Guide to expenses involved in purchasing a new property

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Property Buyig Guide

If you’re looking to buy your own home in Singapore, no one really needs to tell you that planning is key. Don’t fool yourself into thinking that the cost of the property is the only cost you’re going to have to bare. Let’s start with the basics – depending on where the property is located, per square foot cost starts at approx. S$400 for a property without land ownership.

And if you’re looking for a simple HDB apartment, the starting price is close to S$200,000. Of course, the average Singaporean cannot afford to buy the property with their own savings, but that’s what home loans are for. But they don’t cover all the expenses involved in buying your home.

You need to foot some of the bill, you know? These are some of the expenses involved in buying your own house in Singapore:

Down payment

Banks in Singapore do not cover the entire cost of your property in their loan quantum. Most banks offer a home loan up to 80% of the cost price of your home. The remaining 20% becomes the down payment that you need to shell out from your own pocket. Let’s say the price of the home you wish to buy is S$250,000. Now, the bank will offer you a loan amount of up to 80% of this price, which is S$200,000. So, you need to make a down payment of S$50,000 (20%) from your own savings.

HDB Home Loans cover up to 90% of the purchase price. So, if you take a HDB Loan, your down payment will be 10% of the purchase price. So, if your home costs S$250,000, then your down payment will be S$25,000.

How to pay: You can use your CPF savings to make the down payment on the house. But remember, you can pay a maximum of 15% of the down payment using your available CPF funds. The balance 5% has to be paid by you in cash.

Option fee

Option fee is what you need to pay to get the OTP or the Option to Purchase the house. Now, don’t worry, the option fee is covered in your down payment. It isn’t something you have to pay extra. But this fee will be paid using the 5% cash you paid for the down payment and not the funds used from your CPF.

The option fee is generally 1% of the price you have agreed to pay for the house. So, if your house costs S$250,000, you’re paying S$2,500 as option fee. This fee is non-refundable. So, if you pay the option fee for a property and then change your mind, this fee will not be reimbursed to you.

How to pay: This fee is not to be paid separately. It will be covered in your down payment.

Buyer’s Stamp Duty (BSD)

According to the IRAS, every buyer has to pay a stamp duty on the market value (MV) or the purchase price of the house they are looking to buy. After paying this fee, you will receive a stamped certificate stating that you own your new property.
According to the IRAS, this is how much a BSD costs for a property:

  • The first S$180,000 – 1%
  • The next S$180,000 – 2%
  • The balance amount – 3%

So, if the purchase price of your property is S$250,000, you will be paying:

Purchase price of your home

BSD Payable

First S$180,000 out of S$250,000

S$1,800 (1% X S$180,000)

Remaining S$70,000

S$1,400 (2% X S$70,000)

Total BSD Payable

S$3,200 (S$1800 + S$1400)

How to pay: You can use your CPF savings to pay for the stamp duty.

Legal fees

You need legal assistance when buying a house because it is more than a transaction, it is a contract between the buyer and the seller, oh, and the bank. Generally, the legal costs are around 0.4% of transaction cost (approx. between S$2000 and S$4000) depending on whether you use a bank appointed lawyer or a private lawyer.

If you choose one on the bank’s list, you may even enjoy a subsidy on your legal fees. For example, the HDB Home Loan offered by RHB Bank offers a legal subsidy of up to S$2,500. UOB offers legal subsidy of up to S$1,800 on their home loan refinancing packages, HSBC offers a full legal subsidy on their home loan with a quantum of minimum S$460,000.

How to pay: You can use your CPF savings to pay for your legal fees.

These are some of the crucial expenses involved in the purchase of your new home that you simply cannot do without. There may be additional fees and charges depending on the type of property you are buying.

Disclaimer: This blog is solely for the purpose of creating general awareness about financial products and services available through banks/ other financial institutions in Singapore. For more details, please consult your financial adviser before purchasing.

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