Beware of These Out-of-Pocket Fees When Purchasing a New Home

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If you are looking to purchase a property in Singapore, the first thing you want to do is to ask yourself: can I afford it? Setting aside enough money for the down payment, home loan repayments and the price of the property itself is one thing. As it turns out, there are a number of other fees involved when purchasing a new home in Singapore, and they can quickly add up if you are not careful.

Contents

  1. What are the out-of-pocket fees to consider when purchasing a new property?
  2. Valuation report
  3. Application fee (for HDB only)
  4. Legal fees
  5. Stamp duties
  6. Insurance
  7. Maintenance and renovation fees
  8. Other fees to consider
    • Agent’s commission
    • Option fees 

 

What Are the Out-of-Pocket Fees to Consider When Purchasing a New Property?

1. Valuation Report

In order to get an HDB housing loan or bank home loan, a valuation report of the property you are trying to purchase is required. In the case of an HDB flat, the fee itself can range from $140 to $200, depending on the type of flat being valued. For private properties, the cost is more variable. It is often between $350 and $500, but can go up to the thousands depending on the type of property.

2. Application Fee (for HDB only)

The application fee varies depending on the type of HDB flat you are trying to purchase. For example, it costs just $10 to apply for a standard HDB flat. However, if you are purchasing a Design, Build and Sell Scheme (DBSS) flat or an Executive Condominium (EC), the application fee will be determined by the respective developers. 

3. Legal Fees

A property transaction doesn’t just involve the buyer, the seller and the agent(s) in between. There is always a solicitor involved as well, which means legal fees need to be paid. A solicitor is critical, since he or she is in charge of tasks such as conducting background checks on the property, as well as to transfer the property’s ownership title, arranging mortgage documentation, and liaising with the banks. The cost of such services is usually around $2,500 to $3,000 if appointed by the bank. Private lawyers’ fees may vary. 

4. Stamp Duties

All property buyers, local or foreign, have to pay a buyer’s stamp duty (BSD), which is basically a form of tax on your home. The higher the purchase price or market value of the property, the more tax you need to pay.

Buyer’s Stamp Duty (BSD) Rates:

Purchase Price or Market Value of the Property

BSD Rates for Residential Properties

First S$180,000

1%

Next S$180,000

2%

Next S$640,000

3%

Remaining Amount

4%

If you happen to be a Singaporean buying your second property onwards, a Singapore Permanent Resident (PR) or a foreigner, you are required to pay the Additional Buyer’s Stamp Duty (ABSD), unless you are a citizen or PR of an exempt country or a joint purchase is made by a married couple that meets certain requirements

ABSD is an added tax of between 5% and 20% of your property price and is payable within 14 days of completing the Sales and Purchase Agreement of any new property. If the property is a resale, then payment must be paid within two weeks of exercising the Option to Purchase (OTP).

Additional Buyer’s Stamp Duty (ABSD) rates: 

Who Must Pay ABSD

Rate

Singapore PR buying first property

5%

Singapore PR buying second and subsequent properties

15%

Foreigner buying any property

20%

Exceptions: US Nationals, and Nationals and PRs of Switzerland, Liechtenstein, Norway, and Iceland are allowed the same stamp duty treatment as Singapore citizens. Married couples may also not have to pay ABSD if they meet certain requirements. 

 

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5. Insurance

It’s an optional fee, but it is important to factor in insurance when working out your budgets. The cost of insuring your home depends on what you are trying to insure in the first place. For example, a typical home insurance policy in Singapore provides protection on the policyholder’s home contents, such as the TV, sofa, computers, furniture, interior renovations and other valuables within the property. A fire insurance policy, on the other hand, protects the original structure of the flat — that is, the house itself. 

The amount also differs based on the size of the property, the type of property, the ownership status, as well as the appraisal of your actual home value. There are also different types of insurance policies. For example, CPF requires the compulsory purchase of Home Protection Scheme if lessees want to use their CPF funds.

6. Maintenance and Renovation Fees

HDB flats and condominiums both have monthly maintenance fees of some kind (in the case of HDBs, it is known more commonly as the service and conservancy charge). For HDB flats, it ranges from $20 to $90 per month for Singapore citizens. Condominiums, on the other hand, charge anywhere between $300 and $700 per month or more, depending on the number of units within the development, the amenities available, etc. 

As for renovations, the sky is truly the limit. According to a recent article, renovation costs for a four-room HDB flat can range from as low as $4,888 to $110,000

 

Other Fees to Consider

There are other payments involved in purchasing a home that buyers may have heard of, including an agent’s commission and option fees. But do these actually come out of your pocket?

7. Agent’s commission

A property agent’s job is to search for properties based on your preferences and arrange for viewings, as well as to negotiate with the seller on your behalf. The agent’s commission, then, is the amount that the agent is paid once the negotiations come to a close. 

Usually for private property, the seller’s agent will co-broke with the buyer’s agent and thus split the commission with him or her. In such cases, the buyer would not need to pay for the agent's commission.

As for how much the agent’s commission usually costs, it really varies on a case-by-case basis. According to the Council for Estate Agencies, commission rates are not fixed “to allow market forces to drive competitive pricing in the industry”. 

8. Option fees

An Option Fee refers to the Option to Purchase (OTP), which is like a deposit you pay to ‘lock’ the seller into the deal. For private properties, this is typically 1% of the property’s purchase price, while for ECs this is typically 5% of the purchase price and for HDB units the maximum amount varies depending on the flat type from $500 to $2,000

On top of that, you will also have to pay the Option Exercise Fee when you carry out the OTP. Although the Option Fee can be hefty, it’s actually part of the purchase price so don’t worry, you’re not paying anything extra.

 

The Bottom Line

The popular advice of ‘read the fine print’ definitely applies to property purchases. Even if you choose not to set aside money for insurance or renovations, the true cost of a property is more than just the down payment, principal and interest. So do the math, double check the results, and talk to someone in the know before committing to what is, more likely than not, the biggest purchase of your life. 

 

Planning to buy a new home? Start by comparing all the home loans available or speaking to our Home Finance Advisors for personalised advice. For more tips and tricks on property financing, look no further than our home financing guides

 

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