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Copyright2011byPropwise.sg

Allrightsreserved.Nopartofthispublicationmaybe
reproduced,storedinaretrievalsystem,or
transmitted,inanyformorbyanymeans,electronic,
mechanical,photocopying,recordingorotherwise,
withoutthepriorpermissionofthepublisher.

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Introduction
TheSingaporePropertyBeginnersGuidewaswritten
tohelptheabsolutebeginnerunderstandthe
Singaporepropertymarket.Buyingahomeisthe
biggestpurchasemostofuswillmakeinourlives,yet
manypeopledonothavethebasicknowledgethey
needtomakeaninformeddecision.
Ivewrittenthisguidetochangethat.Itcomprisesthe
mostrelevantpostsonmyblogforthosejuststarting
out.Hopeyoufinditusefulandgoodluckonyour
propertyjourney!
Towisdomandbeyond,
Mr.Propwise
AboutPropwise.sg
Propwise.sgisaSingaporepropertyblogdedicatedto
helpingyouunderstandtherealestatemarketand
makebetterbuying,selling,rentingandinvesting
decisionsminusallthehypeandmisinformation.
Ifyouhaventdonesoalready,dontforgettohead
overtowww.propwise.sgandsignupforour
newslettertogetourfreereportsandupdates.
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Contents
Typesofhomes.................................................5
DistrictsandPlanningAreas...........................12
Majorplayersinthepropertymarket............18
Knowyourpropertylingo...............................24
The10StepSystemtoBuyingaPropertyin
Singapore........................................................28
HowtoChooseYourMortgage......................34

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Typesofhomes
Whatarethedifferentofhousingoptionsavailablein
Singapore?Wecanbroadlysplittheoptionsinto
Public/Quasipublicandprivatehousing.
Publichousing(HDB)
HousingandDevelopmentBoard(commonlyknown
asHDB,astatutoryboardoftheMinistryofNational
Development)flatsareregulatedandmaintainedby
thegovernment.Theyaremeanttobeanaffordable
housingoptionforSingaporeresidents,and
governmentsubsidiesareavailableforthepurchase
andfinancingofthese.Theyaretypicallylocatedin
selfsufficientclustersknownashousingestates
whereaconcentrationofHDBblocksaresupported
byamenitiessuchassupermarkets,foodcourts,
coffeeshops,clinics,malls,parksandagoodpublic
transportationnetwork(viatrainsandbuses).
Morethan80%ofSingaporeansliveinHDBflats,with
morethan90%ofthemowningthehometheylivein.
TobuyanHDBflat,youneedtomeetanumberof
eligibilityrequirements,theprimaryonebeingthe
possessionofaSingaporeancitizenshiporPermanent
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Residence(visitwww.hdb.gov.sgformore
information).

TypesofHDBflats
Studioapartments
Studioapartmentsizesrangefrom377484square
feet,andaremeantforseniorcitizenswhowantto
liveindependently.Theyarerenovatedwithelder
friendlyfeaturesandaresoldon30yearleases,
makingthemmoreaffordablethanotheroptions.
2roomflat
2roomflatsareusuallyunder500squarefeetand
containamasterbedroom,kitchen,livingareaand
storeroom.Theyaremeantforlowerincome
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households.Theyaretheprivatehousingequivalent
ofaonebedroomapartment.
3roomflat
Thefloorareaofnew3roomflatsrangefrom646to
700squarefeetandtheycomewithonemaster
bedroom,onecommonbedroom,akitchen,living
area,commonbathroomandstoreroom.Theyarethe
privatehousingequivalentofatwobedroom
apartment.
4roomflat
4roomflatsaretypicallyunder1,000squarefeetin
size,andhaveamasterbedroom,twocommon
bedrooms,akitchen,livingareaandstoreroom.They
aretheprivatehousingequivalentofathreebedroom
apartment.
5roomflat
5roomflatsarearound1,200squarefeetandhavea
masterbedroom,twocommonbedrooms,kitchen,a
separatelivinganddiningarea,andstoreroom.They
aremeanttoprovidealargerlivingspacefor
extendedfamiliesof45members.Theyarethe
privatehousingequivalentofalargerthreebedroom
apartment.
