Asked by Anonymous
Asked on 24 Sep 2018
Just wondering if I should just BTO for a 4/5 room flat first then invest my money
I would recommend you to stick to BTO and upgrade later!
EA Affordability (I assume you're referring to resale EA)
from $4xxK at Jurong West/Pasir Ris
Executive flats cost an average of $6xxK in Singapore
Assuming you are both earning about $3500 and age 25-30 with no outstanding loan,
HDB Loan: Max loan of $419,000 (90% of property price) which translates to a property price of $465,000 if you are taking 90% loan and 10% CPF/Cash.
Bank Loan: Max loan of $419,000 (75% of property price) which translates to a property price of $558,000 if you are taking 75% loan, 20% CPF and 5% Cash.
I assume you would use the CPF Housing Grant to offset/partially pay the CPF portion in the payment. (ie. $40,000 CPF Housing Grant for both Singapore Citizens for 5 room and bigger HDB resale)
From this calculation, EA is a viable option if you are comfortable with the locations which are further away from the city. However, you would need to prepare more cash savings or CPF OA if you intend to purchase an average EA that cost more than $600K.
There is no outstanding new ECs in the market and the next launch would be next year in Sumang (Punggol). For the past 2 launches, there are no 2 Bedrooms so the most affordable option is a 3 Bedroom unit.
The lowest price unit from the last launch (Rivercove Residences in Sengkang) was $830,000. Rivercove land bid price was $355psf while the next EC launch's (Sumang Walk/Punggol) land bid price was $583psf.
We would expect this EC price of a 3 Bedroom to be at least $9xxK.
(You can only apply for bank loan for EC)
Bank Loan: $467,000 (75% of property price) which translates to a property price of $622,000 if you're taking 75% loan, 20% CPF OA & 5% Cash. You would be eligible for $30,000 CPF housing grant if both you and your partner are both Singapore Citizens and I assume you would use it to partially pay the 20% CPF portion.
From the above calculation, I would not advise you to go for an EC as you would need a combined cash/CPF OA savings of more than $400K (ie. $9xxK - $467,000 - $30,000).
As a rule of thumb, usually we advise couples with more than combined monthly income of $8000 to consider for EC unless you have cash savings or financial support from your parents.
Hence, I would suggest going for BTO first before upgrading! Hope I provided a clear explanation! :)
you should utilise the fact that your combined salary allows you to buy BTO.
as u progress with higher salary you might not have a choice to buy BTO.
BTO are alot cheaper and less captial upfront bcos you can utitlise ur cpf. i wun go deep into the numbers but this is usually the key decision factor.
you also get to choose between HDB Loan or Bank Loan. EC only allows bank loan.
the management fee for EC will be way higher then HDB maintenace fee.
the only attaction point in EC is they have condo facilities tt u share w everyone and 10 years later u can sell it as a pte ppty with hearsay tt u sure can sell at a price higher then BTO.
but bear in mind sales does not equate to profit margin.
u will be surprise how much u can save over the 10 yrs with BTO and if u sell it like ur EC planning the profit margin will be way higher.
Hope my reply helps.
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Generally, I would recommend couples to go for a BTO first, before upgrading to a private property in the future.
There is less of a drag on your finances (i.e lower capital outlay, higher financing available, lower maintenance fees) when choosing a BTO over an EC. In addition, your combined monthly income (est $7000) is unlikely to allow for a high quantity of financing from banks, thus requiring a huge upfront downpayment for an EC.
In your situation, I humbly recommend that you go for the BTO route. However, if you wish to do otherwise for whatever reasons, we will respect your decision as well.
I think is better to BTO HDB first. Make full use of all subsidies from govt and get a BTO. After that you can either sell or upgrade
Many don't dare to leverage when they are young including myself.
I borrow 20k cash from my dad in 1995 for my 5 room HDB deposit.
You need to first understand yourself than calculate the risk.
Your profile given is not enough for accurate sharing.
You can message me if you are not comfortable to share here.
I would recommend sticking to a BTO so that you and your wife could save up or invest to buy a new EC or EA after satisfying the 5 years MOP. This is because in the current climate where interest rates are rising, it may not be prudent to buy EC or EA as you would have to pay more for interests.
Question for you. What do you think your combined income be within 5 years. That should determine your choice. Unless is around or above $10k per month, should stick to BTO.
Get a bto first before jumping into an ea/ec or private property. This will help you with managing your cash flow as the properties you mentioned will require substantial mortgage and both you and your partner may not be to support it financially. Typically more grants for bto as well. Probably a good time to sit down and plan your finances together before jumping into any purchase. Hope this helps
I think going for BTO and taking all the grants available for the government would be a good first step.
in the future when your salaries have grown, maybe consider other options. Who knows maybe you would go for a condo instead ?