18 Apr 2019
What are the financial considerations to make in wanting to upgrade from a 4-room BTO to an EC/condo after 5 years. Approx how much savings does one need and the joint household income level. ?
Hey! It's hard to advise for your question without understanding your specific financial position.
However, when it comes to property affordability, consider the 3-3-5 rule and you will be very safe.
3 - Your monthly mortgage should not exceed 30% of your monthly income
3 - Your initial capital should be at least 30% of the purchase price
5 - Purchase price should not exceed 5 times of annual income
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Cash Proceeds = Sale of BTO - Outstanding Loan - CPF used - CPF Accrued Interest.
BTOs in the market today experience decent capital appreciation right after MOP, i.e. Buangkok Vale owners have profited over $100K
This makes it easier for them to upgrade to a condo without tapping on their savings. Simply because,
Purchase of condo:
75% loan -- 25% Downpayment
Buyer's Stamp Duty
Additional Buyer's Stamp Duty
Can be covered with the Cash/CPF proceeds.
What's important also is your future mortgage payments, which can be calculated through the TDSR (which is limited to 60% of your income) and lastly,
how long you can survive in your property assuming that you lose your job and use mainly your CPF to cover the remaining mortgage.
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