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Executiveflats
Executiveflatsaretypicallyaround1,400squarefeet
insize,andhaveamasterbedroom,twocommon
bedrooms,akitchen,separatelivinganddiningarea,
storeroom,andspaceforastudyroom.Some
executiveflatscomewithabalconyaswell.Theyare
theprivatehousingequivalentofa3+1orfour
bedroomapartment.
DBSSflats
Design,BuildandSellScheme(DBSS)flatsarebuiltby
privatedeveloperswhohavetobidfortheland,
designandconstructtheflats.Theyusuallycomewith
minimalfinishingsandlookmorelikeprivatehousing
butwithoutthefacilities.TheHDBprovideshousing
loanandconveyancingservicestoeligiblebuyers.The
incomeceilingtobuyDBSSflatsisalsohigherat
$10,000insteadoftheregular$8,000.
Quasipublic
ExecutiveCondomniums
ExecutiveCondominiumsareahybridbetweenpublic
andprivatehousing.Theywereintroducedbythe
HDBtocatertoyounggraduateandprofessional
Singaporeanswhowantedhigherqualityhousingbut
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couldnotaffordprivateproperty.Theyarebuiltby
privatedevelopersandhavecondominiumfacilities,
andtheincomeceilingtobuythemis$10,000.But
theyalsohaverestrictionssuchastheMininum
OccupationPeriodof5yearsbeforetheycanbesold,
andfromYear6to10canonlybesoldtobuyerswho
meetHDBseligibilityrequirements.Fromthe11
th

yearallrestrictionsareliftedandtheycanbebought
andsoldfreely,evenbyforeigners.
Privatehousing
Privatehousingcanbroadlybecategorizedintonon
landedandlandedproperty.
Nonlanded
Condominiums
Condominiumsarehighriseresidentialdevelopments
thatusuallycomewithfacilitiessuchasaswimming
pool,gym,security,BBQareaandsoon.Technicallya
developmentisonlycalledacondominiumifitsitson
asitethatislargerthan4,000squaremeters(43,056
squarefeet).
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Apartments
Apartmentsaremediumtohighriseresidential
developmentsthataresituatedonasmallerplotof
landthancondominiumsandtypicallyhavefewer
facilities.
Landed
Terrace
Thesearehousesthatsharecommonwallswith
neighboursonbothsides,unlessattheendofarow.
Semidetached
Thesehousesshareonewallincommonwitha
neighbour.
Detached/Bungalows
Thesehousesdonotshareawallwithotherhouses
andarelocatedontheirownpieceofland.
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GoodClassBungalow
GoodClassBungalowsareanexclusivecategoryof
detachedhomeswithaminimumlandplotsizeof
1,400squaremeters(15,070squarefeet)inprime
landedareassuchasNassimRoad,ClunyRoad,
TanglinRoad,DuchessRoadandKingAlbertPark.
Shophouse
AuniquearchitecturalfeaturetoSoutheastAsia,
shophousesareterracedrowsoflowrisebuildings
withnarrowfrontagesbutdeeprears,andtypically
haveshopsonthegroundfloorwithaccommodations
ontheupperfloors(hencethename).

