The long-term goal of many Singaporeans is to become the proud owner of an individual piece of the home property. To precise, a condominium or a landed property.
Singapore is known as the Little Red Dot. This means that land is scarce. Singapore’s housing is known to be super expensive and it costs at least $1 million to own a condominium or a private property. Compared to Malaysians or Australians, most of the citizens in Singapore live in HDBs. However, with hard work and self-improvement, investments or perhaps starting their own business, some of us may be able to afford a landed property.
Areas such as Serangoon, Bukit Timah, Sixth Avenue, Hillview, Orchard and Marine Parade are areas known for their expensive properties.
If you already own an HBD flat, it could be the right time for you to upgrade to owning your own private home. However, before you embark on this upgrade, there are some critical questions that you need to ask yourself. Some of these are outlined below.
1. Have you fully paid off your current mortgage?
The funds that you receive when you sell your HDB flat should be first used to pay off any outstanding amount that you owe on the loan of the house. If any amount was borrowed from your CPF account, it should be repaid in full together with any amount of accrued interest. If the amount that you receive from the proceeds of the sale of your HDB flat is less than your outstanding loan, then you will need to top up the balance in cash.
However, if the amount that you receive from the proceeds of the flat is more than the amount you have outstanding on loan, then you will remain with the other balance.
Should you require funds to upgrade your home from a HDB to a condominium or private property, Lending Bee’s Bridging Loan may be able to help.
2. Do you satisfy the eligibility requirements?
Before upgrading to owning a private home property, there are specific requirements that you will need to meet.
Firstly, you will need to have lived in your HDB flat for a minimum of five years. It is called the Minimum Occupancy Period. It is a government rule in Singapore that you must live in your HDB flat for five years before renting out the whole unit, or selling it.
Secondly, as you sell your flat, you will need to be careful to adhere to the Ethnic Integration Policy and Single Permanent Resident quota.
3. Will you need to apply for a new private home loan as well as a short-term loan?
Most Singaporeans who upgrade to the ownership of private property do it by acquiring a new mortgage. Generally, for most home loans, you will be able to get up to 75% of the value of the property. Some banks offer longer loan terms than others, and different banks give different types of interest rates on private home loans. Therefore, you should research widely and settle for the loan terms and conditions that are most suitable for you.
Apart from taking out a new home loan, you will also need to decide as to whether you will need to take out a short-term loan. It might be necessary if the proceeds from the sale of your HDB flat take longer than expected to be processed and received. You may need to take out a bridging loan to cater for the payment of your new credit while you wait for the proceeds of the sale to be realised.
Should banks reject your loan application, consider licensed moneylenders in Singapore. The word “moneylenders” often puts a frown on people’s faces. However, there are many licensed moneylenders in Singapore that are regulated by the Ministry of Law. They abide by the rules and often offer another solution to borrowers. Lending Bee is one of the biggest licensed moneylenders in Singapore and one of the six new firms piloting alternative business models for money lending. We offer one of the best bridging loans in Singapore and we promise to get back to you within a day.
4. Are you aware of your current Total Debt Servicing Ratio (TDSR)?
The Total Debt Servicing Ratio is the maximum portion of your monthly income that you are allowed to use for the servicing of all your debts. These debts include mortgages, car loans, house loans, credit cards and any other loans that you may have.
In Singapore, the Total Debt Servicing Ratio has been set at 60%. Therefore, if you earn a monthly income of $5,000, you can only use up to $3,000 to service all your debts. If you have already reached your maximum TDSR of 60%, then it may be difficult for you to apply for another loan and you may need to pay off some existing loans first before you apply for your new private home loan.
Alternatively, you could take out a home loan which has a longer loan term so that the monthly instalments payable are lower and accommodated within your Total Debt Servicing Ratio.
5. Do you know how much Additional Buyer’s Stamp Duty (ABSD) that you will be charged?
In Singapore, there is no Additional Buyer’s Stamp Duty charged when you buy your first home property. However, once you decide to upgrade and buy a second private home property, you will be charged ABSD.
Permanent Residents and citizens of Singapore are charged 12% as ABSD when purchasing their second home property. On the purchase of the third home property, the Additional Buyer’s Stamp Duty goes up to 15%. In addition to these charges, there are also legal fees which will cost you a minimum of $2,000, depending on that law firm that you decide to engage to handle the purchase of your private property.
However, it is still the goal of many Singaporeans to purchase their own private property. Getting a bigger home not only increases comfort, but it also increases the owners’ social status. Once you choose to upgrade to private property, there are some benefits that you will enjoy. Some of these are described below.
a) Fewer restrictions when applying for a bank private home loan
In Singapore, there are some restrictions given when you apply for an HDB loan. One of them is that you need to satisfy the terms of the Mortgaging Service Ratio. It means that you are only allowed to use up to 30% of your monthly income for the repayment of the HBD loan. It also excludes the repayments of other investments.
However, with a private home loan, you only need to adhere to the Total Debt Servicing Ratio, which is at 60% of your monthly income. Meaning that if you have few debts, it will be easier for you to access a bank home loan since you will be able to use a more significant ratio of your income to service the loan.
b) Fewer restrictions on resale.
As an owner of private property in Singapore, you will not be subjected to the Minimum Occupancy Period of 5 years which applies to owners of HDB flats. The owner of an HDB flat can only sell or rent the house after living in it for a minimum period of 5 years. However, as a private property owner, you will be able to rent or sell your house at any point in time. It will enable you to generate an income from your investment in the form of rent at a much earlier date. Also, you will be able to liquidate your asset without any time restrictions.
In conclusion, making an upgrade to owning a private home property is a good investment, and the gains will prove to be worthwhile for you in the long run.
Lending Bee understands the needs of Singaporeans and has designed our very own Bridging Loan to help make dreams come true. If you would like to upgrade your property, be it for the comfort of your family or for your own personal goal, let Lending Bee, one of the most reliable licensed moneylenders in Singapore help you.
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About Lending Bee
In a volatile, uncertain, complex and ambiguous world, you can count on one thing – your partner in credit, Lending Bee. Just like an industrious bee, we are committed to helping each and every customer access credit – quickly, easily and seamlessly.