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Most financially sound way of financing a condo?
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Nigel Tan
31 May 2021
Executive Senior Financial Planner at Great Eastern Life
There's alot of factors to this depending on your property value, loan eligibility & CPF OA funds.
I'm assuming you'll be looking to buy minimally a 2BR condo so lets estimate the value to be about $1.3mil, at maximum loan.
Downpayment wise (25%)
20% CPF OA limit - $260,000 (cash if not enough)
5% cash - $65,000
Legal fees - $2,500 - $3,000?
Valuer - $250
Stamp duties
First $180,000 at 1%
= $1,800
Next $180,000 at 2%
= $3,600
Next $640,000 at 3%
= 19,200
Remaining $300,000 at 4%. = $12,000
Upfront you'll need a total of about $365,000 readily available.
Taking a loan with the current interest rate environment of 1.3%,
repayment would be about $39,456 a year, about $3.3k per month excluding other running costs like utilities, condo maintenance fees etc.
The loan could be fixed maybe 2-5 years but after that you'll probably need to refinance or reprice unless you're ok with floating rates.
Investments to get to a condo? Depends on your time horizon of investing.
Investing to pay off your mortgage on your condo fast, plenty of available options out there so as long as your returns are able to beat the interest loan Rate. However if all you're going to do is leave money in the bank or if you expect that your returns are beneath the prevailing interest rates, better to just clear off the house ASAP.
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How many years to purchase the condo? Less than 5 years, save for the downpayment. More than 5 years...
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My simple advice: don't overstretch and watch out for the accrued interest if you are using CPF OA