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DistrictsandPlanningAreas
Whiletherearenolongeranyofficialdistrictcodes
usedinSingapore,manypeoplewilloftenrefertoa
propertybeinginaspecificdistrictwhenbuyingor
renting.Thesecodeswereoriginallyusedforthe
postaldistricts,butwerereplacedbythe6digitpostal
codesanumberofyearsago.Herearethegeneral
areasthedistrictcodesreferto:

01RafflesPlace,Cecil,Marina,People'sPark
02Anson,TanjongPagar
03Queenstown,TiongBahru,Alexandra
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04TelokBlangah,Harbourfront,Sentosa,Keppel,
MountFaber
05PasirPanjang,BuonaVista,Dover,WestCoast,
ClementiNewTown
06HighStreet,BeachRoad,CityHall
07MiddleRoad,GoldenMile,Bugis,Rochor
08LittleIndia,FarrerPark,SerangoonRoad
09Orchard,Cairnhill,RiverValley
10Ardmore,BukitTimah,HollandRoad,Tanglin
11WattenEstate,Newton,Novena,Thomson
12Balestier,ToaPayoh,Serangoon
13Macpherson,Braddell,PotongPasir
14Geylang,PayaLebar,Eunos,Kembangan
15Katong,JooChiat,AmberRoad,MarineParade,
TanjongRhu,Meyer
16Bedok,UpperEastCoast,Eastwood,KewDrive,
ChaiChee,Siglap
17Loyang,Changi
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18Tampines,PasirRis,Simei
19SerangoonGarden,Hougang,Punggol,Sengkang
20Bishan,AngMoKio,Braddell
21UpperBukitTimah,UluPandan
22Jurong,BoonLay,Tuas,Lakeside
23Hillview,DairyFarm,BukitPanjang,ChoaChu
Kang,BukitBatok
24LimChuKang
25Kranji,Woodgrove,Woodlands
26UpperThomson,Springleaf
27Yishun,Sembawang,Admiralty
28Seletar,YioChuKang
Whilethereareatotalof28districts,youllmostly
hearreferencestodistricts9(Orchard,RiverValley),
10(BukitTimah)and11(Newton,Novena)asthe
traditionalhighendhousingareas,andtodistricts1
(MarinaBay),2(TanjongPagar)and4(Harbourfront,
Sentosa)asthenewupandcomingluxuryareas.For
amorerelaxedandlowerdensitylifestyledistricts14
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(Eunos,Kembangan),15(Katong,MarineParade,
TanjongRhu)and16(UpperEastCoast,Siglap),
broadlyknownasEastCoast,arealsopopular.
Districtcreep
Donotethatthereissomeambiguityaroundthe
bordersofthesedistrictssooneareacouldcovertwo
ormoredistricts.Infactinrecentyearsasthe
propertymarkethasheatedupIvenoticeda
phenomenonIcalldistrictcreep,whereproperties
inalessprestigiousareaaremarketedasbeingina
moreprestigiousonenearby.
SoforexamplepropertiesinNewtonareadvertisedas
beinginOrchard,propertiesinNovenaasNewton,
andthoseinBalestierasbeinginNovena.Thisis
probablyaresultofdeveloperswantingtopushup
thepricestheycanchargebyincreasingthestatureof
theirdevelopment,andofstatusconscious
Singaporeanswantingtoshowcasetheirhomeas
beinginamoreprestigiousdistrictbutnotbeingable
toaffordone!
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UrbanPlanningAreasTheMaster
PlanandConceptPlan
Distinctfromtheconceptofdistrictsthatare
commonlyusedinthepropertymarket,theUrban
RedevelopmentAuthority(URA)hasdivided
Singaporeinto55urbanplanningareas,whichare
organizedintofiveregionsCentral,East,North,
NorthEastandWest.TheURAputstogethertwo
urbanplans,theConceptPlanandMasterPlan,which
cansignificantlyaffectthevalueoftherealestate
whenanychangestotheplantakeplace.
TheConceptPlanisthelongtermstrategiclanduse
planwhichguidesSingapore'sdevelopmentovera
fortytofiftyyearperiod.Reviewedeverytenyears,it
providesforsufficientlandtomeetlongterm
population,economicandqualityoflifegoals.Thelast
ConceptPlanReviewwasin2001,andthenextone
willbecompletedin2011.
TheMasterPlanisthemediumtermstatutoryland
useplanwhichguidesSingapore'sdevelopmentin
overatentofifteenyearperiod.Reviewedeveryfive
years,itrendersthebroadstrategiesoftheConcept
Planintodetailedplansthatshowthepermissible
landuseanddensityfordevelopmentsinSingapore.
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ThelastMasterPlanwasin2008,andthenextone
willbecompletedin2013.

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Majorplayersintheproperty
market
ThepropertymarketinSingaporeisdrivenbyfour
majorgroupsofplayersthegovernmentagencies,
developers,propertyagenciesandbanks.
1)Governmentministriesand
agencies
ThegovernmentministriesandagenciesinSingapore
shapepolicychangesthatcansignificantlyaffect
sentimentinthepropertymarketandhencereal
estateprices.
Theministriescoordinatepoliciestocontrolor
supportpropertypricesdependingontheirviewof
thelevelofspeculationandassetpricestability.For
example,abroadroundofpropertymeasuresthat
affectedthenewandresaleHDBmarket,taxesand
banklendingwasjointlyannouncedbytheMinistryof
Finance(MOF),MinistryofNationalDevelopment
(MND)andMonetaryAuthorityofSingapore(theMAS
isSingaporescentralbankandfinancialregulator)on
August302010.
