Are you a first timer looking to buy your first property or a HDB upgrader who is looking at the possibility of buying an EC?
Eligibility aside (For eligibility issue click Eligibility For EC), let me touch on the topic on a very basic financial eligibility check. Please note that the below calculations is just to give you a very rough idea and that if you wish to have the exact financial assessment to talk to an experience project banker.
For first timers:
First of all, you have to determine your average monthly household income. Note: For self employed personnel, you will have to do a 30% haircut on your income first. For example, self employed personnel earning $10K a month will be deemed as $7K after the 30% haircut.
Next, determine the number of years loan you can take, max up to 65 years old. For example the loan is to be taken by both working husband and wife and the average age is 38 years old. Then this combination is eligible for 65-38 = 27 years loan (Or 30 years whichever the lower)
Then if the household income for the above couple is $10K, you can then refer to the appended table to cross reference 27 years loan vs $10,000 household income to derive an estimated loan quantum of $628,240.
With this estimated loan quantum of $628,240, the buyer can then roughly project up to their maximum budget if they do not wish over stretch on extra cash or CPF to top up to 80% of the EC selling price which is also the maximum allowed loan percentage by banks. Simply, taking $628,240 divided by 80%, you can find the projected maximum budget of $785,300.
Say in this case, this first timer household wants to purchase an EC priced at $780,000.
The minimum cash required is a 5% booking fee would be $780,000 x 5% = $39,000
The next stage of payment would be another 15% due 9 weeks from the date of booking. This 15% based on the above scenario would be 15% x $780,000 = $117,000. Based on the above scenario, this set of buyers assuming is a Singaporean family nucleus would be eligible for a $30,000 CPF grant. They can then offset partial of the 15% using the grant taking balance to $117,000 – $30,000 = $87,000. Then, as they can obtain 80% loan, the buyers can fully utilize CPF in their Ordinary Account towards payment of this balance $87,000. Say for example their combined OA is only $40,000, the buyers must then pay $87,000 – $40,000 = $47,000 in cash by the due date. The buyers will also have to pay their stamp duty of $18K with full cash as their CPF in OA will be wiped out for their partial 15% payment.
Appended a table of the full scenario:
But what if this family wishes to purchase an EC unit at $850,000 which is above their projected maximum budget of $785,300? What happens now is that the loan amount now will not hit the maximum loan of 80%. Instead, they will be only getting $628,240 divided by $850,000 = 73.9% loan.
For easier calculations, let’s just assume that the buyers can only get 70% loan. The buyers will now have to pay 5% booking fees at $42,500 in cash followed by 15% $127,500 in cash and CPF grant within 9 weeks from booking day. The reason why the buyers cannot utilize their CPF in their OA now is due to the 10% further shortfall in the 70% loan. The buyers can only utilize their CPF in their OA at the stage just prior to the loan disbursement stage. However having said that, they still can choose to utilize their CPF in their OA towards stamp duty payment first after having secured a valid bank loan.
Therefore going by the flow and stages of payment, it would be according to the appended table:
Then how different would sums work out for HDB upgraders?
Assuming a scenario where a 2nd timer HDB owner wants to purchase an EC. First of all, this HDB owner have to note that he will be liable to pay resale levy upon selling his subsidized HDB subsequently. Whether or not the resale levy is applicable will be based on the EC project the buyer is looking at. Refer to my summary of EC in market.
Next will be pertaining the financial calculations for this existing HDB flat owner.
Assuming the total monthly household income is $10K and the average household age is 50 years old. Eligible loan up to 65 years old will be 15 years. Then referring to the MSR loan table again cross referencing $10K household income with 15 years loan you will get an estimated loan quantum of $419,652.
Then assuming this household combined remaining CPF in OA is $100K and the EC unit which they are looking to purchase is $900K in value. Effectively this implies a cash shortfall of $900K-$100K-$419,652=$380,348 not even taking account of the stamp duty of $21,600. In a normal scenario, this might have been a cash gap too far to bridge for a normal household.
However, hope is not all lost as this set of buyers still has in their possession their HDB unit. Say for example they own an Executive Apartment valued at $600K which still has $100K in outstanding loan.
The buyers can engaged certain local banks’ package to do a bridging loan using their HDB. Say for example this case, the bank assumes 80% of the $600K value = $480 and after deducting $100K of outstanding = $380K of future CPF returned + sales proceed. Certain banks can then use this future proceeds to form a bridging loan to boost their loan package.
Taking this bridging loan plus the $419,652 normal loan, the total sum of $799,652 exceeds 80% of EC selling price of $900K. Therefore boosting up an 80% loan, this family can then fund their existing $100K in CPF OA towards partial of the 15% initial outlay drastically reducing the cash outlay.
However, a few key things to note here is that in order to do bridging loan, the buyers will then have to choose Deferred Payment Scheme which likely will be around 2/3% higher in pricing compared to Normal Payment Scheme. Also, the buyers must sell their HDB subsequently before the collection of keys for their EC so that the bank can disburse the bridging loan. This is in contrast to normal cases where HDB owners can sell their HDB within 6 months after getting keys to their EC.
Appended would be a tabulated mockup table for this example:
I hope this very general explanation is of benefit to you. However, do also note that this is not a coverage of all possible scenarios and every bit of fundamental difference might mean a totally different scenario. In such, the financial approach to each case might also vary. If you might have any other doubts or queries, please feel free to email or call me.
If you might require pricing, floorplans or ebrochure on any EC projects, please feel free to call or whatsapp me too.
Associate Senior Marketing Director
(CEA Reg No R049737E)
Huttons Asia Pte Ltd (L3008899K)
[Mobile]: (65) 9455 8898