You will be able to describe how the price of a Singapore home is paid with cash, CPF and borrowing.
Wei Ling, from lesson 5.2, plans to buy an HDB flat with her fiance Jun in about three years. When they talk about it, they talk about one number: the price. A flat at S$480,000 sounds possible or impossible depending on the day. What neither of them can say is how much of that S$480,000 comes from their bank accounts, how much from CPF, how much from a loan, and what they will pay on top of the price.
The price on its own does not tell you much. The split does. Once you know which part of a purchase comes from where, you can tell whether a flat is out of reach or only a couple of years away. This lesson takes a Singapore home purchase apart.
Every purchase is paid in three parts.
The first is the down payment: the part of the price you pay yourself, before the loan covers the rest. It can be paid partly in cash and partly from your CPF Ordinary Account. How much must be cash, and how much CPF can cover, depends on the type of property and the type of loan.
The second is the home loan, from HDB or a bank. It covers the rest of the price and is repaid monthly over many years, from CPF, cash or both.
The third is the cost of buying itself, on top of the price. Stamp duty is usually the biggest item. IRAS sets it, and it is charged on the price or the value, whichever is higher. Legal fees, valuation fees and the fees tied to the loan come next. CPF can pay for some of these, and the rest is cash. Renovation and furniture sit outside all three parts, and you will almost always pay for them in cash.
Here is the split with figures made up for the example, not taken from any HDB or bank rule. Say Wei Ling and Jun find they can borrow S$360,000 towards a S$480,000 flat. The down payment is S$480,000 minus S$360,000, which is S$120,000. For stamp duty they use the calculator on the IRAS website, and with legal and other fees added they arrive at an estimate of S$12,000. So the sum they must find themselves is S$120,000 plus S$12,000. That is S$132,000, and renovation is still to come.
Today their Ordinary Accounts hold S$32,000 and S$28,000, a total of S$60,000. They have S$14,000 in cash put aside for the home. Lesson 7.3 turns the difference into a plan.
The rules depend on what you buy, and three bodies publish them.
HDB sets who can buy a flat, which grants are available, and the terms of an HDB loan. Eligibility depends on things such as citizenship, household type and income. Housing grants for eligible buyers are paid into CPF to go towards the purchase. The amounts and conditions are on hdb.gov.sg.
MAS sets the rules for bank loans on any property. One of them limits what share of the price a bank may lend. IRAS sets stamp duty, and charges extra duty on some purchases, such as a second property.
Private property comes with no HDB grants and no HDB loan. The loan has to come from a bank, and the cash part of the down payment tends to be larger. Weighing a flat against a condo? Set both out in the three parts above and compare the cash each one needs from you on the day.
Lenders do not lend on price alone. Limits set by MAS and HDB cap how much of your income can go to loan repayments each month. For HDB flats and executive condominiums there is the Mortgage Servicing Ratio, and for all property loans there is the Total Debt Servicing Ratio, which also counts your other debts, such as a car loan. A separate limit caps the loan as a share of the property's price or value.
These limits change, sometimes more than once in a few years. So set your budget from your own figures under today's rules, not from what a friend borrowed. For an HDB flat, apply for an HDB Flat Eligibility letter, which tells you whether you can buy and how much HDB would lend. For a bank loan, ask for an in-principle approval. Both are based on your actual income and debts.
A car loan or a large card balance counts against you here, which is one more reason lesson 6.1 put expensive debt first.
Using CPF for a home is normal, and for most buyers it is the only way to afford one. It has a cost all the same. Every dollar taken from your Ordinary Account for housing stops growing there, and less is left for your Retirement Account at 55. If you sell, you refund the amount used plus accrued interest, as lesson 5.2 explained.
A home bought mostly with CPF can leave your retirement savings thinner than you expected. Property & Mortgages covers the balance between the two in detail. It also deals with whether to repay in cash or CPF, and how long a loan to take.
For now, the useful picture is the split. Think about the home you have in mind, its rough price, and what you already have in cash and in your Ordinary Account towards it.
Write down the type of home you are aiming for, a rough price, and how much cash and CPF you have towards the down payment today.
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