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Whiletheministriescomeupwiththebigpicture
policies,thestatutoryboardsundertheministriesare
generallyresponsibleforissuingthedetailed
guidelinesandimplementingpolicies.
Thekeystatutoryboardsinclude:
BuildingandConstructionAuthority(BCA)
TheBCAisastatutoryboardundertheMNDwhose
roleistoprovideguidelinesforbuildings,structures
andinfrastructuresoastoshapeasafe,highquality,
sustainableandfriendlybuiltenvironment.
HousingDevelopmentBoard(HDB)
TheHDBisastatutoryboardundertheMNDandthe
publichousingauthority.Itsmissionistoprovide
affordablequalityhomesforSingaporeansby
planninganddevelopingvibrantpublichousingtowns
withgreatamenitiesandcohesivecommunities.It
alsopublishesstatisticsonthepublichousingmarket
includingaquarterlyResalePriceIndex.
SingaporeLandAuthority(SLA)
TheSLAisastatutoryboardundertheMinistryofLaw
focusedonlandresourceoptimization.Inits
developmentalrole,itoverseesgovernmentland
sales,leases,managementofstatelandandbuildings,
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acquisitionsandallocation,developingandmarketing
landrelatedinformationandmaintainingthenational
landinformationdatabase.Initsregulatoryrole,it
actsasthenationallandregistrationauthorityand
managesandmaintainsthenationallandsurvey
system.
UrbanRedevelopmentAuthority(URA)
TheURAisastatutoryboardundertheMND,andthe
nationallanduseplanningauthority.Itprepares
mediumandlongtermstrategicandlocalplansfor
landuseinSingapore,andhelpstoimplementthem.
Atthemacrolevel,theURAcontrolsresidential
developmentinSingaporeviauseoftheplotratioand
buildingheight.Atthemicrolevel,itdevelops
guidelinesonhousingtypeandform.Italsopublishes
updatesontheprivatepropertymarketincluding
priceindicesandindividualtransactions.
2)Developers
Thebasicroleoftherealestatedeveloperisto
convertrawlandintoacompletedpropertyandlease
orsellit.Todosotheyhavetoorchestratearangeof
activities:buyland,financethedeal,workwith
architectstodesigntheproject,obtainapprovalsfrom
thegovernment,engageaconstructioncompanyto
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build,workwithagenciestomarketandsellthe
propertyetc.
Youlloftenhearnewsofdevelopersbiddingforland
thatthegovernmenthasputupfortender.
Developersneedtoconstantlybuylandtomaintain
theirlandbank,thepipelineofprojectsthattheyhave
underdevelopment.Thepricetheypayforlandisalso
agoodindicatoroftheirviewonthemarketfurther
downtheline,andwillgiveyouaroughideaofthe
pricetheyhavetolaunchtheprojectforsaleinorder
tomakemoney.
ProminentpropertydevelopersinSingaporeinclude
Capitaland,Centrepoint,FarEastOrganization,City
DevelopmentLimited,GuocoLand,KeppelLand,
WheelockProperties,AllgreenProperties,HoBeeand
SCGlobal.
3)Propertyagenciesandagents
Propertyagenciesandagentsarebusinessesor
peoplethatarrangetheselling,rentingor
managementofproperty.Theyactasthe
intermediary(middleman)betweenthebuyerand
sellertheytryandmatchsellerswhowishtosell
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withbuyerswhowishtobuy,andtakeacommission
foranysuccessfulmatches.
TypicallyinSingaporepropertyagentswillchargea
commissionof12%tothesellerofaprivateproperty,
and1%tothebuyerand12%tothesellerforHDB
flattransactions.
Asofmid2010,thereareanestimated25,000
propertyagentsand1,700agenciesinSingapore.
Somepropertyagentsarefulltimeprofessionals
whileothersarejustmoonlightingasparttimers.The
largeagenciesincludePropnex,ERA,HSR,DTZ,Knight
FrankandDennisWee.Manyoftheagenciesareone
ortwomanoperations.
