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Important Points to Note Before Purchasing a New Home

If you are seriously looking and buying your first property, It is good to run through some numbers to determine how much you can afford. These are the things you may need to note:

Cash Saving

Calculate the amount of Cash you have set aside for the initially down payment (usually 5%) for the purchase. This cash payment is usually required during when you book a new home.

For most property purchases, there is a 25% down payment. The first 5% has to be in cash followed by the remaining 20% which can be either cash or CPF

Determine Your CPF

Determine the amount of CPF in your Ordinary Account (OA) you have set aside for property purchase. Please note that any CPF in your Special and Medisave Account cannot be used for housing. *CPF is only available to both Citizen and Singapore Permanent Residents only.

Basic Retirement Sum / Full Retirement Sum (FRS) 

If you are buying your second property using CPF, you will have to set aside the Basic Retirement Sum (BRS) before you can use your excess Ordinary Account savings for the purchase. As of 1st Jan 2019, the Full Retirement Sum (FRS) is $181,000 if you are 55 years old today. In this case, the BRS is $90,500. The BRS can comprise both the CPF money in both the Ordinary Account (OA) and Special Account (SA).

Total Debt Servicing Ratio

Check with a banker on how much you can borrow based on your TDSR (Total Debt Servicing Ratio). The TDSR will assess your income, expenses and age. You should preferably obtain an Approval In Principle (AIP) from a bank first before committing to a property.

The maximum Loan to Value (LTV) granted to Singapore Citizen and Permanent Residences is 75%. If you are a foreigner taking a loan from a local bank. Your Loan to Value (LTV) could be significant lower between 50% to 70%. Please check with a mortgage broker for an assessment.

Additional Buyer’s Stamp Duty

Check your tax rates. Are you affected by the Additional Buyer’s Stamp Duty (ABSD) (www.iras.gov.sg). Do you co-own any other property with someone else. Are you a beneficiary of some trust? It is always good to check with your lawyer on this. If you are a foreigner holding on to other passports or having permanent residents status elsewhere, it will be good to let your lawyer know so that they can advise on the tax rates you will be paying. Under the respective FTAs, Nationals or Permanent Residents of the following countries will be accorded the same Stamp Duty treatment as Singapore Citizens. They are Nationals and Permanent Residents of Iceland, Liechtenstein, Norway or Switzerland & Nationals of the United States of America.

Seller Stamp Duty

You should also be aware that there is a Seller Stamp Duty (SSD) tax rate if you dispose your property within a time frame. (www.iras.gov.sg) SSD is applicable to all residential properties. The SSD rates for residential properties purchase on and after 11 Mar 2017 shall be 12% if the property is dispose within a year. The SSD rates will be 8% if it is dispose more than 1 year and up to 2 years. The SSD rates will be 4% if it is dispose more than 2 years and up to 3 years. No SSD is payable if the property is dispose more than 3 years.

Normal Progressive Payment Scheme

Know how the Normal Progressive Payment Scheme (NPS) works. The progressive payment scheme deals with houses or condominiums that are in the process of being built. It refers to payment by installments, with each payment being made when a specific construction stage is reached. So instead of paying the developer one lump sum, you mitigate your risks in case the developer become bankrupt. You pay the installments according to the completion of each construction stage.  In the event that you are taking a mortgage with a bank, the bank will disperse the money directly to the developers according to those installments.

Normal Progressive Payment Scheme

o             Upon the grant of Option to Purchase : 5%

o             Upon the signing of the*Sales & Purchase Agreement, or within 8 weeks from the Option date : 15%

o             Completion of foundation work : 10%

o             Completion of reinforced concrete framework of unit : 10%

o             Completion of brick walls of unit : 5%

o             Completion of roofing / ceiling of unit : 5%

o             Completion of electrical wiring, internal plastering, plumbing and installation of door and window frames of unit : 5%

o             Completion of car park, roads and drains serving the housing project : 5%

o             Completion of car park, roads and drains serving the housing project : 5%

o             Notice of Vacant Possession : 25%

o             On Completion Date : 15%

Here, the installments are paid into a project account. This is an account that the developer opens with any bank or related institution, and the money is set aside for the project.

You may like to contact us here for any further clarification.

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