Whether you’re one half of a newly married couple or a single looking for their own pad, buying your first flat is probably the biggest, and most intimidating, purchase you’ll make in your lifetime. But before committing to such an investment, here are some factors to consider first.
Consider what you can afford
As with every purchase, there’s no point in looking beyond your means and falling in love with an expensive house you can’t afford. That’s why it’s important to take stock of your finances and look at properties that fall within your affordability range. The CPF website’s Our First Home Calculator is especially useful in helping you calculate your sums, and churns out useful numbers like the maximum property price you can afford, an estimated loan needed from both the Housing Board and banks, and the monthly instalments required. Do note that there is also a whole range of other fees and charges that come with a property purchase. Renovation fees, property agent commissions and home or fire insurances must also be taken into account when doing up your budget.
Consider the grants you can apply for
For first time homebuyers, there are 2 different types of CPF Housing Grants that you can apply for to help offset the cost of purchase: the Additional CPF Housing Grant or the Special CPF Housing Grant. Depending on the type of conditions you fulfil, first-time applicants can receive up to $40,000 in HDB grants. There are also a number of grants available for singles above 35 years of age, resale flat buyers and for people who want to stay near their parents, so be sure to check out which one gives you the best advantage before you set off applying.
Consider the type of loan you’re planning to get
For HDB flat purchases, you can either apply for an HDB concessionary loan or a bank loan. A quick look at the two loans brings about several differences. Firstly, the interest rate for HDB loans is at a stable 2.6%, but bank loans have interest rates that vary. Secondly, HDB charges a late payment interest at 7.5% per annum, while banks charge 24%. Lastly, downpayment for HDB loans can be made with CPF funds, but bank loans require at least 5% cash upfront. For HDB loans though, there are several eligibility conditions you’ll have to fulfil before being able to qualify for one, and you can refer to the HDB website for more information. Do also bear in mind that if you have had repayment issues in the past, it will affect your loan, no matter with HDB or the banks.
Consider the lease of your flat
You’ll often see the term “99-year” when researching about HDB flats, but in case you didn’t know, what it means is that HDB flats have a running lease term, which will be returned to the State at the end of the 99-years lease. The lease doesn’t reset itself when you purchase the flat, and flats with lesser years left on its lease have an impact on the loan amount you’re getting from HDB or the bank, and how much CPF you can use for the purchase. As such, it’s always best to keep in mind how many years of the lease the unit has left, to avoid overpaying for an ageing property.
Consider what you want from your home
Whether you consider this fun or tedious, creating a list of what your first home should have is a necessary step to take before going house-hunting. It could be the proximity to your parents or in-laws, or the time it takes to get to the office or the nearest MRT station. Or it could be the need for a spacious kitchen if you love to host, or the need for a larger square footage should you decide to start a family in the future. Don’t forget that there are some things that can be “solved” with a renovation. For example, the hacking of a non-load bearing wall to create an open concept floor plan is not possible or approved by the HDB. While some factors – especially the long-term ones – may not be at the forefront of your mind when purchasing a flat right now, it’s good to take them into consideration as it will ultimately affect the purchase price of you’ll have to fork out at the end of the day.