Foralongtimethereputationoftheindustrywas
tarnishedbytheactionsofasmallgroupof
unprofessionalrealestateagents,withmanycalling
forgreatergovernmentregulation.Thuson
September15
th
2010,thegovernmentintroducedthe
EstateAgentActandsetupanewstatutoryboard
calledtheCouncilforEstateAgencies(CEA)thatwill
regulateagentsandtheagencies.Therearealsonew
entrycriteriaandamandatoryexamthatallagents
mustpassbytheendof2011.Theserequirementsare
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expectedtoreducethenumberofagentsand
agenciesby30%.
4)Banks
Bankprovidethepetrolthatdrivesthewholereal
estatemachinemoney.Theyfundtheproperty
projectsofrealestatedevelopers,andextend
mortgagestoqualifiedbuyerssotheycanpurchasea
property.Theiraimistomakeaspread(the
differencebetweentheinterestratestheychargeto
lendmoney,andtheratestheypayforyourdeposits),
andminimizetheriskofanylosses(e.g.frompeople
defaultingontheirloans).
ThetoplocalbanksinSingaporeincludeDBS,UOB
andOCBC.TheactiveforeignbanksincludeHSBC,
CitibankandMaybank,amongstmanyothers.
Togetherthesefourplayersdrivethefunctioningof
thepropertymarket.Thegovernmentsetsguidelines
andprovideslandfordevelopment.Developersbuy
landandtransformitintoproperty.Agenciesand
theiragentshelptomarketandsellthisproperty,and
banksprovidethefundingthatmakesitallhappen.
Phew,thisisalongarticle,butIhopeitprovidesyou
withahighlevelperspectiveofhowthemarketworks!
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Knowyourpropertylingo
Thepropertymarkethasitsownjargonandacronyms
thatcanbeconfusingtothebeginner.Nofear,the
termsbelowwillcoverthemostcommonlyused
jargonyouwillhearwhenpeopletalkaboutthe
market,andwillencounterifyouarebuyinga
property.
CSC
TheCertificateofStatutoryCompletion(CSC)isissued
bytheCommissionerofBuildingControloncethe
buildingworkshavebeencompletedandall
requirementshavebeencompliedwith.Itdenotes
legalcompletionandisusuallygivenafterthe
TemporaryOccupationPermitisissued.
Downpayment
Thisistheinitialupfrontportionofthetotalamount
duewhenyoupurchaseahouse.Thedownpayment
canusuallybepaidpartlyincashandpartlyusingyour
CPF.
Enbloc
Enblocisthecollectivesaleofanumberofownersof
separateunitsinaprivateresidentialorcommercial
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building.Unitssoldinanenblocsaleusuallyfetcha
higherpriceversuswhatthemarketpricewouldbe,
asthedeveloperneedstoofferapremiumto
convincealltheownerstosell.
Freehold
Freeholdisaformofpropertytenurewhereyouown
thepropertyforanindefiniteperiodoftime.
Leasehold
Leaseholdisaformofpropertytenurewhereone
partybuystherighttooccupylandorabuildingfora
givenlengthoftime.Commonlengthsoftheleasefor
residentialpropertyare99yearsand999years.
LTV
LoanToValue(LTV)isthemortgagequantumdivided
bythetotalappraisedvalueofrealproperty.LTVis
oneoftheriskfactorsthatlendersassesswhen
qualifyingborrowersforamortgage.
OTP
TheOptionToPurchase(OTP)isarightgivenbythe
vendorofapropertytoapurchasertobuythe
propertyataspecifiedpricewithinaspecifiedperiod
oftime(thevalidityperiodoftheoption).The
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purchasermustpayabookingfeetoobtainthisright,
andhastoexercisetheOTPwithinitsvalidityperiodif
hedecidestobuytheproperty.
MOP
TheMinimumOccupationPeriod(MOP)isthelength
oftimeabuyerofanHDBflathastostayinitbefore
hecansellit.
Plotratio
Theplotratioisthetotalcoveredareaonallfloorsof
allbuildingsonacertainplotdividedbytheareaof
theplot.Theplotratiotellsthedensityofthe
developmentonthatpieceofland.
Psf
PerSquareFootisaunitofmeasurementofarea,and
$/psfisthetotalpriceofthepropertydividedbythe
landarea(insquarefeet).
