Buying a home is a big deal for Singaporeans. For most of us, the HDB flat, condominium or for the lucky few, a landed house, will be the single biggest purchase of our lives. A home loan is a long-term commitment that can stretch for up to 35 years, hence, it pays to spend some time and effort in understanding about them before you sign the dotted lines.
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How much home loan can you take?
A general rule of thumb is that the monthly repayment amount should not exceed 40% of your monthly income.
The next thing to understand is the initial costs of a home:
a) Option to Purchase (OTP)
An OTP gives you the sole rights to purchase the said property within a validity period, that is mutually agreed upon between you and the seller. The option fee for the OTP ranges between 1% to 5%. To exercise the OTP, you pay between 5% to 10% of the property price.
b) Stamp Duty
Stamp Duty is stated in the Sale and Purchase agreement, and is calculated based on the higher value of either the property price or the market value:
First S$180,000 – 1%
Subsequent S$180,000 – 2%
Thereafter – 3%
c) Legal Fees
The cost of legal fees can be paid using CPF.
d) Agent Fee
The fees charged by property agents range between 1% to 2% of the property price.
Once your loan is approved and you’re legally the owner of the purchased property, the loan will be disbursed according to:
a) A completed property – fully disbursed.
b) An uncompleted property – disbursed in stages.
Loans for New HDB Flats
For new HDB flats, once you have been shortlisted by HDB, you’ll be invited to book the flat by paying an Option Fee which costs S$1,000 for a 3-bedroom HDB flat and S$2,000 for a 4-bedroom or bigger HDB flat. Next, provide the bank with the property details to generate a Letter of Offer, which is required for you to sign the Lease Agreement. At this point, a 20% downpayment, the legal fee and stamp duty is payable.
Looking for home loans in Malaysia?
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