How much does it cost to upgrade to a condo
So you’ve saved up for a long time, and now you’re finally ready to make the leap. Congratulations, but here’s how much you should expect to pay to upgrade to a condo.
How much do you need as a down payment?
The maximum Loan to Value (LTV) ratio of a loan is 80%. That means you can borrow up to 80% of the property price or valuation, whichever is lower.
Another 15% of the condo can be paid using cash, money from your CPF Ordinary Account (CPF OA), or a combination of the two.
An absolute minimum of 5% must be paid in cash, for any private property purchase.
For example, say you are purchasing a condo for $1.6 million. Assuming you get the full LTV of 80%, you would be able to borrow $1,280,000 from the bank.
Of the remaining amount, up to $240,000 can come from your CPF OA. The remaining $80,000 will have to be paid in cash.
But I heard that I can borrow up to 90% for Executive Condominiums (ECs)?
Not true, unfortunately. This belief stems from the fact that HDB Concessionary Loans have an LTV of 90%. However, even though ECs are HDB properties (for the first 10 years), you cannot use an HDB loan to buy an EC.
As such, bank loans for ECs are capped at an LTV of 80%.
What if I want to buy a condo, but I haven’t fully paid off my flat yet?
It’s highly advisable that you pay off / sell off your flat before trying to buy the condo. If you have an outstanding home loan, the maximum LTV drops to 60%. In the case of a $1.6 million condo, that means a stunning down payment of $640,000!
Can you also borrow money for the down payment?
No. Under the Monetary Authority of Singapore (MAS) notice 632 (28th June 2013), it is illegal for banks to lend you money for the down payment on your property.
How much do you need to pay in fees?
There is a Buyers Stamp Duty (BSD) of 3% of the property price. This can be paid using cash, your CPF OA, or a combination of the two.
Next, you have to pay the Additional Buyers Stamp Duty (ABSD), if it’s you haven’t sold your flat yet. Singapore citizens pay ABSD of 7% on their second property, whereas Permanent Residents (PRs) pay 10%.
You will be reimbursed for the ABSD if you sell your flat within six months of purchasing the condo. Otherwise, you’ll forfeit this amount. If you’re not comfortable with this, you should sell off your flat before buying the condo (in which case there’s no ABSD, as you’re not buying a second property).
You then need to pay a mortgage stamp duty of $500, which can come from CPF.
With all those taxes done, you then need to pay for the valuation of your property. This generally costs between $300 and $500, and must be paid in cash. If you’re buying a condo that’s still under development, there’s usually no need to pay for a valuation; the bank will often accept the developer’s valuation.
Finally, you need to pay the legal fees, also called the conveyancing fees. These range from $2,000 to $3,000. It may be payable through your CPF; that depends on the legal firm in question.
Note that you don’t have to use the law firm chosen by the bank. If you can find a better deal from a different law firm, you can request to use them instead. Each bank has a panel of law firms that they accept (ask for the firms “on the bank’s board”, to check prices between them).
In the case of a $1.6 million condo, the total fees and taxes should come to approximately:
– BSD of $48,000
– ABSD of $112,000, which will be refunded once the flat is sold within six months (alternatively, there is no ABSD, if the flat is sold before the condo is bought).
– Mortgage stamp duty of $500
– Valuation of $500
– Conveyancing fees of $3,000
Total = $164,000, or $52,000 excluding ABSD
How much do I need to earn, to get the loan?
Having the down payment, and money for the fees, is not enough. You need to earn enough to qualify for the loan. Under the Total Debt Servicing Ratio (TDSR), your total monthly loan obligations cannot exceed 60% of your income. This is inclusive of all your loans, including credit cards and car loans.
For example, if you earn $7,000 per month, and you have monthly repayments of $1,500 a month for other debts, your TDSR limit is $4,200 (60% of $7,000) – $1,500 (other debts) = $2,700 per month.
If your monthly loan repayments would exceed this amount, you will have to apply for a smaller loan.
(For loans with variable repayment, such as credit cards and credit lines, the minimum monthly repayment is used to calculate the TDSR).
Don’t forget about the ongoing fees and loan repayment
Condos tend to have higher maintenance fees. Unlike HDB flats, there is a wide disparity here. The typical condo has maintenance fees of about $350 per month, but maintenance for higher-end condos (which often include services like a concierge or valet) can reach four digits.
Also be aware that many condos like to collect maintenance fees on a quarterly, not monthly, basis. This means you may get hit by a maintenance bill of, say, $1,200 every quarter, which needs to be paid within the month. Brace for impact, as they say in the movies.
(Special GoBear tip: the more residents there are in a condo, the lower maintenance costs tend to be. That’s because the cost is spread out among more people.)
In terms of loan repayment, the typical home loan interest rate is about 2% per annum. However, bank interest rates fluctuate, unlike the mostly static HDB rate (2.6% per annum).
Assuming you borrow $1.28 million (for a $1.6 million condo), at a rate of 2% per annum over 25 years, your monthly repayment will be about $5,425 per month. This is payable in cash, or through your CPF OA.
However, since bank loans and the recent SIBOR have been changing, be sure to check on GoBear regularly for the best rates.