Basic Factors to Consider
Some of the things you need to consider before purchasing a home are:
• Commuting plans
• Type of property you are looking to purchase
• Additional facilities
The most important question to consider is: what is your budget for purchasing a home? This will help you in determining the type of residential property you are eligible for.
However, if you do not have a specific budget constraint, then you might want to decide what type of residential property is suitable for you and your family. This can be determined by other factors such as commuting plans and additional facilities, which may include neighbourhood schools, if you have children, and the proximity of certain amenities such as shopping malls and sports complexes.
Financing Your Home
It is advisable to finance the purchasing of a home using a bank loan, especially if you have limited excess funds. For this, it is recommended that you decide first on the type of residential property you are looking for, and ensure that it is within your budget. If you have engaged a real estate realtor or a solicitor to act on your behalf, check with them on all fees payable so as to prepare a more accurate estimate of your overall budget.
Banks will also charge an administrative fee for processing a mortgage, as well as an additional fee for valuing a property. When applying for a mortgage, the amount you will ultimately be allowed to borrow will depend on your own individual financial circumstances and the bank's valuation of the property or the actual transaction price, whichever is lower. The bank will also take into consideration your ability to make the monthly instalments to repay the loan, as well as your credit history.
Singaporeans are usually allowed to borrow up to a maximum of 90 per cent of the property value, while foreigners may be granted a loan of up to 60 per cent to 70 per cent of the property value or purchase price. Some foreigners may be allowed to borrow up to a maximum of 80 per cent, depending on their credit standing and their ability to provide evidence of having established funds, but this approval is only granted on a case-by-case basis.
For resale flats, a loan of 90% of the resale price of 90% of the market value, whichever is lower is offered to qualifying parties.
If you are buying a Housing Development Board (HDB) flat, you may want to look into applying for a HDB loan. HDB offers concessionary loans to first-time home buyers and second-time home buyers, who are upgrading to another HDB flat. DBSS (Design, Build and Sell Scheme) and BTO (Built to Order) flats are also available and applicable to Singaporeans only. (Visit the HDB website here)
There are various schemes offered by HDB to ease the process of paying for a HDB flat.
Listed below are some of them;
• Additional CPF Housing Grant (AHG): This is meant to assist families with a steady income to purchase their first subsidized HDB flat. The AHG can be used for the purchase of new, resale and DBSS flats and it is an additional subsidy over and above the regular market subsidy and CPF Housing Grant that new and resale flat buyers respectively enjoy. This scheme was further enhanced in 2009 to make owning a home easier especially for lower income families. The maximum AHG amount has been increased from $30,000 to $40,000 and the income ceiling has been raised from $4,000 to $5,000. Continuous working period preceding the flat application is reduced from two years to one year.
• Special CPF Housing Grant (SHG): This scheme provides first-timer families who are earning up to $2,250 a month to buy a smaller flat from HDB that is well within their means.
• CPF Housing Grant for Families DBSS: The CPF Housing Grant is a housing subsidy (in the form of CPF monies) provided by the Government. The grant assists eligible first-timer family to buy a DBSS flat from the developer. (Visit the HDB website here)
• CPF Housing Grant for Singles/Singles living with parents: This is to assist singles who are 35 years and older in purchasing a flat. (Visit the HDB website here)
• The CPF Housing Top-Up Grant: This scheme is a housing subsidy for those who have taken a CPF Housing Grant for Singles previously in their purchase of a resale flat who marry a first-timer citizen spouse or another Singles Grant recipient or in the event where the non-citizen spouse or child have become a Singaporean Citizen or Singapore Permanent Resident.
• CPF Housing Grant for Family: The CPF Housing Grant is a housing subsidy (in the form of CPF monies) provided by the Government. The grant assists eligible first-timer family to buy an EC from the developer
As home purchase is a long-term financial commitment, therefore it is imperative for you to consider and plan your budget effectively before purchasing a flat.
These are some steps to take:
• Available cash savings
• CPF Monies
• Housing Loan (if required)
• CPF Housing Grant (if required)
Foreigners are allowed to purchase resale HDB flats and private residential property according to their financial abilities. Foreigners looking to purchase private residential property or landed property are still required to seek approval from the Singapore Land Authority prior to purchasing.
Do bear in mind that if the property you are buying has a limited lease, it may be more difficult to finance the purchase using a housing loan. Generally, the shorter the lease period, the higher the interest rate of the loan will be.
If you are planning to use your Central Provident Fund (CPF) savings to finance part of your purchasing of a private residential property, you must familiarise yourself with the limits on the use of CPF savings for residential properties. Visit the CPF website here.
