Buying Guide

Basic Factors to Consider

• Budget

• Location

• Type of property (Private condo, HDB, Executive condo, commercial, etc.? Freehold or leasehold?)

• Public Transport and neighbourhood amenities 

The most important question to ask before you even start looking for a house is: what is your budget? Set a budget after considering your household income and expenditure. Calculating your Total Debt Servicing Ratio ("TDSR") is a good starting point. More importantly, don't over-stretch your finances and always leave a buffer for unforeseen events.

Your budget should also account for other transaction costs such as stamp duties, legal fees, valuation fees, etc.

Getting an in-principle loan approval ("IPA") from at least 2 banks is advisable before you start viewing any properties. An IPA is a good indication of the amount of loan you might be able to get based on the bank's credit assessment. Knowing the amount you're able to borrow in turn helps you to determine the maximum purchase price you can consider.

Total Debt Servicing Ratio ("TDSR")

In a nutshell, your monthly mortgage repayment plus all your other debts (e.g. credit cards, car loans, personal loans, etc.) cannot exceed 60 per cent of your gross monthly income. All banks in Singapore have to abide by the TDSR framework as part of their credit assessment.

Assuming you earn S$10,000 a month, your TDSR threshold is S$6,000 (60% of S$10,000). This means the maximum monthly repayment for all your debt obligations including your mortgage repayment cannot exceed this threshold.

Note: For HDB flats and Executive Condos, mortgage repayments must not account for more than 30 percent of a borrower’s gross monthly income, even if they have no other debt obligations. This is called the Mortgage Servicing Ratio.

When applying for a housing loan, the amount you will ultimately be allowed to borrow will depend on your own individual financial circumstances, your credit history and the bank's valuation of the property or the transaction price, whichever is lower. A good realtor will help you to obtain an indicative bank valuation for the property which you're interested to buy before you even make an offer.

Stamp Duties

Buyer's Stamp Duty ("BSD"): 3% of the property transaction price.

Additional Buyer's Stamp Duty ("ABSD"): See table below

Transaction Flow

Once you've found your dream home, you'll have to make an offer for it together with a deposit of 1% (i.e. the "option money"). If the seller accepts your offer, this 1% option money is non-refundable. The seller in return gives you an Option to Purchase ("OTP"), which is typically valid for 14 days. You may exercise the OTP any time within the option period. Another deposit of 4% is due when the OTP is exercised. Stamp duties are payable within 14 days from the exercise date.

1% option money - when making an offer
4% deposit - when exercising the OTP
3% BSD and ABSD (if applicable) - within 14 days from exercising OTP

Note: The typical transaction flow described above is for resale transactions. It differs slightly from units purchased from developers for projects under construction.
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Shareen Tan
OrangeTee & Tie Pte Ltd
shareen.tan@orangetee.com
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