From Figure 1 and 2, we can see that the prices of both resale HDB flats and private residential properties have been steadily rising since the later half of the 2000s to reach new heights, not seen in the last 20 years or so. See Figure 1 and 2.
Thus, buying a home in this little red dot will require careful thought and planning. This article hopes to present some nuggets of advice to help you afford your first home.
Minimise debt and maintain a good credit standing
Consumers' credit reports by the Credit Bureau (Singapore) can be released to financial institutions (FIs), which are members (all major FIs are) of the Bureau, under authorised conditions.
In the credit report, it will display all credit facilities the consumer has with member FIs. The repayment history of the consumer will be reflected in the credit score. To have a good credit score, always make prompt payments. Closed default account with full or negotiated settlement, will also be displayed in the report for 3 years from the date of settlement.
However, currently, the outstanding balance and credit limit are not displayed in the report. Plans are in the pipeline to change this.
Therefore, when applying for a mortgage the bank can establish your credit worthiness through the credit report. Needless to say, a low credit score and too many credit facilities will seriously affect your chances of getting a mortgage with good rates either because the bank will reject your application, or it offers you a lower loan quantum.
Having excessively many credit cards can also lower the loan quantum the bank is willing to make you.
Long term planning
Have ready cash when properties prices dip, you will be able to home in on the property you want.
Work out your finance
Do your homework diligently on the type of housing and the location you want. Find out the transaction prices for houses in the area. This will give you a rough idea of the cash you may need.
Unless you are buying a HDB flat using a HDB concessionary loan, you are definitely require to pay a component of the down-payment in cash.
Cash may also be required for miscellaneous expenses: legal fees, stamp duties and etc. Although you are allowed to utilise your CPF funds for some miscellaneous fees, for example the stamp duties; still you maybe required to pay for it first before reimbursement by CPF Board.
Do note that you are forbidden to use CPF funds for miscellaneous fees if you have been disallowed from using it to pay for your house or housing loan.
For instance, when the remaining lease of the private property is under 30 years you cannot utilise your CPF savings for its purchase (from July 2013, HDB flats will be affected by this rule as well).
On a final note
With the sky-high property prices, eroding affordability and the host of home financing regulations, it is even more important to select an ideal home loan. Do not leave things to chance, seek professional advice by contacting a mortgage consultant.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Susan Teo is a writer for research-focused Singapore mortgage consultancy firms: Property Buyer, iCompareLoan and Singapore Home Loan, which offer free professional advice and use reports from Singapore's best loan analysis system (exclusive to them) to help borrowers select the best property loan.