SIBOR
TheSingaporeInterbankOfferedRate(SIBOR)isa
dailyreferenceratebasedontheinterestratesat
whichbanksoffertolendunsecuredfundstoother
banksintheSingaporewholesalemoneymarket(or
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interbankmarket).Itissimilartotheinternationally
usedLIBOR(LondonInterbankOfferedRate).
Stratatitle
Stratatitleisaformofownershiptypicallyusedfor
apartmentblocksorcondominiums.Typicallya
projectisdividedintolots(unitsorapartments),and
eachlotwillhaveashareoftheentireproject.Thisis
distinctfromlandedpropertywheretypicallythe
ownerwillhavetitletotheland.
TOP
Abuildingcanonlybeoccupiedbytheowneror
tenantswhenitreceivestheTemporaryOccupation
Permit(TOP),whichisgrantedbytheCommissioner
ofBuildingControloncecertainrequirementsaremet.

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The10StepSystemtoBuying
aPropertyinSingapore
Buyingahomeisthebiggestpurchasemostofuswill
makeinourlives.Yetmanypeoplerushtobuya
propertywithlesspreparationthantheywould
planningaholiday.Thiscanhavefinanciallydisastrous
consequences,especiallyinlightofthemeasures
announcedbythegovernmentonAugust30th2010,
whichhavecreatedalotofuncertaintyinthe
marketsdirection.
FollowthestepsIvelaidoutbelowwhenbuyinga
propertyandyouwillbemuchlesslikelytomakean
expensivemistake.
Step1Decidewhetheryouwantto
rentorbuy
Buyingahomeisoftenanemotionaldecision.Thats
finejustmakesureitsarationalonetoo.Honestly
askyourselfifyouneedtobuyahome,andwhether
rentingmightbeaviableoption.
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Step2Calculatehowmuchyoucan
afford
Firstlookathowmuchmoneyyoucurrentlyhave,
includingcashandCPF.Notethatbasedonthe
governmentspropertymeasures,ifyoualreadyhave
atleastoneloanoutstanding,yourminimumcash
outlaywillincreasefrom5%to10%.Nextfigureout
howmuchyoucanborrow,takingallyouroutstanding
debtsintoaccount.Youcanworkwithabanker,or
usetheaffordabilitycalculatoravailableonLoanguru.
Mostbankswillonlylenduptoa3550%DebtService
Ratio(yourtotaldebtpaymentsdividedbyyour
monthlyincome).
Step3Figureoutwhatsortofhome
youwant
Whatareyourcurrentandfutureneedsforhousing?
Forexample,anewlymarriedcouplethatbuysa
studiooronebedroommightfindwithinayearortwo
thattheyneedatwoorthreebedroomapartment
onceababyisontheway.WouldyoupreferHDBor
privateproperty,ifyoucanaffordit?Whichdistricts
orareasdoyouprefertolivein?Whatarethe
amenitiesandpublictransportationoptionsyouwant?
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Step4Buildalistofoptions
Youcanchoosetoeitheruseabuyersagentand/or
goDIY.Lookatbothoffline(e.g.classifiedadsinthe
newspapers)andonline(propertywebsites)sources
togetthelargestpooltochoosefrom.Basedonwhat
youvefiguredoutfromSteps2and3above,comeup
withalistofpotentialprojectstoconsider.
Step5Domarketresearchand
narrowdownyourchoices
Checktherecenttransactedpricesoftheseprojects
fromtheURAwebsite.Comparepricestherewith
surroundingprojects.Comparethetransactedprices
withtheaskingprices.Ifyouarebuyingfor
investment,lookatthemarketrentsandrentalyields.
Eliminatetheprojectsthatdonotlookattractive.
Step6Goforpropertyviewings
Basedonthissmallerlistofprojectsarrangeviewings
ofatleastafewdifferentunitsineachproject.Its
helpfultotakephotosandnotestohelpyou
rememberwhatyousaw.Visiteachprojectat
differenttimesofthedayandnighttoseeifitisnoisy
orotherwiseunpleasant.Narrowdownyourlistto
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yourtopfewunitsanddoasecondviewingif
necessary.
