2018 could be the year that you get the keys to your first home.
Deciding on which property to buy as well as other considerations such as the location and financing conditions can make life very stressful, so we’ve come up with a step-by-step guide to help you buy your first home with less hassle.
By Alexis Poon
A young couple will experience many firsts together when they get married. An important first is deciding which property to purchase as their marital home. It is not surprising that many young couples are stumped by the numerous choices.
Not to fear because PropertyGuru is here to point out some key things that all young lovebirds must know in their search for their dream nest.
Saving for a home
The first item is savings. The couple must check the amount they have in their savings and CPF accounts. They must bear in mind that the deposit is 20 percent of the purchase price if they wish to buy a condominium unit, of which, 15 percent can be paid using CPF, but the remaining 5.0 percent must be paid in cash.
Their combined savings and CPF monies will indicate how much cash they have for the 20 percent deposit. Besides the deposit, the lovebirds will also need to set aside some money to renovate and decorate their nest. It is wise for the couple to have a discussion about their savings early so that they have time to cut their expenses or take on a part-time gig for more income.
It is also important for the young couple to take a long hard look at their spending patterns to ensure that they can pay the bills associated with being a homeowner. Being first-time homeowners, they may not realise the numerous expenses that come with owning a home.
When they are living with their parents, they don’t have to pay for utilities and property tax. Neither do they need to purchase groceries, cleaning supplies and toiletries. Each of these necessary expenses is a small amount, but they do add up to a tidy sum.
The most important monthly expenditure that all homeowners must take note is their mortgage payment. Banks offer a large variety of mortgage packages. The young couple must start doing their research early so that they can choose a loan that is most suitable for them.
The key things to look out for are the interest rate and the lock-in period. Interest rates for mortgages can be divided into two general categories; namely fixed and variable. Fixed rate means that the interest rate is fixed for a specific number of years during the duration of the loan. Variable rate means that the interest rate changes over the entire loan duration.
The lock-in period is the number of years that neither the bank nor the borrower can change anything about the loan. In today’s environment of rising interest rates, it will be wise to choose a fixed interest rate with a long lock-in period.
After doing their research, it will also be a good idea for the couple to approach the bank that has the most suitable loan and ask for a pre-approval. This will give the couple an idea of how much the bank is willing to lend them, which can also serve as a guideline for their housing budget.
Prior to doing that, the young couple should do some housekeeping of their finances. They should pay down any personal loans, cut up any credit cards they do not use and make prompt monthly payments on their remaining credit cards. Their outstanding debts and credit history will significantly affect the bank’s decision to give them a loan and the amount they can borrow.
Location, location, location
Other than finances, another essential thing that the couple should note is the location of the property and the surrounding amenities. It is important for them to check that the walking distance from the condominium to the MRT station is really seven minutes and not just take the agent at his word.
The couple should take a walk around the neighbourhood and note the amenities within walking distance of the development. What is important is not what amenities are available, but if the available amenities suit their lifestyle. Numerous nearby hipster cafes will be treasured by a young couple who enjoys lazy Sunday brunches, but a health-conscious couple who cooks frequently will prefer a supermarket well-stocked with organic ingredients.
The couple should also do a check of the government’s plans for the area. The Master Plan on the website of the Urban Redevelopment Authority (URA) is a good place to start. Things to look out for include future MRT stations or transport nodes, nearby schools and any major future developments.
If the couple is buying a resale condominium, it will be prudent to check the asking prices of other units in the same development and neighbouring developments. The listings on PropertyGuru will be a good place to start their research on asking prices. Information on sales transactions of private residential properties for the past three years can be found on URA’s website.
Such information will allow the couple to better negotiate with the seller. It will also give them an idea of the amount of capital appreciation they can expect.
It is also essential for the couple to visit the resale unit at different times of the day. One of the visits should be at night when the neighbours are home so that the couple can gauge the noise level from the neighbours. They can also determine the peak hour traffic conditions.
They should also do a quick internet search of the development and the neighbourhood. Are there reports of many crimes or quarrels among neighbours? While negative press can help the couple negotiate the price downwards, it will also have a negative impact when they want to sell the place.
Do your research
If the couple is buying a new condominium unit, information on transacted prices for the same development may be limited. However, transacted prices for the surrounding developments can serve as a good proxy. The couple should also do a quick check on the developer’s track record. Does the developer have a history of delays? Are there many complaints from buyers of their previous projects?
Finally, the property has to fit the plans of the young couple. If the young couple plans to purchase their first home with an eye towards investment, then they must not only consider their personal needs, but also keep in mind that the property must be able to fetch a good price on the resale market.
An obvious choice will be to buy a small unit in central Singapore as condominiums in that area tend to be more popular in the resale market. However, a cash-strapped young couple may not have the financial means to buy such a unit.
An alternative solution for the savvy young couple is to choose a condominium unit that is currently in a less developed area, but where the government has announced plans to transform the area. Jurong and Woodlands are examples that immediately spring to mind.
A major drawback will be the inconveniences that the couple has to bear for a few years. However, the significant capital appreciation as the area matures will make the unit a worthwhile investment.
To conclude, the first home of a young couple can be more than just a comfortable home. It can also be their first foray into property investment albeit with some prudent financial planning and careful research.
|This article was first published in the print version PropertyGuru News & Views. Download PDFs of full print issues or read more stories now!|