Wednesday, February 24, 2016

Your Complete Guide To Buying A Property In Singapore

Buying a property can be confusing for many first time buyers in Singapore. What should we do first and how should we find the property we desire? With so many rules governing the property market, it takes some knowledge to be able to make the right decisions. Making the wrong decisions can be costly where we end up forfeiting the property if we cannot get a loan or can't afford to continue paying for the property along the way.


With this, I will try to write down the step by step procedures to buying a property in Singapore and give you some tips which will get you the best cost savings for your property purchase.  Let's start off with the first step: Searching for a property.

Property Hunting

Do I need a property agent in order to search for a property to buy? This may be a question that is on many property buyers' mind. Gone are the days where we need to rely solely on property agent's expertise to find us a property. We can be our own property agent these days. How can we do it?

Simple... we have online platforms where we can find properties easily. One such platform is from SRX property. I can key in the area where I'm interested, the property type, the price and even any MRTs or Schools which I want the property to be near to.


Once you click search, one whole list of properties which match your criteria will appear and you can select the properties which you're interested in. You can see the price of the property, a virtual tour of the entire property and other important information such as price per square foot etc.

There are other platforms such as property guru which also offers similar search engines for property hunting. If you find a property agent to search for the property for you, you will have to pay some extra money. Most property agents charge an average of 0.5%-1% of the property price. Searching on platforms is completely free of charge.


Accessing your affordability - Can I Afford A Loan?

So now, you may have found some properties which you're interested in but can you afford it? Accessing your affordability is the most important part of the property buying process. Nowadays, it is very difficult for anyone to buy a property with cash. Most of us have to take a loan for it.

Getting a loan can be tricky with all the cooling measures in place. Did you know since 2010, the government has introduced about 8 cooling measures to cool the property market? We need to know these before we can make better decisions for our property purchase.

The amount of loan we are eligible for has been reduced by a significant amount. We can only borrow a maximum of 80% of the property price and still have to meet an income requirement. This is know as the Mortgage Servicing Ratio (MSR) for HDB flats and the Total Debt Servicing Ratio (TDSR) for private properties and HDB as well.

The MSR is set at 30% of our gross monthly income. This simply means that if our income is $4000, the maximum loan instalment we can have per month for housing loans is $1200. The MSR is for the purchase of HDB flats. HDB flats are also subjected to the TDSR which is set at 60%. This simply means that if our income is $4000, the maximum loan instalment we can have per month is $2400. TDSR includes housing loans, car loans, student loans, credit card debts etc.

If you're still confuse about the cooling measures and how much loan you can get, try the free calculator here.


The Buying Process - Step By Step Guide

After searching and accessing if you can afford the property, its time to take action to buy the house of your dreams. Here I will let you understand more on what you should do to make your property purchase a smooth sailing one and provide you the procedures which you can follow.

HDB (BTO)

Buying a HDB BTO is not much of a problem since HDB will definitely guide you along for this. The Home Loan Eligibility (HLE) letter is the key for HDB BTO if you intend to take a HDB loan.

For the application of HDB BTO, here's the timeline:

  1. Check your eligibility to buy, eligibility for HDB or bank loan and check your finances.
  2. Submit application during 1 week application period through HDB website or any HDB branches or HDB hub
  3. Notification of ballot results will be out in 1.5 months for BTO
  4. If you're successful in the ballot, after 1 to 2 weeks, you will be invited for an appointment to book a flat
  5. If you intend to take a HDB loan, you need a valid HLE letter during the booking of flats
  6. The signing of agreement of lease will happen within 4 months after you book a flat. You are required to submit the letter of offer (LO) if you are taking a bank loan. 
  7. Your BTO flat will be ready in about 3 years time

For the bank loan, you can get the LO through an approval in principal (AIP) with any of the banks in Singapore. I can also do the AIP for you with the bank. Just contact me and I'll guide you along.

BTO Tip: If you're looking out for a BTO soon, you can subscribe to a free alert service by HDB here

HDB (Resale)

For HDB resale, the buying process is between you and the seller of the HDB. A property agent may be involved in the process with a law firm compulsory to execute the transactions.

