There’s nothing quite like having a place of your own. Being able to pay for the first home partly through the Central Provident Fund (CPF) allows most Singaporeans to reach this goal.
But it’s still a daunting process. There are different types of homes, location, and mortgage plans to pick from. How should you take these factors into consideration?
Agent or no agent?
A property agent helps you to look for the right property — other than build-to-order Housing and Development (HDB) flats — and guide you through the buying process.
But with listings now on online portals like PropertyGuru, 99.co and omh.sg, an agent may seem redundant.
Hiring an agent boils down to your schedule and expectations. If you’re busy, good agents can help you scout for and shortlist suitable properties through their network, including units that haven’t been listed online. They can also advise you on your payment plan and handle the paperwork.
But you will have to pay them 1% of your purchase price as commission if you buy a HDB flat. For private properties, your agent splits the commission with the seller’s agent.
You could do your own search and arrange the viewings without an agent if you have time. Keep track when new listings come on the market and expect to talk to multiple sellers’ agents during your search.
Public or private?
Most Singaporeans buy a HDB flat as their first property due to the grants and price. But that doesn’t mean you should rule out going private.
Eligibility
Anyone can buy a private property, while HDB imposes conditions on buyers, whether it’s a new or resale flat. This depends on your household income and who the flat occupants are.
Minimum Occupation Period
HDB flats have a Minimum Occupation Period (MOP) of five years to prevent people using these flats as a form of speculative investment. You have to wait five years after living in the flat to sell or rent it out entirely. Individual rooms can be rented out before that.
Private properties do not have a MOP, but there is a Seller’s Stamp Duty if you sell within three years.
Buying a second property
You can buy a private property even if you already own a HDB flat, but not vice versa. Remember this if you plan to buy a second property in the future.
Read more: What is Decoupling and How Can It Help You in Buying a Second Property?
Age of property
Check how long the property’s lease lasts for as the length of the lease affects the amount you can borrow from the bank.
All HDB flats have 99-year leases, while the lease varies for private properties. They can range from 60 years to being freehold properties.
Freehold properties are worth considering if it’s a home you want to pass down to the next generation. But these properties are usually 15% to 20% more expensive than a private property with a 99-year lease.
Price and size
Most HDB flats are cheaper than condominiums and terrace houses, but some flats could cost as much as these private homes. Some buyers are willing to fork out seven-figure sums due to their large size, location, and the flexibility they have in renovating these flats.
Older HDB flats tend to be roomier, but some come with layouts — wash basins separated from the toilet, units that face the corridor — that could make for an uncomfortable stay.
Sometimes, buyers pay more for certain homes as they already come renovated and furnished. These might be worth your money if you like the look and you want to move in fuss-free.
Type of loans
HDB flat buyers can borrow from either HDB itself or a bank, while private home buyers can only take out loans from the latter.
One advantage of HDB loans is the fixed interest rate, which is pegged at 0.1% over the Ordinary Account rate. The interest rate is currently 2.6%. But some buyers prefer to take bank loans as they could be able to secure lower interest rates or refinance their loans.
However, bank loans require a 25% down payment, with at least 5% in cash. The rest could be through the money in your CPF Ordinary Account.
HDB loans require only a 10% down payment, which can be entirely paid for through your CPF.
Payment plans vary based on your preferred timeline and interest rates. Planner Bee’s Mortgage Calculator helps you figure out the size of your loan and payments.
To ensure your loan plan is feasible, apply for a HDB Loan Eligibility Application (HLE) letter, or an In-Principle Approval (IPA) from banks before you look for a home.
How much cash and CPF do I need?
Here are the other fees you should take note of. Most of them can be paid for using your CPF money, except for the Option fee which needs to be paid in cash. You should bring it as a cheque when you view a house.
The Option to Purchase fee is paid when the seller confirms your offer.
| Public | Private | |
| Option fee (part of the down payment) | ● BTO flats: S$500 to S$2,000 depending on type of flat ● Resale flats: S$1 to S$1,000 | ● 1% of purchase price |
| Option to Purchase fee (part of the down payment) | ● Not applicable to BTO flats ● Resale flats: Not exceeding S$5,000, including the previously paid Option fee ● Executive Condominiums: 5% of purchase price | ● 5% to 10% of property price |
| Stamp duty | ● First S$180,000: 1% ● Next S$180,000: 2% ● Next S$640,000: 3% ● Remaining: 4% | |
| Legal fees | ● Minimum S$20 if HDB is acting on your behalf with loan from HDB ● S$1,500 to S$2,500 if you take a bank loan | ● From S$2,000 |
Buying your first property can be an exciting journey if you’ve planned ahead and know what to expect. Remember these factors to ensure everything’s in order for a smooth house-hunting process.
Read more: Should you jump into property investing?
