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Work Out Finance
Before Buying Property-Singapore

This guide is useful for those who are planning to sell or buy property in Singapore. One should establish his or her own financial standing before buying a property.   Please note that this guide is by no means very thorough, representative and exhaustive.    Homebiznez.com or its representatives give no warranty, guarantee or other representation about the approaches, accuracy of the information and accept no liability for any loss or damage which may arise from reliance on it.

1.  Do your homework.- Commitment in property needs careful consideration. Please read the article on "How to build your dream home" to get some ideas and also other tips from this site before buying a property. Do some homework to find out more from other avenues. You wish that you purchase a good unit for your family.

2.   Don't act on impluse - Although many analysts may say that the price of property has hit rock- bottom due to the continuing weak economic situation... giving rise to a weak purchasing power, an oversupply situation, a cheaper bank loan and so on, one should not be influenced or act on impulse. It is neccesary that you know your financial standing and the market situation before buying a property.

3.  Establish your current financial position.

3a. Present property - Check out how much your present property can fetch i.e the estimated selling price of your property. Go to the CPF board and get a print-out on the CPF amount you have utilized on the present property, or the amount you need to return to CPFB after selling the property.  Next, check out the outstanding loan with the bank or HDB which you need to repay after selling the property. Having all the information, you will roughly know the balance or cash available after disposal and also the amount to be returned to your CPF account.

3b. CPF balance - Get a print-out of the CPF Ordinary Account Balance. With the information, you can roughly ascertain the total CPF available for the purchase of property, i.e. if you add up the CPF Ordinary A/C balance and the estimated amount of CPF to be returned to your account after disposal of your property.

3c. Income -work out your monthly contribution to your CPF ordinary account from employment or your self-employed business, which can be utilized towards paying the monthly installment for your new home.

3d. Spouse - Do same for your spouse (Steps3a to 3c) if he/she is also using CPF for servicing the loan or payment of installment for the property.

3e. Don't overstretch - Don't use up all your cash and CPF balance towards purchase of the property. Allow for some contingencies for `rainy days' , renovations, children education, and so on.

3f. Financial Calculator - Make use of the bank financial calculator or the HDB concessionary rate calculator to roughly map out your financial strategy.

Note : the above is assuming you have one property.

4. Available Housing Withdrawal Limit (AHWL).

To cater for retirement needs, the government has reduced the available housing withdrawal limit for housing i.e by 6% a year from 150% in year 2003 to 120% in year 2008. This reduction in AHWL affects the withdrawal of your CPF account towards payment of the property. Those who purchase HDB flats from 1 January 2003. i.e those take up bank loans for their HDB Flats or refinance their HDB concessionary loans with bank loans will fall under the new limit. This limit also applies to those who take bank loans to buy private property or refinance their existing housing loans for their private property from 1 Sept 02. Once your have reached the limit, CPF members will not be able to withdraw any more CPF for their property. Please check your AHWL from CPFB or consult the staff from CPFB directly.

5.   Going forward to look for property. Once you have established your current financial position, you will know your budget for the property. Identify the location, size and type of property you are looking for. Check the past transacted prices for resale HDB flats from HDB, or private property from URA.  Call up the bank or the financial institution for an indication on the proposed property such as valuation, loan quantum, loan period, monthly repayment, and so on.

Currently for HDB resale flat i.e from 19th July 2005,  you can use up to a maxmum of 6% CPF and the balance 4% in cash for the 10% deposit of the property. You can arrange a mortgage loan up to the 90% financing limit from the banks and financial institutions or HDB, which is based on the valuation or the purchase price whichever is lower. The cash component for HDB resale flat will be increased by 1% to 5% from 1st January 2006 in order to be in line with the private property, which takes effect from 19th July 05. In another words, the 10% deposit for purchase of HDB resale flat will be the same as private property i.e 5% cash and 5% CPF and the balance 90% on loan from bank or financial instituation from 1st January 2006 onwards. For details, please consult your bank or financial institution.