Here's the time line for buying a HDB resale flat:

  1. Before purchasing a resale flat, check how much loan you are eligible for. You can engage the services of a mortgage broker or approach the banks for assistance. 
  2. Do an approval in principal (AIP) with the bank before you sign the option to purchase (OTP) with the seller. Most AIP are valid for 1 month.
  3. Get OTP. You need to pay $1000 at this stage
  4. You have only 2 weeks to decide whether to exercise the OTP to buy the property before it expires. Your LO for the loan must be out within this 2 weeks. If you already did an AIP previously, then you don't have to worry about this. 
  5. Exercise OTP to buy the property
  6. Agent will receive 1st appointment date from HDB
  7. After 1st appointment with HDB, HDB will fix 2nd appointment date
  8. Before second appointment with HDB, you should proceed to law firm to sign all mortgage documents and pay legal fees, COV.
  9. OTP ends 8 to 10 weeks, 2nd appointment at HDB to collect keys

Private Properties (New/under construction)

For private properties which are under construction, these are the properties you buy directly from the developer during sales launch. Here's the timeline for it:

  1. Do an approval in principal (AIP) with the bank
  2. Get OTP. At this stage you need to pay 5% of the purchase price
  3. Within 1 week, developer will send out sales and purchase (S&P) agreement to law firm or buyer
  4. You should have LO from the bank for the loan within 3 weeks of S&P date to sign the S&P. You need to pay 15% of purchase price and stamp duty at this stage
  5. OTP will end in 8 to 10 weeks

Private Properties (Resale)

For resale private properties, here's the timeline:

  1. Do an approval in principal (AIP) with the bank
  2. Get OTP. At this stage you have to pay 1% of purchase price
  3. You have 2 weeks to decide whether to exercise the OTP to buy the property before it expires. Your LO for the loan must be out within this 2 weeks. If you already did an AIP previously, then you don't have to worry about this. 
  4. Exercise OTP to buy the property
  5. 1 week before collection of keys, sign mortgage documents, CPF documents and pay 4% of purchase price and stamp duty
  6. OTP ends 8 to 10 weeks, collect keys

Tips on buying a property

After researching and writing on topics related to property since 2014, I've got to learn much more about property purchase over the years. From what I see, buying a property isn't the main issue but the issue is with getting the loan approved. Getting a loan is an integral part of purchasing a property in Singapore.

There are currently more than 16 banks in Singapore all with different loan packages and interest rates. When we get the option to purchase (OTP) for the property, do take note that we only have 2 weeks to produce the letter of offer to exercise the OTP. This is a very short time to get the loan approved although it is possible but it will result in a lot of anxiety and stress because of the tight timeline. Thus, before buying a property, it is important to do an Approval In Principal (AIP) so that we know our loan eligibility and get the approval for the loan as well. 

Another thinf tk note is if we do the AIP with bank A, we will be getting the loan from bank A as well. If we want to get the best rates for our loan package, then we should apply the AIP with the right bank right at the start. But, with so many banks to choose from, how do we know which has the best rates? 

I do have tie up with all the banks in Singapore and I know which bank has the best rate for home loans. I have also screened through a selective group of bankers to provide you the best and most efficient service. Furthermore, I also have tie up with various law firms in Singapore to help you save on your legal costs. If you would like to do an AIP for your new property purchase or get a new home loan, you can email me at sgyi@homeloanwhiz.com.sg. I can also advise you on your loan eligibility. You can click on this LINK for more information on the service I provide. 


Buying a property can be a fuss free experience in Singapore if we know the procedures for it. We definitely do not want to be caught off guard and add to our stress and anxiety when owning a home should be an enjoyable process.

Take action and equip yourself with the knowledge in property purchase today!

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Related Posts:
1. Refinancing Your Housing Loan To Fixed Rates When Interest Rates Are Rising
2. Can I Buy A Private Property If I Own A HDB?

4 comments:

  1. Hi SGYI, what if you have an HDB, and you have already stayed for 5 years, and now you are looking to purchase a second property. Private property. The HDB is not fully paid and your mortgage is less than 1k a month. How does the TDSR come into play when getting the second loan?

    ReplyDelete
    Replies
    1. Hi Edwin Gerard,

      The TDSR is 60%. So if your combined income is $10K, you can only have a monthly loan instalment of $6000. Since the existing HDB mortgage is about $1K, then when you buy the private property you can only take a monthly loan instalment of $5000 instead of $6000. Do take note that for second property purchase, you have to pay additional buyer's stamp duty and you can only take a loan of 50% of your second property.

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  2. This is not a complete guide. The conveyance part is not covered. The blog comes with so many typo errors. The use of acronyms must have a precedence of their full forms. What is AIP ?

    ReplyDelete
    Replies
    1. Hi,

      Conveyance is always done by the law firm as assigned by the bank. This is not really a part to worry about. In my post, I've actually stated that AIP is approval in principal if you've read in detail. Nevertheless, I've added in more precedence of the full forms for easier reading. Thanks for your feedback :)

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