Buying an Uncompleted Private Residential Property
If you own a HDB apartment or an executive condominium, make sure that you have fulfilled your minimum occupation period. You cannot purchase a private residential property until you have done so.
If you are a non-Singaporean citizen and you intend to purchase a landed residential property, you must first obtain approval from the Controller of Residential Property under the Singapore Land Authority. Non-Singaporean citizens include permanent residents. Visit the SLA website here.
If you are buying an uncompleted private residential property, it is essential that you check that the housing developer you are purchasing a residential unit from has a Sale Licence. Only housing developers with a Sale Licence are allowed to offer housing units for sale.
When viewing a show flat, you should be aware that show flats may differ slightly from the actual units. In this case, you should check the specifications of the unit you are purchasing in the Sale and Purchase Agreement.
You should also be thorough and check with the housing developer if the housing project will be affected by any public schemes and special conditions stipulated by authorities.
The sale and purchase of a private residential property is only deemed complete when the housing developer has transferred to you the legal title of the unit.
One important thing to note is that HDB does not allow for the buyer, the spouse or anyone listed in the application form to have ownership or a vested interest in other property, be it in Singapore or overseas.
Applicants must not currently own or have disposed property within 30 months before the date of application and between the application date and the date of taking possession of the flat.
HDB may grant an exemption but this is strictly on a case to case basis. If you are interested in seeking exemption, you must fill up a questionnaire and send it back to HDB. Fill in the questionnaire here.
Singaporean buyers may purchase the below mentioned housing units only twice:
• a flat from the HDB;
• a resale flat with the CPF Housing Grant*;
• a DBSS flat from developer;
• an EC unit from developer.
*Only applicable for first-timer applicants
If you have already bought two housing units, you will not be eligible to apply or be listed as an essential occupier in an application.
For more information regarding HDB eligibility, visit the HDB website here.
Option to Purchase
If you wish to purchase a property, you must obtain an Option to Purchase from the seller. An Option to Purchase is essentially a right to a property and acts as a reservation.
As the intending purchaser of the property, you will be required to make a payment known as the booking fee, or the option fee, as a deposit of good faith.
The option fee payable for a HDB unit is of an amount not exceeding SGD1,000 and the Option deposit does not exceed SGD5,000. This amount is inclusive of the option fee. Once an Option to Purchase has been granted, you or your representative should receive all necessary documents, including a duplicate of the Sale and Purchase Agreement, within 14 days from the date of the Option to Purchase. This 14 days includes Saturday, Sundays and any public holidays that may fall within the allocated period. If the buyer decides not to go through with the sale, he can simply allow the Option to expire. Only the Option Fee will be lost.
During the validity period of your Option the Purchase, the seller is not allowed to offer the property for sale to other interested parties.
You should be aware that the Option to Purchase obtained from a housing developer is only valid for three weeks from the date of delivery to you or your representative, and if you do not exercise your Option to Purchase within its validity period, it will expire and the seller is entitled to keep 25 per cent of the option fee. You will be refunded the remaining 75 per cent of the booking fee and the seller may then offer the property to other prospective buyers.
All licensed housing developers are required to use the standard form of the Option to Purchase, which can be found on the Urban Redevelopment Authority's (URA) website. Any amendments to be made to the Option to Purchase must be approved by the Controller of Housing. Visit the URA website here.
Please note that the Option to Purchase is non-transferrable. Therefore, all persons intending to buy a property together should be named as intending purchasers in the Option to Purchase.
Only those named as intending purchasers in the agreement may exercise the Option to Purchase. After an Option to Purchase has been granted, any name changes in the agreement must be approved by the Controller of Housing.
If you wish to exercise your Option to Purchase, you must sign all copies of the Sale and Purchase Agreement and return them to the housing developer, and make a down payment, which may be between five per cent and 15 per cent of the purchase price, within the validity period.
However, the housing developer may also permit you to make the down payment within eight weeks from the date of the Option to Purchase. The standard down payment is 20 per cent of the purchase price, inclusive of the option fee.
Sale and Purchase Agreement
A Sale and Purchase Agreement is a contract for the sale and purchase of a property between a buyer and a seller. If you have been granted an Option to Purchase, you should have received a copy of the Sale and Purchase Agreement within 14 days from the date of the Option to Purchase.
All licensed housing developers are required to use the standard form of the Sale and Purchase Agreement, which can be found on the URA website. Any changes to be made to the Sale and Purchase Agreement must be approved by the Controller of Housing and when this has been done, the housing developer is required to list all amendments made in a separate schedule in the contract, commonly referred as the second schedule.
