Buying Your First Home
Starting out and planning for the future
| Work out | Why? |
|---|---|
| 1. Savings in cash and CPF OA | This will help you decide how much downpayment you can put down |
| 2. Total monthly income | This will help you decide how much you can afford in terms of monthly mortgage. |
| 3. Outstanding debts |
This is for your downpayment, miscellaneous fees such as legal fees and stamp duty, as well as for renovations and furnishings.
2.1 Fees
Option Fee:
BTO flat: $2,000 for 4-room and larger flats , $1,000 for 3-room flats, and $500 for 2-room flexi flats.
Resale flat: Initial Option Fee payable to sellers who grant you an Option To Purchase (OTP) their flat is between $1 and $1,000. When you decide to exercise the OTP, you need to pay the seller an additional option exercise fee. The combined total of the option fee and option exercise fee is capped at $5,000. This forms the deposit of the purchase.
Buyer Stamp Duty is computed based on the purchase price or market value of the property. Example: If you purchase a HDB flat for $400,000, the stamp duty will be ($180,000 x 1%) + ($180,000 x 2%) + ($40,000 x 3%) = $6,600.
Legal Fees:
Also known as conveyancing fees, can range from a few hundred (HDB conveyance fees) to over $3,000 (if you engage a private lawyer).
2.2 Housing Grants
- Enhanced Housing Grant:
Ranges from $120,000 (if your combined income is less than $1,500) to $5,000 (if your combined income is between $8,500 to $9,000).
Proximity Housing Grant:
Resale flat buyers may also receive the Proximity Housing Grant of $20,000 when they choose to live near their parents, or $30,000 if you are staying with your parents.
2.3 Keep monthly mortgage within 30% of your combined gross salaries:
For example: If you and your partner earn a combined $7,000 a month, you should keep the monthly mortgage payment to $2,100 or lower. If you have other debt (e.g. student loans or car loans), try to keep all monthly debt repayments to be 35% of your monthly gross salaries.
2.4 Emergency Funds
Ensure you have an emergency fund of 6 to 9 months of expenses – including mortgage payments – to meet large and unexpected expenses or temporary job loss.
If you are taking a HDB housing loan, you can retain a maximum of $20,000 in your CPF OA, which helps meet the equivalent emergency fund of 6 to 9 months of mortgage payments from your CPF OA. If you are taking a bank loan, there is no restriction on how much you choose to retain in your CPF OA.
| BTO | Resale | |
|---|---|---|
| Price | Generally lower | Generally higher |
| Waiting time | Longer (3-5 years) | Shorter (~6 months) |
| Location | Restricted to new launches | Island-wide |
| Renovation | Additional outlay, fully customised by you. | Depends on condition. |
| Length of lease | 99 years | Varies, shorter than 99 years |
| Financing Options | Choice of HDB or bank loan. More details below. | Choice of HDB or bank loan. Units with shorter leases may affect how much CPF can be used and amount of loan. |
| Minimum Occupation Period | 5 (Standard) or 10 years (for Plus and Prime) | |
(a) If you have decided to get a BTO, choose from BTO Standard / Plus / Prime:
| Standard | Plus | Prime |
|---|---|---|
| Locations across Singapore. Form bulk of BTO supply so most options. | Better locations e.g. near MRT stations and town centres | Best locations in prime and central district |
| Standard subsidies | More subsidies | More subsidies |
| No subsidy recovery | Subsidy recovery upon resale of flat | Higher subsidy recovery upon resale of flat |
| Minimum Occupation Period (MOP) is 5 years | MOP is 10 years | MOP is 10 years |
| Private property owners need to fulfill 15-month wait-out period before they are eligible to purchase the flat. | Private property owners need to fulfill 30-month wait-out period before they are eligible to purchase the flat. | Private property owners need to fulfill 30-month wait-out period before they are eligible to purchase the flat. |
(b) Apply for HDB Flat Eligibility (HFE) Letter to find out:
Whether you are eligible for new or resale HDB flat
Whether you qualify for CPF housing grants and how much
How much HDB loan you can take.
If you are considering taking a bank loan, you can also concurrently apply for an In-Principle Approval from the bank when you are applying for the HFE to get an indicative loan assessment.
