Condominiums are highly sought after in Singapore. Condo residents enjoy a host of amenities that could include swimming pools, tennis courts, gyms, and play areas. You will also have the benefit of security guards and a convenient place to park your car.
There are other advantages too. You don’t have to bother about maintenance issues. The condo management will take care of any problems that arise.
Of course, you have to be ready to pay for all this. A condo can cost significantly more than a million dollars. When you are making such a large investment, it’s advisable to do your homework carefully. Here’s a step-by-step guide to set you on the right track.
Step 1: Choose a good agent
The first step is to identify a suitable property that meets your needs and falls within your budget. With hundreds of options available, how will you make a choice?
This is where a good property agent comes in. Your agent will understand your requirements and create a shortlist of properties. You will also receive advice and guidance on the prevailing market rates and the documentation that you need to enter into to complete the transaction.
When you are selecting a property agent, there is one precaution that you must take. Ensure that the person you are dealing with is listed in the Public Register maintained by the Council of Estate Agencies. This step will take only a couple of minutes but will assure you that you are dealing with an authorised person.
Step 2: Select a property lawyer
A property lawyer plays a crucial role in a property purchase transaction. Remember that the stakes are very high. You are probably putting up hundreds of thousands of dollars of your own money to buy the condo. Additionally, you could be borrowing an even more substantial sum from the bank.
You must ensure that the legal documentation is perfect and that you are taking all the correct steps to complete the transaction. That’s where the property lawyer comes in. Here are the specific areas in which you will receive assistance and guidance:
A seller grants you an option to purchase the property when you complete the OTP form and pay an option fee of 1% of the price. You have 14 days to finalise your purchase.
This is a critical step in the property purchase process. A competent lawyer will ensure that you don’t make any mistakes at this stage.
Accessing your CPF
Your lawyer will also help you to withdraw the CPF money that you will be using to pay for your condo. The application process for this can be complicated.
When you are buying property, it is essential to investigate whether the seller is the actual owner. In addition to this, you should find out if the property is subject to any legal dispute. A lawyer’s help in these areas can be invaluable.
Your lawyer will also guide you through the process of paying the stamp duty involved in the property purchase.
Step 3: Arrange your finances and your financing
You will probably be approaching a bank for a loan to pay for the condo that you intend to buy. The amount that they are willing to lend will depend on two factors:
- Your creditworthiness
- The loan-to-value (LTV) limit specified by the Monetary Authority of Singapore (MAS)
In July this year, MAS tightened LTV limits. Why did they do that? This step was in response to the sharp increase in property prices in the period beginning in the third quarter of 2017. Before that, real estate prices had dropped steadily for almost four years.
What is the implication of the new LTV limits? If you are taking your first housing loan, the maximum loan amount will be restricted to 75% of the property price. Before the new rules came into force, the LTV limit stood at 80%.
If your loan tenure is more than 30 years or if the loan extends to a date that is past your 65th birthday, the LTV is even lower. Prior to the new rules coming into force, it was 60%. Currently, it is 55%. You can see the details of the LTV rules on the MAS website.
Remember that when you make the down payment, you will have to put up your own funds or use the money that you have accumulated in your CPF account.
Step 4: Understand how much you have to pay for BSD and ABSD
In addition to the price of the property that you are planning to buy, you have to arrange to pay for buyer’s stamp duty (BSD) and Additional Buyer’s Stamp Duty (ABSD). This can add up to a substantial amount.
Here’s how much BSD you have to pay. It is calculated on the purchase price of the property.
- 1% on the first S$180,000
- 2% on the next S$180,000
- 3% on the next S$640,000
- 4% on the remaining amount
How much does that add up to? If your condo costs S$1.3 million, your BSD will be S$36,600. You can use this calculator to arrive at the BSD that you will have to pay on the property that you are planning to purchase.
In addition to BSD, there is an additional buyer’s stamp duty (ABSD) as well. If you are a Singapore citizen, you don’t have to pay ABSD for your first residential property. But ABSD applies for all other property purchases.
ABSD rates were revised upwards in July as part of the government’s drive to cool property prices. Here are the old rates as well as revised rates:
Step 5: Check if you have enough cash
Remember that you have to come up with part of the purchase price in cash. You can’t use your bank loan or CPF money for the “minimum cash down payment” component that is stipulated by MAS.
If it is your first housing loan, the cash that you have to put up is 5% of the purchase price. If the loan tenure exceeds 30 years or extends beyond the date when you will reach 65 years of age, the percentage climbs to 10%. For the second or third loan, this percentage goes up further to 25%.
The bottom line
As you can see, the procedure involved in buying a condo can be complicated. It’s best to seek help from experts. A good agent and an experienced lawyer can provide invaluable advice and guidance. In fact, finding professional help should always be your first step in the buying process.