Buying a house in Singapore is a tedious process. It may also be the biggest purchase of your life. Thus, you must carefully weigh down your decisions.
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To help you with your house hunting, here are ten steps that you should follow:
Step 1: Consider Where You Want to Buy a Property
Before you jump in to buying any properties, it is always best to conduct thorough research first.
The two things you have to look into are:
- The area where you want to live; and
- The type of property you want
Check the Market History of Your Desired Area
Some property experts would say that any time is a good time to buy a property.
It’s not advisable to buy a house in Singapore when the property market is at its peak. That’s because you might end up buying an expensive house and selling it cheap.
So, consider buying a property when the market is coming to a low point.
How would you know when the market bubble is about to pop?
- When there are news of decrease in property prices as well as number of sales
- When there’s an increasing number of “sandwich” class HDB flats popping up
- When the government is considering (or implementing) cooling measures; and
- When creative home loan packages are becoming more and more apparent
You should also dig deep on your desired area’s market history. Doing so can help you big time when you start making an offer.
Determine the Type of Property You Want
When buying a house in Singapore, it’s also important to know the different types of properties available in the market:
HDB Public Housing
HDB stands for Housing Development Board. It is also used to describe any government housing in the Island Republic.
In fact, about 80 per cent of Singaporeans live in HDB public housing. However, this property is only available for the citizens.
This is a type of public-private hybrid property. That’s because HDB issues ECs, but features design and facilities akin to a private condominium.
ECs come with a five-year Minimum Occupation Period, meaning you have to live in it for at least five years. After that, you will be granted the rights to sell your property in the open market.
This type of property is available to citizens and private residents. As for foreigners, they can buy an EC 10 years after the completion of its construction.
This type of property is the luxurious version of an HDB flat. It is also a popular choice among expats, as they don’t have restrictions on foreign ownership.
The following are sub-types of a private residential property:
- Condominiums: Condos come with provisions such as swimming pools, tennis courts, gym, and security.
- Apartments: Similar to condominiums but are part of a smaller development. Thus, they only feature less generous amenities.
- Walk-up: This is a low-built apartment or condominium, and doesn’t include a lift.
A landed house comes with a lot. It is definitely incomparable with a condo or an HDB flat, although it requires huge maintenance.
Step 2: Determine How Much You can Afford
So you have your desired area and type of property in mind. The next thing you need to do is determine how much you can afford.
When calculating how much you can afford, always take the following into consideration:
- Your age
- Your type of residency (Singaporean, Foreigner, or Permanent Resident)
- Your gross income
- Your available funds (In hand and through CPF)
- Your debt obligations
- Your existing property loans
- Your loan tenure
- The type of property your want to buy ; and
- The type of purchase you’re going to make (joint or single)
Besides, there are other government fees and duties and that you need to include in your computation. For a more thorough calculation, it is best to seek the advise of a professional property agent.
Step 3: Take Note of Property Valuation
Property valuation, or real estate appraisal, is sometimes used to set a sale price for a property.
It is important that you check the indicative valuation of the property you want to buy. That’s because it can affect the amount of loan that you can get.
If this will be your first time to apply for a house loan, keep these three points in mind:
- Loan-to-Value limit is 80%
- It becomes 60% if the loan tenure exceeds 30 years
- It is also 60% if the loan period exceeds your retirement age of 65
Step 4: Secure an Approval-in-Principle (AIP)
House hunting in Singapore is like going to a restaurant, buying and eating as much food as you can, and then realizing that you forgot to bring your wallet. The only difference is that you don’t get to wash the dishes. You’ll lose thousands of dollars instead.
Before you get the chance to buy a house, it is important to secure an Approval-in-Principle (AIP) first.
In the Island Republic, you shell out some money for a booking fee of one per cent. So if the house you’d like to buy costs SGD 1,000,000, the booking fee would be SGD 10,000.
You have two weeks to one month to pay the rest. However, you should also secure a loan from the banks during this time. Otherwise, your booking fee will be forfeited.
This is where your AIP comes in. It is a bank’s promise to lend you a certain amount of money with the promise of buying a house for a particular time frame.
How much does it cost to get an AIP? Nada!
It’s free and you can simply ask for it from your bank of choice.
Step 5: Know the Mortgage That Suits Your Situation
It’s a no-brainer that applying for a mortgage can pose concerns. This is true when you’re taking into consideration the amount of interest you’ll end up paying.
After all, a house in Singapore doesn’t come in cheap. The expected down payment is around 20 per cent of the full price of the property. So if the house you’d like to buy costs SGD 1,000,000, your down payment would be SGD 20,000.
Although it is difficult to compute for monthly mortgage, it takes the interest rate and loan term into consideration.
Step 6: Save Up for Down Payment
As mentioned earlier, buying a house in Singapore would need a down payment of around 20 per cent. According to MoneySense:
“How much you pay and the amounts payable in cash and from CPF savings depend on the value and type of property you buy, whether you have an existing housing loan, as well the tenure of loan you intend to take.”
In addition, HDB offers two types of down payment schemes:
- Staggered Down Payment Scheme, which is available for first-time couples and flat owners who are right-sizing in non-mature estates (or properties that are newly built).
- Deferred Down Payment Scheme, which are available for flat buyers aged 55 years old and above.
Step 7: Consider Your Property’s Rental Yield
When buying a property, is it important to always think long-term. Thus, you also have to consider your house’s rental yield. Think how it easy it will be to rent your place, as well as how much you can charge.
Thinking of buying a house for investment? Your safest bet would be buying properties in prime districts like the Central Business District.
However, keep in mind that the Urban Redevelopment Authority (URA) prohibits homeowners from renting their properties shorter than six months.
So, if you’re thinking of posting your house on AirBnb, better forget about it. Otherwise, you’ll incur a fine of SGD 200,000 and be imprisoned for up to a year.
Step 8: Seek Professional Advice
Since 2013, about 25 per cent of HDB buyers and sellers have bought and sold units without seeking the help of a property agent.
While citizens are becoming more and more savvy in buying and selling a property, seeking professional advice could still come in handy. Especially if you’re a first-time home buyer.
Sure, it’ll cost you money, but a real estate agent will work to get you the best deal. They can provide you information on the property market, the neighbouring area, and the buying process.
Buying a house in Singapore is a long and tedious process. A property agent can help you go through necessary paperwork. They can also represent you when negotiating and making an offer to buy a property.
Step 9: Conduct a Home Inspection
How can you say if a particular house is something you want to live in?
Aside from the price, the area, and amenities, it is also important to conduct a home inspection.
You also need to consider the property’s layout. Is it ideal for the size of your family? Is it ideal for a multi-generation family?
What about the plumbing, electricity, and water source. Does the property have provisions for air conditioning and Wi-Fi installation?
How accessible is your house from work, school, and mall?
Conducting a home inspection allows you to make a shortlist of houses that you can buy.
Step 10: Make an Offer and Negotiate
So you now have a shortlist of properties that you can possibly buy. The next step is to seek the help of your property agent to make a fair offer for you.
Does the house has a previous owner? If yes, see whether he’s in a hurry to sell his property. There’s a high chance that he’d be willing to sell the house for a lower price. The same thing goes if he’s been selling it for a long time.
The steps indicated here are preliminary. As previously mentioned, buying a house in Singapore is a long and tedious process. Not to mention that it comes with government fees you need to pay.
Nonetheless, celebrate! After all, you’ve finally found your ideal home.
Are you a homeowner? Or, perhaps, buying a house? Share your experience in the comments section below!
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