First-time buyers of home can prevent heartaches by being better prepared

If you are first-time buyers, an FAQ (Frequently Asked Questions) could save you not just dollars, but also some heartaches as you close on your first home.

By: Phoenix Lee/

The first question first-time buyers should attempt to answer is “who is a “first time” homebuyer?”

If you are buying a HDB (Housing & Development Board) flat, the HDB has clear guidelines as to who it considers to be first time home owner. You will be considered a first-timer applicant if you have not received any housing subsidy from HDB. This means that you must not:

  • Be the owner of a flat bought from HDB
  • Have sold a flat bought from HDB
  • Have bought an Executive Condominium (EC), Design, Build and Sell Scheme (DBSS) flat or an HDB resale flat with CPF Housing Grant, or taken over ownership of such a flat or EC
  • Have transferred the ownership of a flat bought from HDB, or an HDB resale flat bought with a CPF Housing Grant
  • Have ever taken other forms of housing subsidy, such as Selective En bloc Redevelopment Scheme benefits or HUDC estate privatisation

First-time buyers can receive up to $120,000 in grants when buying a resale flat, and up to $80,000 when buying a new flat.

first-time buyers
Screengrab MND

If you are considering buying a private residential apartment, the restrictions which apply to HDB flat buyers do not apply to you.

The second important question first-time buyers should attempt to answer is “how much down payment and closing costs would I incur?”

Down payment is a percentage of the purchase price of a home. Lenders require that borrowers must invest a certain percentage of the purchase price in the home. It is an assurance to the lender that the borrower is willing to make an equity commitment (investment) to the property.

The amount to pay as downpayment for HDB flat depends on whether you are:

  • Taking an HDB housing loan
  • Not taking any housing loan
  • Taking a bank loan
Type of Loan (If Applicable) Downpayment Mode of Payment
Taking an HDB housing loan 10% of the purchase price CPF and/ or cash

  • You can use your CPF Ordinary Account (OA) savings to make the downpayment in full. If the CPF OA amount is insufficient, the balance is to be paid in cash.
Not taking any housing loan
Taking a bank loan 20% of purchase price for loan ceiling of 75%
  •  5% in cash
  • Balance using CPF OA savings
20% of purchase price for loan ceiling of 55%
  • 10% in cash
  • Balance using CPF OA savings

First-time buyers, should not ignore the first time home hunters of private properties. If you are buying a private property, you will also not be affected by the Additional Buyer’s Stamp Duty (ABSD), but will be affected by the reduced Loan-to-value ratio.

There is a slight impact on the loan-to-value ratio. This means a lesser loan available for your house.

In short, there is a 5% reduction in every category of loans. So if originally the Loan-to-value is 80%, it becomes 75%.

For example, a 75% loan-to-value means a down payment of 25%, made up of 5% cash and 20% CPF (provided you have enough CPF).

For example, for a $1,000,000 house: 

  • $50,000 cash downpayment
  • $200,000 CPF Ordinary account balance (OA) for downpayment
  • Buyer Stamp Duty (BSD), 1% on the first $180,000, 2% on the second $180,000 and 3% on the next $640,000 and 4% thereafter. For a S$1m property, the 4% stamp duty does not apply.
  • Loan-to-value of 75%, that is $750,000. This 75% of loan is subjected to the usual Total debt servicing ratio (TDSR) which limits the person’s overall debt to be within 60% of a his/her gross income.

Most mortgages for first-time buyers would require a minimum down payment of at least 10% – 25%, depending upon the loan type and terms, with the mortgage financing the balance of the purchase price. Closing costs are the other, non-down payment costs, paid at closing. Closing costs include the total costs and fees associated with closing a loan, including property taxes, fees (e.g. legal, conveyancing) , and insurance premium. Be mindful that closing costs can be substantial for first-time home buyers.

The third important question first-time buyers should answer is, “what are the 3 most important steps to do before I buy a home?”

In today’s market, the best steps that you can take to prepare for buying a home are:

  • Improve your credit score;
  • Increase your household savings/reserves;
  • Be prepared to make a minimum cash down payment

If you are planning to invest in properties but are ensure of funds availability for purchase, you should speak to a mortgage broker who can set you up on a path that can get you a home loan in a quick and seamless manner. Most mortgage brokers have close links with the best lenders in town and can help you compare Singapore home loans and settle for a package that best suits your home purchase needs. Before you set out to find the best home loans, you should find out about money saving tips as well.

Whether you are looking for a new home loan or to refinance, mortgage brokers can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all their services are free of charge. So it’s all worth it to secure a loan through them. They can also give you good refinancing advise, which could help you save thousands of dollars. Home loan shopping for the best mortgage will help you get the best financing deal.

Written by Ravi Chandran

homeowners missing refinancing

Comprehensive finance development is important for all businesses to grow

Securing bank loans

Potential lenders and financing objections – how to land loans?