
Legal Fee
Home Insurance premium
Property Tax
Miscellaneous Fee
Maintenance Fee
Agency Fee
Renovation Fee
6. Deciding what you Need
Who doesn’t want to stay in a luxurious apartment and enjoy all the facilities? Let’s be realistic!
Regardless of what you want, you need stick to your budget
7. Home finding
Other than the type of property you want, you need to understand your objective of buying. While most first time buyer are buying for own stay to be near good school or near parent, there are some buyer who buy for their property merely for investment.
Consequently, the objective will determine the location and size of the unit required for the specific purpose.
It is important to understand your needs from the start before your start your home hunting process so that you will not waste time looking at property that do not need your criteria or missing out the property that you like because you have taken too much time home viewing.
Here are the summary of the options available.
In Summary
It is never a stress-free process when it comes to buying your first property.
You need to equip yourself with more knowledge before making an informed move. Any mistake made during this process can result to huge capital loss.
I have assisted many of my friends, and clients throughout the whole complex process of buying their first property through a detailed property wealth planning. This ensures that they make informed decision and prevent them from making avoidable mistake.
Do you need more clarification?
If you are not clear about your current situation or what are your options available or you need more information before taking action, feel free to contact me.
I do provide a Free consultation for couples who wishes to make changes to their property portfolio but not sure how to go about it
Click Whatapp to get in contact with me for a 1 time free 30min Property Wealth Planning (PWP) consultation.
A PWP consultation includes the following:
A detailed financial affordability assessment
A clear and customised investment road map for your real estate investment journey.
About the Author
Maine Soh holds a Bachelor’s Degree in Real Estate from NUS and has more than 10 years’ experience working as Real Estate consultant. While focusing on sales, she has attained consistent Top Achiever awards.
She has been known for being well versed with all the marketing strategy and tools. She will constantly make diligent effort to be updated with all the new trend and digital marketing platform to enhance the sales.
She has assisted many of her clients throughout the whole process successfully by making informed decision and prevented them from making avoidable mistake.
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