Step7Getindicativevaluationsand
yourmortgagepreapproved
Dontmissthiscriticalstep!Beforeyoumakeanoffer
ensurethatyouhavegottenanindicativevaluation
fromabankandaninprincipleapprovalfora
mortgage.Youcanapproachthedifferentbanks
yourselforuseamortgagebrokertosavetime.Based
onthenewmeasures,ifyoualreadyhavean
outstandingloanyourLoanToValuation(LTV)limit
hasbeenloweredto70%from80%,soyoullneedto
coughupmorecash.
Also,bankswillonlylendtoyoubasedontheLOWER
ofthevaluationlimitorpurchaseprice,soifyouare
buyingabovethebanksvaluationyouwillneedto
paythedifferenceincash.Ifyouaresellingyour
existinghometopurchaseanewoneandhopeto
borrowat80%LTV,younowneedtopresentproofto
qualify(intheformofasignedpurchaseagreement
foryourcurrenthomeandcertificationshowingthat
stampdutyforyourexistingpropertyhasalready
beenpaidforbythebuyer).
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Step8Makeanofferandnegotiate
thepurchase
Onceyougettheindicativevaluationsandatleast
onepreapprovedmortgagefromthebanks,youcan
thenmakeanofferknowingyoucanborrowwhatyou
need.Therehavebeenanumberofunfortunatecases
ofbuyerswhohavelosttheirdepositsbecausethey
realizedlaterthatbankswouldnotfinancetheir
purchase.Whennegotiatingthepurchaseprice,it
helpstohaveanumberofoptionsonhandsoyouare
notforcedtooverpayduetoalackofoptions.
Step9SignandexercisetheOption
ToPurchase
Iftheselleracceptsyourbid,typicallyyouhavetoput
downa1%deposittogettheOptionToPurchase
(OTP),andhave14daystoexerciseit,bywhichtime
youwillhavetopayanother4%ofthepurchaseprice.
Makesureyouhavethefundsonhandtodoso.Once
yougettheOTPliaisewithyourconveyancinglawyer
andmortgagebankertosettletheprocedures.
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Step10Completethesaleand
collectthekeys
Beforethecompletiondate,doaninspectionofthe
hometoconfirmthatallagreedonfixturesanditems
arestillaround.Onthedateitself,collectthekeysand
checkthatyouhaveacompleteset.Congratulations!
Youaretheownerofanewhome.Timetothink
aboutrenovationandfurnishing
Iveputtogetheradetailedchecklistwithsubsteps
foreachofthestepsabove.Youcandownloaditat
www.propwise.sgbyenteringyouremailaddressin
theformontheright.
Gothroughthesestepswhenbuyingahomeitwill
saveyoutearsandmoney!

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HowtoChooseYourMortgage
Choosingamortgagecanbeconfusing.Thereareso
manyoptionstothinkabout:fixedorfloatinginterest
rates,loanterm,lockinperiods,subsidies,penalties
andotherspecialfeatures.Thereisntonebest
mortgageoutthereitalldependsonyourneedsand
preferences.
Ifyoudliketocompareloansonlineandevengetfree
cashrewardsifyoutakeupaloan,checkout
http://www.propwise.sg/moneyiq/.
Herearethemainoptionsyouneedtoconsiderwhen
makingyourdecision:
1)Loanamount
Thelocalbanksusuallygivealoanofupto80%ofthe
propertyvalueforfirsttimehomebuyers,butthe
actualamountwilldependontheirassessmentof
yourabilitytorepaytheloan.Theytypicallylookata
debtservicingratioof3550%asaceiling.Tocalculate
thisratio,theysumupyourlongtermliabilities
(includingthepotentialmortgagepayment)and
dividethatbyyourmonthlyincome.
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Alsonotethatthebankwillonlylendyouupto80%
oftheLOWERofyourpurchasepriceortheirown
internalvaluation.Soifyourpurchasepriceisabove
theirvaluation,youwillhavetotopupthedifference
incash.Asabestpractice,youshouldalwaysgetan
indicativevaluationandinprincipleapprovalfroma
bankbeforeyoucommittoapurchase.
2)Loanterm
Theloantermisthedurationoftimethatyoutaketo
completelyrepaytheloan.Loantermsusuallyrange
from10to35years.Thelongeryourloanterm,the
smallerthemonthlyrepaymentyouneedtomake,
butthehigherthetotalamountofinterestyouwill
eventuallypay.
