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Singaporean couple needed home financial planning

Financial Planning when Buying a Home

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Written by: Benjienen Toledo

It is indeed sweet to be home!

As we all grow older, we will reach a point in life that we would want to live independently or build a home for our own family. This a big step so you should definitely start to plan for that next big step immediately. The whole process of buying a home requires a carefully laid out financial plan.

What are the real costs of buying your own HDB flat?

Here are 4 things you must pay in cash:

Particular Cost
Option Fee $1-1,000
Valuation Fee $120
Admin Fee $80
Exercise Fee The amount together with the Option Fee must not exceed $5,000

Other Fees:

  • Stamp Duty– may be paid in CPF or Cash
  • Legal Fees– may be paid in CPF or Cash

A valuation report is used to determine the home loan and the CPF monies that can be used for the resale flat purchase. If buyers are planning to take a home loan and or use their CPF monies, they need to have a valid valuation report when they submit a resale application to HDB. No valuation report is required if buyers are paying the full amount in cash for the flat.

The stamp duty computation for an HDB flat with a purchase price of $360,000 or less. For example, if the purchase price is $360,000:

Purchase Price BSD Amount
First 180,000 (1%) $1,800
Next 180,000 (2%) $3,600
Total $5,400

Here’s how BSD is calculated for example the property price is below $300,000:

Purchase Price BSD Amount
First 180,000 (1%) $1,800
Next 120,000 (2%) $2,400
Total $4,200

Stamp duty for a property’s purchase price in excess of $360,000 is calculated at 3%. For example if the price is $361,000:

Purchase Price BSD Amount
First 180,000 (1%) $1,800
Next 180,000 (2%) $2,400
Excess $1,000 (3%) $30
Total $5,430

Here’s how BSD is calculated for example the property price is S$500,000:

Purchase Price BSD BSD Amount
On the first $180k 1% $1,800
On the second $180k 2% $3,600
Thereafter (Remaining $140,000) 3% $4,200

The legal fee for a bank loan is higher because you need to hire a private lawyer, the average price ranges between $1,800-2,500.
If you do not have enough money in your CPF account, you will have to pay the Stamp Duty and Legal Fees in cash.

Check: Residential Property Market Measures: TDSR, SSD and LTV

What is the difference between a Bank Loan and HDB Loan?

Particular Bank Loan HDB Loan
Deposit Fee 5% (less the Option Fee and Exercise Fee) 0%
Maximum Loan 80% of Purchase Price 90% of Purchase Price
(Varies based on your income)
Interest Rate Varies Fixed at 2.6%

Check: 5 Financial Tips for Newlyweds

What is Cash Over Valuation?

With the new revised resale procedures, negotiation is no longer based on Cash Over Valuation (COV) but on the total price of the resale flat, the price is negotiated between a willing-buyer and willing-seller (Housing & Development Board, 2017). If the price agreed on is higher than the market valuation, buyers will have to pay the difference in cash. For example, the HDB flat’s valuation price is $370, 000 and your buying price is $390,000, the $20,000 must be paid in cash.

With determination and a keen attention to financial planning details, there’s no mistake you can make. You are guaranteed to seal the deal in no time and get to live in your own HDB flat.

Get the best home loan suited to your needs with Ohmyhome’s Free Mortgage Advisory Service.

Call 6886 9009 to talk to our mortgage specialists today.

References: Central Provident Fund Board (2017), Housing & Development Board (2017), HDB (2017)

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While the Information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact on the accuracy of the Information. The Information may change without notice and Ohmyhome is not in any way liable for the accuracy of any information printed and stored or in any way interpreted and used by a user.

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