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A Newbie’s Guide to Home Ownership
Way before rushing to view houses, prospective homeowners should get tough with the following questions, says Segment Manager Kenny Loh.
It's only a matter of time before we all leave our nests for a place to call our own. Yet the thought of being slapped with a 25-year loan is terrifying. I get it — these were what my now-fiancee and I contemplated when we wanted to settle down and make a home together.
But rather than jump the gun on marriage and a Build-to-Order (BTO) ﬂat, we felt it was wiser to ﬁrst reflect on our commitment to each other — and then create a detailed financial blueprint for the next chapter of our lives. Here are some important questions to ask if, you‘re thinking about getting your ﬁrst home.
Will You Marry Me?
Above all else, you want to be totally committed to your partner before walking on this path to be homeowners. Because if you're below 35 years old and considering a new HDB purchase, you need to make an equally big decision: getting hitched. Sorry singles, but it is an eligibility criterion for public housing properties.
I'm sure you‘ve heard of couples that registered for marriage, only to part ways and forfeit their deposit — it's not uncommon. My advice? Get hitched because you are committed to your partner and not because of a piece of property. He or she should be someone you want to spend the rest of your life with: if it's not right, take time to think it through.
How Informed Are You About Your Potential Purchase?
Just as weather conditions and terrain are vital to explorers, there are key factors to study before buying a house. You may want to learn about the current housing market, interest rates, then weigh all of that against say, your income and expenditures. As a kind of SWOT analysis, work out what's "for" and "against" your decision to buy a home — well before signing the mortgage papers. Don't rugi (Malay for ’"be disadvantaged") just because you got lazy.
Living Within Your Means?
It may sound like, duh, but purchasing a house is a problem if you're spending more than you earn. Financial institutions won't risk lending money to those who are — and will assess your credit before doing so. That said, being in debt because you took a home loan is different from being in debt because you splurge on every pay cheque. The idea of borrowing (a lot of) money for an asset may cause some migraines — but it is not at all unusual and certainly manageable: provided you plan carefully. And that really is key - planning carefully.
How Much Do You Both Earn?
Whether you’re considering a bank loan or an HDB loan for a joint purchase with your spouse, lenders are also going to determine if you are able to service your loans by looking into your combined monthly income. For couples intending to buy a HDB flat, read up on the income ceiling — it will tell you if you can qualify to buy an HDB flat, and the type of flat you’re qualified to buy.
Mature versus Non-Mature Estates?
The main differences here lie in affordability and available amenities. Because you’re close to schools, malls and MRT stations, mature estates tend to be pricier, but they may also retain their value better. You may need to bus down to the nearest hawker centre in non-mature estates, but you’re likelier to be within your budget as a first-time homebuyer. So it’s less about which of the two is better, than about knowing your goals. And I stress again, doing your research.
Is There a Limit to How Much Money I Can Borrow from Banks?
Yup. You should familiarise yourself with these two terms: loan ceiling and loan tenure. A loan ceiling is the maximum amount of money you can obtain, while loan tenure is the duration of time you want to take to pay it off. Your bank loan ceiling depends on your loan tenure. Of course, how much you borrow and how long you take to pay it back affects the interest rates. To get an estimate, use a loan calculator here. It can be frightening to calculate such large numbers at first, but just take a deep breath and press on — you’ll thank yourself later.
What Kind of Housing Grants and Schemes are Available?
Good news: check out this list of priority housing schemes that can privilege your application to get a new flat. Also, if you’re eligible for CPF Housing Grants, you can use the cash to offset the purchase price of the flat or reduce the mortgage loan for the flat purchase. More bonus, too, if you choose to live near your folks!