Ravi Chandran
The mortgage landscape here is constantly changing and getting a most affordable housing loan is possible if you know where to look
Recently, the Ministry of National Development announced 4 property rules that are aimed at helping Singaporeans achieve our dream of becoming homeowners. Here is a summary of the 4 new property rules which we think every Singaporean who dream of being a homeowner should know.
Rule 1: Shorter Waiting Time To Book Unsold Flats
Instead of having an SBF/ROF exercise, unsold flats will be offered to Singaporeans on a rolling basis. You can book them anytime the moment they are released.
How Will This Affect Singaporeans?
Under the new scheme, you can find out within a day if your application is successful. This reduces the waiting time for booking a flat to just one day, instead of few months. For a start, the new scheme will be tested on a small batch of 120 flats in mid 2019. If the trial is successful, Singaporeans can expect this scheme to become a norm in the future when applying for balance flats.
Rule 2: Shorter Balloting Time For BTO Projects
National Development Ministry announced the BTO projects’ balloting time will be cut by half, from 6 weeks to 3 weeks.
How Will This Affect Singaporeans?
The shorter balloting time will allow Singaporeans to re-evaluate their housing choice without having to wait for an additional of 3 weeks. In conjunction with the new scheme to roll out unsold flats on a rolling basis, Singaporeans who are unsuccessful in their BTO application can switch to the rolling balance flat scheme.
Rule 3: Expanded BTO Announcement Schedule Allow Singaporeans To See More BTO Projects
The HDB will be announcing BTO projects 6 months in advance. Homeowners will be able to find out about the next 2 BTO projects at any point in time. In the May exercise, buyers will know which projects are launching in August and November.
How Will This Affect Singaporeans?
With the expanded BTO announcement schedule, Singaporeans will be able to view upcoming projects and make their plans accordingly. This will reduce the likelihood of Singaporeans balloting for not-so-ideal projects for fear of a lack of decent projects in the upcoming BTO. In short, more visibility means more choices for homeowners.
Rule 4: Relaxed Restriction On CPF Usage For Older Flats
The issue of CPF usage on older flats (above 40 years) has been plaguing Singaporeans for a long time. After such a long time, the government has finally announced much needed changes to the CPF usage regulation.
CPF usage rules have now been relaxed. This will apply for flats with less than 60 years of lease. The formal announcement was made in May 2019.
How Will This Affect Singaporeans?
In the coming years, a good proportion of HDB flats will be hitting the 40-year mark. The new regulation will create more liquidity for these older flats and allow Singaporeans with older flats to upgrade. At the same time, it will give Singaporeans more affordability if they have a preference for older flats in more mature estates.
Besides that, the banks are currently taking reference from CPF restrictions in assessing loan quantum. The relaxation of CPF usage on older flats will create a new benchmark for banks to reference, which could allow Singaporeans to get more access to home loans.
But still how much of a loan you will get is dependent on how much you earn, and securing the most affordable housing loan will depend on that.
With housing being one of the biggest expenditure many expect to invest in, it is crucial for both homeowners and tenants to determine how much of their income they should set aside for housing costs, such as mortgage payments or rent along with utilities, maintenance charges or homeowners insurance.
To have the most affordable housing loan, do not spend more than 30-40 per cent of your income on housing costs. As a general rule of thumb, housing experts advise that homeowners or tenants should not spend more than 30-40 per cent of their gross monthly income on housing costs.
This is so that individuals can afford basic necessities like food, healthcare, and transportation each month while being able to set aside some personal savings. This means that a homeowner or tenant earning $50,000 each year should spend up to $1,250 to $1,667 monthly for housing costs to keep affordable housing loans.
If you want a most affordable housing loan, consider downsizing to a median 2-room flat in Bukit Merah and Queenstown is respectively 23 per cent and 32 per cent less expensive than a median 3-room apartment in the same regions.
30-40 per cent cap on monthly spending on housing costs is a good starting point for homeowners and tenants alike. It must be noted, however, each budget is different and that this maximum limit is simply a guideline.
For example, new working adults could find that they are not able to set aside 30 per cent of their income on housing while those generating high incomes can afford to spend more of their income on their home. There are always exceptions to the rule. What is important is to ensure that your budget works for you and to ensure that you spend appropriately on housing while having enough to meet your other primary necessities.
As a rule of thumb, most affordable housing loan is subject to assessment and best home loans will put your heart at ease. You should also consider the services of mortgage loan experts as their services are always free.
