The most common question that home buyers ask regarding condos is “how much?” While most of us have some vague ideas of the costs, that doesn’t help to prepare for a property purchase. Whether you’re aspiring to own a condo, or fully intend to buy one soon, here’s a more concrete rundown on how much to set aside:
First, you need to set aside the down payment
The amount down payment for your condo will vary based on the Loan To Value (LTV) ratio offered by your bank. This is always expressed as a percentage.
For example, an LTV ratio of 75 percent means the bank loan can cover 75 percent of your property price or valuation, whichever is lower. So if the property valuation is $1 million, but the asking price is $1.1 million, the bank loan will only cover 75 percent of $1 million.
(You will have to cover the excess $100,000 in cash).
One advantage to buying a new launch condo is that the bank will accept the developer’s price as the valuation, whereas for a resale condo, the asking price and valuation may not match.
Under normal circumstances, the maximum LTV ratio is 75 per cent.
Another 20 percent of the property can be paid through a combination of cash and/or CPF, and at least five percent must always be paid in cash.
So if you’re buying a $1 million condo, you might need:
- $50,000 in cash
- $200,000 in any combination of cash, or from your CPF Ordinary Account
- A bank loan at full LTV, to cover the remaining $750,000
Note that under MAS Notice 632, banks cannot lend you money to cover the down payment.
Can the bank offer less than 75 per cent LTV?
There are some situations in which the bank will decrease the LTV. Typical examples are:
- You have a poor credit score* from late loan repayments or other defaults. You can check your credit score with the Credit Bureau of Singapore (CBS) and can raise a dispute with them if you find any inaccuracies.
- You have one or more outstanding home loans
- Your loan tenure exceeds 30 years (even though the maximum allowable loan tenure is 35 years)
- Your age, plus your loan tenure, would stretch past the retirement age of 65
- The property has limited lease remaining (LTVs may be reduced for properties with 60 or fewer years left on the least. A bank loan is not possible for properties with 30 years or less on the lease).
- The bank judges the property to be in a poor state or problematic location (location is seldom a problem outside of the Red Light zone in Geylang)
- You attempt to purchase the property through a company, instead of under your own name All of the above can drop your LTV ratio to 55 percent or even lower. This means having to fork out more cash for the down payment.
If you’re a foreigner, note that there’s currently no data exchange agreement, so your credit score from abroad will not apply in Singapore.
Second, you need to know the stamp duties you’re liable to pay
This is the tax you pay to buy the property. Stamp duties are payable within two weeks of completing the property transaction, and they are payable through cash or your CPF.
All stamp duties are based on the higher of the property price or valuation. So if the property value is $1 million, but the sale price is $1.1 million, then the stamp duties are based on the amount of $1.1 million.
The Buyers Stamp Duty (BSD) is required for all property purchases. The amount is as follows:
|First $180,000 of price||1%|
|Next $180,000 of price||2%|
|Next $640,000 of price||3%|
|Any amount above $1 million||4%|
So if the property price is $1.5 million, you would pay $44,600 for the BSD.
Paying the Additional Buyers Stamp Duty
If you’re a Singapore Citizen and don’t own any other property when you buy your condo, you can skip this section. If you’re a Permanent Resident (PR), the ABSD for your first property is five percent of the price.
If you’re a Singapore Citizen buying your second property, you’ll have to pay the ABSD. You must pay this even if you intend to sell your existing property, and will ultimately still own one home (e.g. you’re upgrading from an HDB flat to a condo).
You can then apply for ABSD remission later, if (1) you’re a married couple, (2) one of you is a Singapore Citizen, and (3) your previous property is sold within six months of acquiring the new property.
Remember that you pay ABSD first, and then apply for remission afterward.
This means that, if you don’t have enough cash or CPF to cover the ABSD, you may have to sell your flat before purchasing your new condo.
An exception to this is if you upgrade to an Executive Condominium (EC) from an HDB flat, in which case there’s no ABSD
The ABSD rates are as follows:
For Singapore Citizens
- No ABSD for the first property
- 12 percent for the second property
- 15 percent for the third and subsequent property purchases
For Permanent Residents
- Five percent for the first property
- 15 percent for the second and subsequent property purchases
- 20 per cent on all property purchases
If you attempt to buy a condo through a company, the ABSD is 25 percent; so it’s usually not cost-effective to buy your home via your business.
Finally, you need to consider legal fees and miscellaneous fees
You’ll need to hire a conveyancing lawyer to manage the property purchase. They typically charge between $2,500 to $3,000. You may or may not be able to pay this with your CPF – it depends on the law firm in question.
Note that you don’t have to use the law firm recommended by the mortgage banker. You can use any law firm that’s currently on the bank’s board (sometimes one is cheaper than the other).
I suggest you avoid using a law firm that is only on the board of one specific bank, as you’ll end up having to pay the conveyancing fee again when you try to refinance (a new firm has to be paid to take over).
There are also miscellaneous costs such as fire insurance, or administrative fees to process the home loan.
There is such a thing called Mortgage Reducing Term Assurance (MRTA), which pays off your outstanding mortgage if you pass away, or suffer permanent disability. This is the private property equivalent of HDB’s Home Protection Scheme (HPS).
MRTA costs are highly variable, as it depends on your property, your health conditions, etc.
Unlike HPS, MRTA is not mandatory. But it’s a very good idea to have it, otherwise, the bank might foreclose on your property if you pass away unexpectedly.
What about the property agent’s service fee?
In most cases, you don’t need to pay your property agent when you’re the buyer. The seller will pay their agent, who will then split the amount with your agent. There are some exceptions to this, but this is the norm in Singapore’s industry.
This is also why it’s a good idea to get a buyer’s agent, as it provides you with convenience and protection, but at little cost to yourself. Drop me a message if you’re currently in the market, and I can help guide you through the property buying process.
In total, the cost to set aside for a $1 million* condo is as follows:
- $50,000 in cash (minimum)
- $200,000 in CPF, not inclusive of BSD and ABSD
- $24,600 for BSD
- $120,000 in ABSD, remissible later under some conditions (see above)
- $2,500 for legal fees
- Approx. $2,000 in other miscellaneous costs
*Assuming the price and valuation are both $1 million
The total to set aside is around $344,600 in CPF (of which $120,000 is remissible later for some buyers), and $50,000 in cash.
If you wait to sell your flat before buying a condo, or are buying a condo with no existing property as a Singapore Citizen, you’ll just need $349,100 in your CPF.
Don’t be put off by the big number, it’s more manageable than you think
You’re likely not buying the condo on your own, so your co-owner, such as your spouse, can also use their CPF. In addition, if you’re upgrading, you also have the sales proceeds from your flat to help.
(E.g. In the above example, if you sell your flat for $400,000, that leaves you needing just $129,100 in CPF, between you and your co-owner).
The main issue for most buyers is meeting the cash down payment. Assuming you save up for five years, while the Minimum Occupancy Period for your flat finishes, you’d need to save about $1,250 per month (or about $625 each for you and your co-owner).
As such, a surprising number of Singaporeans can afford to upgrade to a condo, after using their HDB flat as a springboard.
In my next segment to this, I’ll be covering how much income you need to secure a loan for your condo. Check out Ron Chong.net for the coming update.
Ron Chong is a leading property agent with Orange Tee & Tie, and had a previous background in construction and Interior Design. His background gives him a wider breadth of experience in dealing with Singapore properties, and he aims to provide practical, actionable advice to buyers and sellers today. Like him on Facebook for the latest news and updates.