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.
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.
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.
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.
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.
Total = $180,000, or $52,000 excluding ABSD
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.
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.
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.