Optional Steps
Comparison between choosing a HDB or Bank loan.
| HDB Loan | Bank Loan | |
|---|---|---|
| Interest rates | More stable rates (2.6% p.a.) | Offers fixed rates (limited period) and floating rates |
| Downpayment | 25% of purchase price. Can be fully paid by CPF OA. | 25% of purchase price. At least 5% must be in cash. |
| Maximum loan tenure* | 25 years | 30 years |
| Flexibility for early repayments | More flexible | May incur costs or penalties. |
Choose HDB loan if you prefer more predictable and stable interest rates or if you like the flexibility of paying down your mortgage early without any penalty.
Most of us would choose to use our CPF OA savings to pay the monthly mortgage, to free up our take-home pay for other expenses, and reach your life goals.
But using cash for part or all of the mortgage payment allows you to grow your retirement fund using CPF, and you will have more flexibility in your sales proceeds if you decide to sell your flat later on. This is because you will get more of your sales proceeds in cash, as opposed to going into your CPF OA.
Do factor in an emergency fund amounting to 6 to 9 months of mortgage payments in either your CPF OA or cash in case of involuntary job loss.
(a) Home Protection Scheme (HPS)
Home Protection Scheme is available if you are using CPF or cash to pay for a HDB flat. It insures you until age 65, or when the housing loan is paid up. In the event of death, terminal illness or total permanent disability, the HPS will protect you and your loved ones from losing your home. Annual premiums are deducted from your CPF OA.
The total HPS coverage of all owners should be at least 100% of the outstanding loan by default. However, you and your co-owner(s) can increase the coverage share so that each owner is insured for up to 100% of the loan amount. That means if anything happens to any of the insured co-owner(s), the outstanding home loan will be fully paid for by the HPS.
(b) HDB Fire Insurance
HDB Fire insurance is mandatory for homeowners on HDB loans. It covers damage caused by fire to the buildings, structures, fixtures and fittings provided by HDB.
(c) Home content insurance
You can consider extending protection beyond the basic fire insurance to home content insurance. Such insurance plans are more comprehensive, and includes scenarios such as theft, burst pipes and flooding.
It also covers the cost of furniture, personal belongings, renovation, as well as costs of alternative accommodation (if your home becomes uninhabitable due to an insured event) and damages to third party property.
Such home insurance plans vary in type and provide differing levels of coverage so you can select one that is suited to your needs or preferences.
Buying a home is a major financial milestone, but it should not come at the expense of your overall financial well-being.
The first home you can call your own is important and close to your heart. It is tempting to channel most of your savings into your home, but you should consider other building blocks of financial security. This includes:
Building an emergency fund of 6 months to meet large unexpected expenses or job loss.
Making sure you have sufficient coverage in case of premature death or if you are diagnosed with a critical illness and can’t work. (Tip: Spend no more than 15% of income on insurance protection)
Consistently contributing towards your retirement or long-term fund through a Pay Yourself First model, starting with at least 15% of your gross salary.
Keep debt ratios healthy. We recommend keeping your total debt servicing ratio – or the percentage of your gross monthly income used to pay off monthly repayments including for your home – to 35%, and your non-mortgage debt ratio – the percentage of take-home income used to service all loans excluding your mortgage – to 15%.
If you find yourself “short” in any of these areas of financial health after your home purchase, re-build them as soon as possible.
We generally do not recommend taking a smaller home loan or paying down on your home loan if you have excess cash.
This is because housing loans are generally considered as a type of ‘good debt’. They typically come with some of the lowest interest rates in the market, are used to finance an asset that is relatively stable in value, and in many cases, appreciate over time. Owning a home early reduces the risk of having to pay more in future with housing or rent inflation.
If you have excess cash, we instead recommend maintaining your housing loan repayments and investing the cash to earn a potentially higher return.
However, if you very much prefer to be debt-free and have no intention of investing, then paying down the housing loan partially or fully may make sense for personal peace of mind – as long as you have sufficient cash or other sources of income to fall back to in case of adverse situations.
(a) Joint Tenancy
If you and your spouse bought the HDB flat under joint tenancy, then the right of survivorship applies. This means that when any joint owner passes away, their interest in the flat would be automatically passed on to the remaining co-owners.
(b) Tenancy-in-common
On the other hand, if you had bought the HDB flat under tenancy-in-common, each co-owner holds a separate and distinct share in the flat. When a co-owner passes away, their interest in the flat will be distributed according to their Will or to the beneficiaries in accordance with the provisions of the Intestate Succession Act.
Click below to download MoneyOwl’s End‑of‑Life and Estate Planning e-book to learn the essentials of estate planning and how to ensure your assets are distributed according to your wishes.
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