Buying an engagement ring and getting down on one knee to pop the all-important question to your better half is one of the most romantic and intimate things a guy can do in his life. Our article aims to prevent you from going on your knees a second time over problems and questions on how to buy your first Built-To-Order (BTO) flat.
Over the past few years, we have met many young couples who have been through the milestone of buying a BTO flat. For most of them, it was one of the biggest decisions they have made together so far and understandably, some were unsure about certain aspects of it.
To help with this, we look at 5 simple steps you and your partner could take when it is your turn to do so.
1. Talk To Your Other Half
We are not claiming to be marriage experts but if there is one thing we are sure would help most couples, it would be communication.
Young couples should plan for the future together, and that includes the home you will be staying in. Talk about the location, the size of the home, and also, if any of your parents or even siblings may move in with you.
Every family is unique and there are no right or wrong answers to each of these questions. If need be, compromise. The last thing you want is to be spending the first few years of your marriage living in a flat that neither of you agreed to and are happy with.
Another thing to note is that both of you are making a decision today, for the long-term. A BTO flat usually takes about 3 years to be completed. So think a little further instead of just deciding based on your present circumstances. Deliberately choosing a flat near your workplace today may not seem like such a clever decision 3 years later when you are no longer working in that area.
That doesn’t mean you should be extra choosy, trying to find the perfect unit at the perfect location on the perfect level with the perfect view. Rather, the key is to make the best possible decision together.
2. Assess Your Personal Finances
No one should ever commit to a big-ticket item, such as their first home, without first having a thorough assessment of their personal finances.
Here are some tips we’d like to share.
As a rule of thumb, look for a flat that is within 5 years of your combined gross salary. For example, if your combined salary each month is $5,000, which translates to $60,000 a year, you should avoid spending more than $300,000 on your flat.
With the wide variety of flat types and locations available, there is no reason for not being able to find a suitable flat within your budget.
In fact, in 2014, more than 80% of first-time 4-room new home buyers bought their flats for under $350,000.
Start Tracking Your Monthly Expenses:
This is as good a time as any to start keeping track of your monthly expenses. Yes, it’s mundane and not the most fun-filled activity, but you have got to start somewhere. This is especially vital if you and your spouse end each month not knowing where your money have went.
3. Check Out Upcoming BTO Flat Launches
Once both of you have talked about your preferences and have assessed your finances, it is time to do some research on what is available in the market.
Upcoming sales launches can be found on the HDB website. It contains details on the locations available, the flat mix in each estate and also when the sales launch will be taking place.
4. Tap On Priority Schemes and Grants
In the past couple of years, the government has introduced and enhanced a host of priority schemes and grants that first-time homebuyer can tap on. There is absolutely no reason why you shouldn’t take full advantage of them.
Priority Scheme for Buying a Flat Near Your Parents
Married Child Priority Scheme (MCPS)
The MCPS gives priority to families buying a new flat to live with or near (in same town/estate, or within 2km) their parents or married children. Up to 30% of the flat supply for first-timer families, and up to 15% of the flat supply for second-timer families, are set aside for those applying to live with or near their parents or married child
First priority is also be given to married children and their parents who apply for a flat to live together under one roof.
Additional CPF Housing Grant (AHG)
The AHG of up to $40,000 is meant to help lower and middle-income families earning up to $5,000 per month buy their first subsidised home. The AHG is granted according to your income, and can be used by families to offset the cost of purchasing their first home, new or resale.
Special CPF Housing Grant (SHG)
The SHG was recently enhanced, as announced by PM Lee at this year’s National Day Rally. The enhanced SHG of up to $40,000 aims to further help lower- to middle-income first-time homebuyers earning up to $8,500 purchase a new flat from HDB (up to 4-room) in the non-mature estates.
A couple that earns a combined monthly income of $4,000, and intending to purchase a 4-room flat in a non-mature estate will qualify for a total grant of $55,000, ($15,000 AHG and $40,000 Special CPF Housing Grant). That means if the cost of a 4-room flat is $295,000, the couple will only need to pay $240,000, or a discount of almost 20%.
Proximity Housing Grant
The Proximity Housing Grant is more applicable for resale flats but we feel it is worth mentioning them as well since its relatively new as well. Introduced during the 2015 National Day Rally, it provides an additional grant of $20,000 if you were to purchase a resale unit within 2km of your parents home, or vice-versa. This is on top of any other grants that you may already have been entitled to.
It is worth noting that in 2014, more than 80% of first-time 4-room flat buyers received grants. So do your homework to see if you qualify and choose your flats wisely.
5. Finalize Your Budget Early
Since you will only find out about the selling prices of particular BTO projects during the sales launch, we advocate working out your budget beforehand. Here is one method you and your partner can consider.
|Couple 1||Couple 2|
|Combined Monthly Salary||$4,000||$6,000|
|Monthly Contributions To CPF Ordinary Account (OA) (Employer + Employee)||$920||$1,380|
|Total Grants Qualified
(Assuming purchase of up to 4-room flat in a non-mature estate)
|Mortgage Loan That You Can Take Based On Only Using CPF OA For Repayment (Assuming 25 years, 2.6%)||$202,000||$304,000|
|Current Amount In CPF OA (Based on 1 year of work)||$11,040||$16,560|
|Maximum Budget With No Cash Outlay for Loan Repayment||$268,040||$350,560|
The above table shows the price of a flat that you and your partner can purchase without any cash outlay for your monthly mortgage repayments.
As you can see, the amount is pretty substantial. It is no surprise to us that more than 80% of homebuyers in Singapore don’t have to pay any cash for their monthly mortgage repayments.
The point we wish to highlight though is to work out your own calculations first, so that you can make a good and informed decision.
Buying your first flat is an important decision, and you should give it at least as much thought as choosing your engagement ring, don’t you think?
Top Image From Benjamin Lim. Used With Permission
This article is brought to you in collaboration with the Ministry Of National Development. All views expressed in this article are the independent opinion of DollarsAndSense.sg