Singapore Property | For most, buying property is a long term and big financial commitment and know more about financing before you buy property. It, therefore, requires one to research more about the financing.
According to Mr. Vasu Menon, senior investment strategist OCBC Bank, buying a home is a personal matter which depends on personal finances and circumstances. When buying property, you should consider if you can pay the mortgage if circumstances and interest rates change.
“This year is likely to have higher interest rates and the uncertain economic atmosphere makes employment unsure,” warns Mr. Menon.
You should be careful not to incur higher debts when purchasing property or other high-cost items than you can pay.
Also, consider property cooling measures. These limit the total you qualify to borrow and the loan duration.
“You may be required to pay a bigger down payment using your Central Provident savings or with cash. You may also discover that the unit you want is beyond what you can afford and opt for a lower priced unit,” said Ms. Tok Geok Peng DBS Bank executive director of secured lending.
The additional buyer’s stamp duty is a levy paid in addition to the existing stamp duty. It was established in Dec 2011 with the rate depending on the nationality of the buyer and the figure of residential properties they own. Singaporeans pay an ABSD of 7 – 10% on the 2nd and subsequent homes purchases while foreigners pay 15% tax.
The total debt servicing ratio (TDSR) measures your loan obligations against a monthly gross income. It stands at 60% which means that your TDSR should not be more than 60% if you are to be eligible for a home loan.
Your mortgage servicing ratio (MSR) measures your total monthly repayment of mortgage against your gross income. It stands at 30% and it is a requirement for those intending to buy an HDB flat or an executive condominium.
The loan to value ratio is the amount that the banks can finance your property purchase. The LTV stands at 80% of the price of the property and for an HDB loan, it is 90%. If you are buying a second property and you are yet to completely pay your current mortgage, the LTV reduces to 50%.
The loan tenure is calculated at 35 years minus the number of years since the loan was first given out when the property was being purchased. For joint borrowers, the tenure is affected by income-weighted average age.
The loan tenure for an HDB flat is 30 years and for a private property is 35 years. For someone whose age will be above 65 years at the end of the tenure, the bank only lends 40% instead of 80%.
Read on more upcoming residential developments this year by visiting the Watercove, a landed property by Bukit Sembawang and Seaside Residences, a seafront condominium by a joint venture including Frasers Centrepoint.