What I wish I knew before I purchased a property

“How do I buy a property?” – It is absolutely critical that we answer this question before we start the shopping. Learn about the “How” before jumping into “What property should I buy?”

If we skip the initial preparation, we will soon find ourselves in murky waters, objectives blurred, and we deviate from what we originally set out to purchase. The more properties we look at, the more confused we become. Of course they are all marketed to look attractive, value-for-money, and present themselves as your dream home.

It is not uncommon for an ecstatic buying experience to turn south quickly. Besides the plethora of options that threaten to derail our original plans, there are fiscal policies and loan requirements to decode for the uninitiated.

What started as shopping excitement via a property portal and newspapers may soon turn into a scramble for loan eligibility, fearful that the time and efforts have been wasted because of the wrong sequence of steps. The mountain top experience morphs into a valley low chore.

Buying a property is not a place for trial and error. A roadmap for property purchase is necessary.

I learnt this lesson the hard way, almost losing my 1% Option Fee. You see, a few years back after saving enough cash for the 5% deposit, I decided to buy my first property. Behaving like a cuckoo, I thought it would be like any other buying experience.

I see what I like, I pay for what I like, and it becomes mine. Done! I did not want to trouble anyone else, so I used online portals for my searches, and short-listed the properties. After 3 weeks of relentless viewings, I got so tired that I was prepared to purchase the next decent place I see. Fortunately, I arrived at something I really liked after my 17th stop.

With all the exhaustion, I was not going to let this property go. I offered 1% Option Fee, and was prepared to exercise the Option to Purchase immediately by writing a cheque for the other 4% of deposit. The seller agent stopped me and advised that I confirmed my bank loan first. And so I did. I walked to the nearest bank and asked for a loan. That is when I got the classic expression from the banker.

His jaw dropped and exclaimed: “How could you have bought a place without getting a loan approved in principle? How would you know if you could afford it? What made you think the bank would loan you any money?”

All my mistakes would have been avoided if I engaged the help of 2 key persons –a Mortgage Broker and a Property Agent. One looks after your loan, and the other, your property purchase. If you are buying a private property, the services of these 2 are free, so why not engage them? There might be some fees to pay to the property agent if you are buying a public property, but the benefits far outweigh the amount.

1. Budget – Start with getting a bank to approve your loan in principle. This will tell you how much you can afford. You will need to set aside 20% for your downpayment – first 5% in cash, and next 15% in cash and/or from your Central Provident Fund (CPF) Ordinary Account. A Mortgage Broker can work out the sums very quickly to see if you meet the requirements for a loan – Total Debt Servicing Ratio (TDSR) for private properties, plus Mortgage Servicing Ratio (MSR) for public properties. He will also be able to advise on your monthly repayment amount, tenure and current interest packages.

Other factors that will affect your loan include, age of borrower, age of property, valuation of property, employed or self-employed, etc. Other items that can affect your budget (and greatly drain your energy) include, how much CPF you can use, Buyer’s Stamp Duty (BSD), Additional Buyer’s Stamp Duty (ABSD), Resale Levy, Seller’s Stamp Duty (SSD), etc.

Leave it to the experts. How ironic it is to call these items a non exhaustive list!

2. Timeline – Next item is to know this well, especially if you are on a tight schedule. Calculating the timing well would provide you with sufficient time for renovations before moving in. Otherwise you might need to rent an interim place, if you have to move out of your previous home before your new place is completed.

  • Building Under Construction (BUC)
    5% Option Fee paid [week 0]
    Sales & Purchase (S&P) Agreement received [week 2]
    S&P exercised [week 5]
    Stamp Duty paid [week 7]
    15% Purchase Price paid [week 8 for private properties / week 9 for Executive Condominium (EC) &Design, Build and Sell Scheme (DBSS)]
    Progressive Payment till Completion
  • Resale Private Property
    1% Option Fee placed [week 0]
    4% Exercise Fee paid [week 2]
    Stamp Duty paid [week 4]
    Completion [week 8 to week 16]
  • Resale Housing and Development Board (HDB) Flat
    $1,000 Option Fee placed / Valuation Report requested / Bank Loan secured [week 0]
    $4,000 Exercise Fee paid [week 3]
    First appointment with HDB [week 7 to week 11]
    Completion [week 13 to week 19]


3. Shopping – This is where a Property Agent comes in really handy. Most of us know that they are paid a commission. It is also by this reason, that you are assured he will act in your best interest to conclude a deal, especially in price negotiations. His expertise includes in-depth knowledge of a neighbourhood, properties for sale, amenities, market values and trends. His experience will help you to read a home quickly and interpret its value without partiality. Spend some time researching online, and then come up with a criteria list as specific as possible. Arrange your list in order of priority and inform your agent that you would not view a place unless it fulfils your minimum requirements. This will save you a lot of time and wasted energy.

  • Location and Neighbourhood – Which district would you like, and in which neighbourhood? Do you need to be near a particular school or Mass Rapid Transit (MRT) station?
  • Size and Feature – How big and what kind of facilities? Coupled with your budget, this will determine if it is private or public housing.
  • Age – This will determine your resale value, and possibly a higher renovations expenditure. The benefits of a mature estate is better amenities, and no new developments to surprise.
  • Space and Layout – How many people will be living together? Do you need special functions like a quiet Study, large Dining, spare Bedroom, etc?

Buying a property should be a pleasure, but it can turn out to be a costly mistake. Knowing when to do what will certainly help minimise the unexpected. Engage the relevant specialists to assist you to smoothen the process. You never know where these new contacts will lead you; perhaps more opportunities coming right up.

Kenneth Koh

Kenneth Koh

Kenneth graduated from Nanyang Technological University with an Engineering Degree and the University of Strathclyde with a Master of Business Administration. He has worked with Keppel Communications and Deutsche Telekom, and spent much time in various cities like Bonn, Shanghai and Abu Dhabi, before returning to Singapore to start his own business.
Kenneth Koh

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