Alsonotethatyouragemaybealimitingfactor
bankswilltypicallycapthemaximumtermuptothe
ageof65.Soifyoure50yearsold,youmayonlybe
givenaloantermofupto15years.Youngbuyers
lookingtomaximizetheamounttheycanborrowwill
usuallyselecta35yearloanterm.
3)Fixedorfloatingrate
Fixedratesoffertheborrowersecurityandstabilityas
theratedoesnotchangeoveracertainperiod.As
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interestratesarecurrentlyverylow,iftheyriseyou
willbeprotectedfromupwardadjustmentsofyour
monthlymortgagepayment.Butthiscomesataprice
fixedratepackagesusuallychargehigherinterest
thanfloatingratepackages.
Borrowerswhobelievethatinterestrateswillfallor
remainlowforalongperiodoftimecangofor
floatingratepackagesastheycangetlowerinterest
ratesupfrontandtheirmonthlypaymentswillfallif
interestratesfall.
Forfloatingorvariableratepackages,theyare
typicallylinkedtoeitherofthetwomajorbenchmark
rates:SiborandtheSwapOfferRate(SOR).These
ratesaremainlyaffectedbyUSinterestratesand
Singaporebankingsystemliquidity.Butdonotassume
thattheywillalwaysstayatthelowstheycurrently
areat(e.g.theSIBORisaround0.5%now)in2007
theywereashighas3.6%!Asaruleofthumb,you
shouldlookatyourmonthlypaymentsusingratesof4%
tomakesureyoucanstillserviceyourmortgagein
caseratesspikeup.
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4)Otherspecialfeatures
Someloanshaveaninterestoffsetfeature,where
depositsatthebankcanbeusedtooffsettheloan
amountsoyouonlypaytheinterestonthedifference.
Forborrowerswithlargeamountsofcashthatthey
wanttokeepavailableforotherusesatamoments
notice(e.g.investinginthestockmarket)thiscouldbe
agoodoption.
Somebanksalsoofferinterestonlypackages,usually
onacasebycasebasis.Fortheseloans,youonlypay
theinterestamountforaspecifiedperiodoftime,and
afterthattheloanwillreverttoanormalinterestplus
principleloan.Thisoptionmaybesuitablefor
investorswhowanttominimizethecashoutflow
duringtheinterestonlyperiod.
5)Subsidies,lockinperiodand
penalties
Mostloanscomewithsomesubsidiesincludingthe
legal,valuationandfireinsurancefees.When
comparingmortgages,borrowersshouldcheckwhat
thevariousfeesubsidyamountsare.Forexample,
thereisusuallyacapof$2,0002,500onthelegalfee,
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andifyourlegalfeesexceedthoseyouwillhaveto
topupthedifference.
Thelockinperiodyoushouldchoosedependsonyour
expectationofwhenyouwillsellthepropertyand
alsoonyourviewofwhereinterestratesaregoing.
Typicallytheshorterthelockinperiod,thehigherthe
interestrate.Butifyourepaythemortgagewithinthe
lockinperiod,youtypicallyhavetopayapenaltyof
anywherefrom0.75%to1.5%,whichissubstantial.
Somebankscanwaivethepenaltyifyouareselling
yourhouse(asopposedtojustrepayingthe
mortgage),somakesureyoucheckiftheywillinclude
thisclause.
Heresatiptosaveyoumoneysometimesthebank
cangiveyouanadditionaldiscountofftheir
advertisedinterestrates,especiallyifyouvebeena
longstandingcustomer.Justask!Iveknownpeople
whohavegottena0.05%discountthataddsupto
someseriousmoney.
Ifyoufeeloverwhelmedbyallthedifferentoptions
above,youcanalsoconsiderengagingtheservicesof
amortgagebroker,whowillhelptofiltertheright
packagesforyoubasedonyourrequirements.You
Page|39

shouldnothavetopaythemanyfeeastheywillgeta
commissionfromthebankiftheycansuccessfully
arrangealoanforyou.Happymortgageshopping!
Tocompareloansforfreeandgetcashrewardsifyou
takeupaloan,checkout
http://www.propwise.sg/moneyiq/.