Legal issues you should know when buying a property

Just saved enough for the deposit for a home? Don't forget about the vital process of going over legalities and formalising paperwork as a home is an expensive investment so it is wise to ensure that the transaction goes smoothly...

Legal issues to take note of when buying your first home

You have finally saved enough for the deposit on your first home and the wait to get your keys couldn’t be more exciting. It is also a tedious and mundane process. 

But with it comes the mundane process of looking through legalities and formalising paperwork. From contracts, monies, loans, to additional costs like stamp duty and maintenance fees, home purchases can be intimidating to first-timers.

Your home is the most expensive investment you will ever make, so it is important that the transaction goes smoothly.

Engaging a conveyancing lawyer

As with any significant purchase, it is wise to do some research prior to parting with your hard-earned money. Some things you need to consider are your ownership eligibility, loan interest rates and financing options.

After you have expressed interest to the seller of the property, you will need to engage a conveyancing lawyer.

A conveyancing lawyer oversees the transfer of the property’s ownership from the seller to buyer.  All property transactions must be verified by a conveyancing lawyer, with documents signed in their presence, in accordance with Singapore’s land laws.

The flurry of legal terms will overwhelm any first-time buyer. A lawyer will assist in ensuring that the transaction will proceed as smoothly as possible. So, don’t scrimp on the legal fees and make sure to invest in a good one.

Your lawyer should hold your hand throughout the process, explaining to you the legal jargons in layman terms and answering any questions you have.

He or she will run a title search to ensure that it is a “good root of title”, whereby the title is in an ideal condition and the property can be put up for sale. The lawyer will also ascertain the property’s ownership and stakeholders.

You can approach banks and mortgage brokers to recommend a list conveyancing law firms.

Law firms that are on banks’ panel of conveyancing lawyers are a good option – should you decide to switch banks when refinancing your mortgage, you can still use the same lawyer. This will minimise any potential hiccups in future, if you would like to sell the property.

Conveyancing fees for purchasing properties typically range from $2,000 to $5,000, with smaller law firms offering more affordable rates.

Other details your lawyer will touch on include the breaking down of costs, such as stamp duties, taxes and down payment. He or she will also set up a conveyancing account for the transfer of monies.

HDB transactions have to go through conveyancing as well, although it provides its own legal services for a much lower fee.

According to HDB’s website, the breakdown of the conveyancing fee is as follows:

– 90 cents per $1,000 for the first $30,000
– 72 cents per $1,000 for the next $30,000; and
– 60 cents per $1,000, for the remaining amount.

So, if your HDB flat is worth $600,000 for example, be prepared to fork out $372.40 for HDB conveyancing fees. You can calculate conveyancing fees on the HDB’s legal fees enquiries section.

Contract and Payment

Once you have decided on the home of your choice, your lawyer can discuss terms with those of the seller for the option to purchase (OTP) or purchase agreement. Both contracts can be used as legally binding documents.  Do get your lawyer to vet the OTP to ensure all terms are mutually agreed upon between you and the seller.

If you have decided to purchase the property and have signed the OTP, the seller provides the OTP to the buyer in exchange for 1 percent option monies from the buyer. After which, the buyer can reconsider his or her decision during an agreed time frame of about two weeks.

The buyer will furnish the balance of the down payment if he or she decides to purchase the property. If the buyer does not make an offer for the property within the agreed window, he or she may lose the 1 percent option fee. The buyer should also take this period of consideration to finalise his or her home loan.

If the home loan is not approved, the buyer should forgo the purchase, as he or she will risk legal action from the seller if the property is not paid for in full.

On approval of the buyer’s home loan, it is time for your lawyer to exercise the OTP and transfer the deposit to the conveyancing account of the seller’s lawyer.

Both parties will now be in a legally binding contract.  Your lawyer will lodge a caveat with the Singapore Land Authority as a record of your property purchase, and prepare other documents for you to sign, such as the sale and purchase agreement.

The entire process of buying your home lasts about 10 to 12 weeks. When all is done, you can collect the keys to your first home.

What if I get divorced?

We all want the best for our marriage, but in the event that things go sour with our partner, it is best to consult a divorce lawyer as the mortgage becomes part of the divorce settlement.

The drama-free route is to sell the home to pay for the mortgage in full or refinance the mortgage in one spouse’s name. That person will be accountable for all mortgage payments from then on.

Oftentimes, one spouse will live in the matrimonial home – that’s when consulting a divorce lawyer to decide who should pay the mortgage will come in.

This could lead to some very messy issues – if your former spouse who lives outside of the home misses some payments or stops paying the mortgage, which is in your name, your credit rating will take a beating and the bank may repossess your home.

Even if the settlement mandates that your former spouse is responsible for the mortgage payments, there is nothing that will guarantee that he or she will make the payments. In some cases, the spouse could be financially unable to do so. Legal actions such as could be threatened, but someone is still required to fork out the money.

Unfortunately, there isn’t a lawyer to guide you through courtship and marriage and marrying your husband or wife is a choice you make for life, so choose wisely.

 
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