A Foolproof Step-By-Step Guide To Buying Your First Home In Singapore

“Look at how much savings you have in terms of cash and CPF. If you’re a couple buying a home together, look at your joint savings,” says Winston. “For first-time homebuyers, they can [take a loan] of up to 80 per cent [of the property price]. If you only have $200k in cash and CPF, you can afford a place that’s $1mil. Don’t go beyond what you have. But if $200k is your entire life savings, you shouldn’t spend all of that on property.

"My rule of thumb is that you should keep enough savings to last you for one year, assuming you lose your income. If you need $5k a month to survive, then you should keep $60k as buffer. And that’s money you cannot use, not even for renovations. At the point of property viewing, you should already have a contractor to give you a quote to get an idea of how much you should factor in for renovations. So, if you have $200k, and $60k has to be set aside for contingency, and the contractor quotes you $40k for renovations, then you only have $100k left for downpayment. That’s one prudent way to plan your finances. Some people buy the property first then realise they don’t have enough money for renovations and dig into their savings, which isn’t wise.”

[Update: Following the latest cooling measures in July, the loan-to-value limit for first-time homebuyers is now capped at 75 per cent, instead of 80 per cent as mentioned above.]

“This determines how much you can afford to take out every month to service the loan installments. Paying the 20 per cent downpayment is just the first step. After that, you have to service the loan in installments.

"Look at your monthly income which includes CPF. Assuming you’re a young couple whose combined monthly income is $6k, you should not be buying a property that requires you to service an installment of $5k. Not more than 60 per cent of your monthly income should be used to service fixed loan components — not just property loans, but also car loans, credit card bills and other loan commitments.

"After Steps 1 and 2, you should know the price point of the property you can afford comfortably. The keyword is comfortably. It shouldn’t be that, after you service your loan, you can’t go on holiday or go out to eat and have to stay home and just eat instant noodles. You shouldn’t have to adjust your lifestyle too much just to service the loan.”

“If you can afford a property that’s $500k, you should consider a HDB. But if you can afford a $1mil property, you should consider private or an EC. If you can afford a private property, the quantum of appreciation you’ll get is higher [compared to a HDB]. In Economics, there’s something called imputed rent. By virtue of the fact you’re staying in your HDB — and I’m still staying in a HDB flat — you’re consuming lower rental for yourself. There are pros and cons. If you want the capital appreciation [of private property] more, then you have to bite the bullet and forget about the low imputed rent of a HDB. If you wanna take it one step at a time and enjoy lower imputed rent and government subsidies, then go for HDB.”

“When choosing a location, you should take a longer term view, about five to eight years. A typical mistake I see young newlyweds making is looking at the short term when selecting a location. Usually they’ll buy a sexy location — one that’s nowhere near schools or their parents, and somewhere near a mall or a park. But after three to five years when they have kids, that’s when the inconvenience starts to happen, for example, there’s no one to look after their kids [when they’re at work]. So they sell their place to be nearer to their parents. In Singapore, it’s not profitable to sell property every two to three years ’cos of all the taxes and stamp duties you incur.”

“A lot of the time, people skip the first few steps and go directly to this step to search for homes. If you don’t want to go for a BTO and wait for two or three years for your flat, then use PropertyGuru to narrow down your choices based on location, price, type of property. This is the last step before going for viewings.”