Should my partner and I get an EC given our financial status? - Seedly
 

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Asked by Anonymous

Asked on 30 Jul 2019

Should my partner and I get an EC given our financial status?

We're a couple with a combined income of $8k. We have a combined value of $70k cash savings on hand and about $90k CPF in each individual CPF account. Do you think we should get an EC or is it too risky for us based on our financial positions?

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Dith Woo
Dith Woo
Level 3. Wonderkid
Updated on 05 Aug 2019

There are a lot of other factors that would help other Seedly members answer your question. For example, what are your ages, your marital status with your partner, are you a first-timer or second-timer, do you own other properties, what are your motivations for buying an EC (amenities, investment, bragging rights, etc), are you eligible for a bank loan, what is the size of the unit you are looking at, how long do you intend to stay in the EC before selling, are both of you Singapore Citizens, what’s the status of your Total Debt Servicing Ratio (TDSR) / Mortgage Servicing Ratio (MSR), and so on…

I’m going to base my answer on the recent EC that was launched in Punggol, Piermont Grand, which has an average price of $1,080 psf (pricier than the usual, but seems to be the only EC launch this year). This means that a three-bedroom unit starts from $888,000.

Unlike that of a HDB flat (just 10% down payment), you need to make a down payment of at least 25% for the EC. This works up to $222,000, which almost nearly wipes out your $250k combined cash and cpf savings. Don’t forget other costs like stamp duty, legal fees, etc. You could be eligible for some grants, which may help a bit.

Those who opt for an EC are also not eligible for the HDB loan, so you will need to find a bank loan and likely refinance it every few years for the best interest rate. Say you get one at 2% interest – for your remaining $666,000 over 30 years, you will need to repay $2,462 every month. That slightly exceeds 30% of your combined income, so you might not be eligible for the MSR… uh oh.

But I took the liberty to reverse engineer the loan repayments… so if you take a loan of $649,125 (means more cash outlay for the down payment), the repayment amount is $2.4k exactly, or 30% of your combined gross monthly income, which is the MSR cap.

If you can tough this out for 10 years, you could gain from selling your now private property in the open market… but you might need the savings for setting up your family, renovation, children’s education, etc. A lot can happen in a decade.

If possible, perhaps consider getting a HDB flat first as your income is well within the income ceiling. Then after the 5-year MOP, sell the flat and use the money to upgrade? Or you can wait for cheaper EC launches.

Either way, all the best!

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Yeap Ming Feng
Yeap Ming Feng

05 Aug 2019

This is so helpful 👍

Your home purchase should only cost between 5-7 X your combined annual income. In this case that's 96k.

Your home should only cost between 475-672k. Anything more, you're stretching it with the mortgage payments you'll need to take.

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Siow Nan
Siow Nan, Electrical And Computer Engineering at Nus
Level 6. Master
Updated on 31 Jul 2019

Are you a 1st timer or 2nd timer? Do note that as a first timer, you will be entitled to an additional 30k of CPF grant given by the government for the purchase.

PM me at 97649657 to find out more. I can speak to you to advise you further or refer you to a banker for a more detailed consultation.

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