You should ensure that you make all necessary payments due to the housing developer on time in accordance with the payment schedule included in the Sale and Purchase Agreement, or you may be held liable for additional interest payments.
If you do not settle any payments due within 14 days, the housing developer may deem that you have repudiated the Sale and Purchase Agreement and take the necessary steps to annul the contract.
Once the contract has been annulled, you will be returned 20 per cent of the purchase price, but you will still be held liable for any outstanding interest owed to the housing developer.
In the event of a dispute between you and the seller, you may wish to engage the services of a professional mediator to resolve the situation, or seek legal advice if the need arises. You cannot request for the Controller of Housing to intervene as this is outside of the Controller's jurisdiction.
Under the Standard Payment Scheme, you will make a total of 10 different payments.
1. The first payment to be made is the booking fee, which is typically between five per cent and 10 per cent of the purchase price.
2. After signing the Sale and Purchase Agreement, you will be required to make a down payment of 20 per cent of the purchase price, less the option fee.
3. Upon completion of the foundation work, you will be required to make a payment of 10 per cent of the purchase price.
4. You will have to make another payment of 10 per cent of the purchase price, following the completion of the unit's reinforced concrete framework.
5. Once the brick walls of the unit have been completed, you are expected to make a payment of five per cent of the purchase price.
6. Another payment of five per cent is due upon completion of the unit's roofing and ceiling.
7. After electrical wiring, internal plastering, plumbing and door and window frame installations have been completed, you will be required to make a payment of five per cent.
8. Following completion of the car park, roads and drains, you will have to make another payment of five per cent.
9. Upon receiving a Notice of Vacant Possession, you will be required to make a payment of 25 per cent of the purchase price.
10. On the completion date, you will have make payment on the remaining 15 per cent.
Besides the purchase price, there are other costs which you are likely to incur such as property taxes and maintenance charges. If you are a non-Singaporean citizen, do note that you will be taxed differently from that of a Singaporean citizen, in accordance with the Inland Revenue Authority of Singapore's (IRAS) regulations. (Visit the IRAS website here.)
Notice of Vacant Possession
When the unit is ready to be handed over, the housing developer will issue you a Notice of Vacant Possession. The housing developer must also provide you with a copy of the Temporary Occupation Permit or Certificate of Statutory Completion as well as a copy of a certificate by an architect or a professional engineer, who can verify that all works have been completed in accordance with the approved plans and specifications.
There is a defects liability period of 12 months from the date you receive your Notice of Vacant Possession from the housing developer. During this period, the housing developer has an obligation to rectify any defects in the housing project which become apparent.
You should inspect your unit thoroughly as soon you take possession of it. If you discover a defect, inform the housing developer in writing and request that it be rectified. The housing developer is obliged to rectify any defect within one month of receiving notice.
If the housing developer is unable to rectify the defect within one month of receiving notice, you may notify the housing developer in writing that you intend to engage a third party to carry out the necessary repairs and provide the estimated costs of the repair works.
You should not include any defects in this notification that were not mentioned in the previous notice to the housing developer. If any new defects are found, you should inform the housing developer in writing first before allowing a one-month period for rectification works.
Following the second notification, you should allow the housing developer an additional period of 14 days to perform the necessary repairs. If the housing developer still fails to do this, you may proceed with the repair works and make a claim for the costs from the housing developer.
Buying a Private Residential Property through a Private Treaty
If you are buying a private residential property from an individual owner, it is advisable to engage the services of a solicitor.
You will be required to obtain an Option to Purchase from the seller and in this case, you should be prepared to pay a booking fee of one per cent of the purchase price.
The validity period of an Option to Purchase from an individual seller is considerably shorter than that of a housing developer's. You only have 14 days to decide whether or not to exercise your Option to Purchase. If you decide not to exercise your Option to Purchase, you will forfeit the booking fee.
If you decide to exercise your Option to Purchase, you should be prepared to make another payment of four per cent or nine per cent of the purchase price, as agreed between yourself and the seller.
Once this is done, you can allow your solicitor to help you complete the purchase of the property. This will probably take eight to 10 weeks, during which, you will be required to make the remaining payment of 90 per cent of the purchase price. Your solicitor will need to coordinate with the necessary financial institutions to finance the purchase, prepare the contracts and lodge a caveat on the property, among other things.
You will also be required to pay a stamp fee to IRAS, which will be three per cent of the purchase price less $5,400, within 14 days of exercising your Option to Purchase.