Upgrading From An HDB To Condo? Here's How Much It Costs
After years of saving, you are finally ready to take the plunge and upgrade to a condo. But before you do that, here’s how much you can expect to pay for that long-awaited upgrade to a private property.
How much do you need as a downpayment?
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Currently, the maximum Loan to Value (LTV) ratio lets you borrow up to 80% of the property price or valuation. 15% of the condo can be paid using cash, money from your CPF Ordinary Account (CPF OA), or a combination of both. The remaining 5% is a cash only component for any private property purchase.
For example, say you are purchasing a condo for $1.6 million. If you receive the full LTV of 80%, you would be able to borrow $1,280,000 from the bank. Up to $240,000 can come from your CPF OA, while $80,000 is in cash only.
Is it true that I can borrow up to 90% for Executive Condominiums (ECs)?
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Banish that thought. Though ECs are HDB properties for the first 10 years, you cannot use HDB Concessionary Loans. Thus, you have to rely on bank loans capped at an LTV of 80% for ECs.
Should I buy a condo if I haven’t fully paid off my flat?
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Our advice? Pay off or sell your flat before you think about a condo. Your maximum LTV stands at 60% if you are still servicing a home loan. Using the $1.6 million condo as an example, you will be looking at a massive downpayment of $640,000.
Can you also borrow money for the down payment?
It is illegal for banks to lend you money for the downpayment, as stated in the Monetary Authority of Singapore (MAS) notice 632 (28th June 2013). So this option is not available.
How much do you need to pay in fees?
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There are a few fees to take note of, which includes:
Buyers Stamp Duty (BSD) - 3% of the property price, paid with cash, your CPF OA, or a combination of the two.
Additional Buyers Stamp Duty (ABSD) - Singapore citizens pay ABSD of 7% on their second property, whereas Permanent Residents (PRs) pay 10%. This applies if you have not sold your current flat. But if you sell your flat within six months of purchasing the condo, the ABSD will be reimbursed. As such, it’s advisable to sell off your flat before buying the condo to prevent the ABSD from triggering.
Mortgage stamp duty - $500, payable CPF.
Valuation of your property - between $300 and $500, cash only. This does not apply if you are purchasing a condo under development as the bank accepts the developer’s valuation.
Legal fees - also known as conveyancing fees, which costs between $2,000 to $3,000. Check with your legal firm if it’s payable via your CPF. Note that banks have a panel of recommended law firms but you can also use your preferred legal team.
How does all this come together for the example of the $1.6 million condo?
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- BSD - $48,000
- ABSD - $112,000, which will be refunded once the flat is sold within six months (alternatively, there is no ABSD, if the flat is sold before the condo is bought).
- Mortgage stamp duty - $500
- Valuation - $500
- Conveyancing fees - $3,000
Total = $180,000, or $52,000 excluding ABSD
Is there a minimum income to qualify for the loan?
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Having enough for the downpayment and various fees is just part of it. To qualify for the loan, your total monthly loan obligations cannot exceed 60% of your income, based on the Total Debt Servicing Ratio (TDSR). This includes credit cards and car loans. For loans with variable repayment, such as credit cards and credit lines, the minimum monthly repayment is used to calculate the TDSR.
For example, if you earn $7,000 per month, and you have monthly repayments of $1,500 a month for other debts, your TDSR limit is $4,200 (60% of $7,000) - $1,500 (other debts) = $2,700 per month.
If your monthly loan repayments exceed this amount, your loan amount will be smaller.
Consider the ongoing fees such as maintenance
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Condos also come with maintenance fees that are generally higher than what you are paying for HDB flats. Typically, a condo’s maintenance costs about $350 per month. The upper class ones, which come with concierge or valet services, can cost as high as a four-figure sum.
Condos also have a habit of collecting maintenance fees on a quarterly basis. This could cost upwards of $1,200 per quarter, which needs to be paid within the month.
Fortunately, if there are more residents, the maintenance cost is spread out and tends to be lower.
Last but not least, loan repayment
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A typical bank loan for home comes with an interest rate of about 2% per annum but this varies, unlike a HDB loan that stays consistent (2.6% per annum).
Assuming you borrow $1.28 million (for a $1.6 million condo), at a rate of 2% per annum over 25 years, your monthly repayment will be about $5,425 per month. This is payable in cash, or through your CPF OA.
However, since bank loans and the recent SIBOR have been changing, be sure to check for the best rates regularly via GoBear.
This article was contributed by GoBear, which helps you compare and find the best credit card rewards, cashback with exclusive welcome gifts, and interest savings for personal and home loans. Compare credit cards, travel insurance and home loans to suit your personal needs.
Note: As of Singapore Budget 2018, Buyers Stamp Duty has been raised to 4% for properties in excess of $1 million.