You know #adulting is real when your friends start to talk about getting married and buying a flat. If you are also thinking of jumping on that bandwagon, you would first need to do some financial planning. It may sound intimidating but it’s as easy as ‘ABC’ – understanding your ability to pay, working out a feasible budget, and then securing credit.
Step 1: Understand Your (A)bility to Pay
The first thing you need to work out is your ability to pay. To do this, look at your monthly income, expenses, and savings, and map out your cash flow using this tool.
After keying in the figures, you can estimate the amount of cash you can set aside for your housing loan instalment payments. As your financial situation might change over time—for example, if you decide to change jobs, or if your income fluctuates according to commissions— it is better to be conservative with your estimate.
Don’t forget about the additional expenses you will incur after becoming a homeowner! Things like monthly utility bills and renovation costs can add up, so do buffer them into your cash flow planning too. You can refer to the infographic below for a brief overview:
Step 2: (B)udgeting for Your New Home
It is easier to shortlist a suitable flat (e.g. location and flat-type) when you have a budget in mind. Calculate a comfortable budget by noting down the amount of:
- Available cash savings
- CPF Ordinary Account (OA) savings (You may retain up to $20,000 balance in your account)
- CPF Housing Grant (if eligible)
- Housing loan
Estimating Additional Costs
Apart from the flat price, there are other costs that come with buying your own home, such as the option fee as well as stamp duty and legal fees. As such, do buffer some funds to cover these costs. Read our article to find out more.
We have tools that can help you estimate the various costs you may incur at each stage of the flat buying process, from signing the agreement for lease to collection of keys. Here are some useful links to work out a feasible financial plan:
CPF Housing Grant
The amount of grants you receive will depend on your eligibility, and the type of flat you are applying for. Check out the table below for a summary of the grants available, or read this article for more information.
Step 3: Securing (C)redit
The final step before you commit to a flat purchase is to secure a housing loan from HDB or a bank regulated by the Monetary Authority of Singapore. The loan amount you can get depends on a few factors such as age, income, and financial standing.
HDB Housing Loan
Run through the eligibility criteria for an HDB housing loan here! If you meet the criteria, you can go ahead to apply for a Housing Loan Eligibility (HLE) Letter, which specifies the maximum loan amount you can receive. You need an approved HLE letter before you book your flat. The HLE letter is valid for 6 months, so you can apply for it ahead of time. Here are the 4 steps to applying for one:
If you are not ready to take the plunge, but are still interested to work out an estimated loan assessment, you can use the Enquiry on Loan Estimate e-Service.
Loan from Banks
If you choose to get a housing loan from a bank instead, you have to approach the banks to check on the loan amount you can obtain.
That’s it… financial planning for your flat purchase in just 3 steps. Let us know what other flat buying tips you would like to know in the comments below!