Housing Matters
Questions You Need To Ask Yourself When Buying Your First Home
By the time you read this, it is certain that you have talked amongst your friends about how expensive homes are in Singapore. The debate between a Build-To-Order flat or a resale flat is also a never-ending topic. Nevertheless, the conclusion is that you and your partner will still need to buy a home to live in.
This article will talk about how you and your partner should decide upon what kind of home you would settle into. Many times in our life we wish we can go back in time just to re-do a certain action but unfortunately that is not possible.
Let’s put that in a scenario of buying your first home. You do not want to come to a point that you wish you had not to settle for something you did not want to own in the first place. The cost of moving homes or even waiting for a new one is not something that you want to happen. Therefore, continue scrolling down to find out how you can make a better decision when purchasing your first home.
Will your first home be your last?
The question holds the most importance, as it will help in foreseeing your future cash flow, asset, and even liabilities.
Most of the times when we buy a home, we would need to take a mortgage, as we definitely are not able to pay the home in the full lump sum. In Singapore, you either take on a HDB concessionary loan or a bank loan.
You are always able to take a bank loan as long as the bank allows you to do so. You are allowed to take a mortgage for most of the properties sold in the market.
But for a HDB concessionary loan, you are only allowed to use it only twice. You can only use it only for properties from HDB. Therefore private properties are not allowed.
If this first home will not be your last home, you should be aware of the limitation of the use of the HDB Loan, as stated above. That is you are more into taking a HDB Loan.
Will you be buying another property?
It is only natural for you to aim high and wanting for better things but nevertheless, not everyone is the same. Hence the question above.
If you and your partner do intend to upgrade your property in the future, it is only wise for you to plan out a way to get the necessary funds. Most of the times you would need to sell your first home in order to free up some money to pay for the next house.
Using your CPF Ordinary Account (CPFOA) money will mean that you need to pay back the money to your CPFOA plus the accrued interest.
If the price of your first home is quite a big amount and you used a large amount of your CPFOA to fund it, there is a possibility you do not receive much cash on hand as most of the money from the sale had to be returned to the CPFOA.
Remember, the larger the amount you take on loan, the larger the amount of interest that has to be paid.
Yes, if you are upgrading to another HDB home, there is not much to worry as you could use your CPFOA. But if you intend to buy another property and you already utilize the HDB concessionary loan twice, you would appreciate every single amount of cash that you can get to pay for the downpayment.
If you intend to upgrade your home in the future, you would want to follow this. You should start small and minimize your financial commitments so you are able to achieve your long-term desire of living in private property.
Do not assume you can sell it at a high profit
Most of us plan to buy a home and sell it in the future in order to gain some profit. It is a basic business idea.
However, the selling prices of your home are something that you can quote. But you do not always get what you want. There are ups and downs everywhere and that includes the property market.
You might think that your area of living is a good location and you might sell it for a high price. You even have the racial quota in your favor. But they’re many other factors that will determine the price.
- If your neighbors are also selling their homes, what makes your home the best for a potential buyer to purchase it?
- There are newer properties being developed nearby, why would someone buy your home that is older?
- There are similar amenities in other areas, is your area really a better choice?
The questions are something that is hard to answer and justify.
Supply for homes is never-ending. As you can see, a new BTO or condominium are being built every now and then.
Thus, do not assume you can sell your first home at a high profit. Yes, you may gain some money from it but is it within your expectations?
Your choice equals your future
If you finally come down to a decision, make sure you are satisfied with it now and in the future as well. The choice you made might open up more opportunities in the future or might even narrow your options in the future. Hence, have a good financial plan and you have better control of your future.
That is the end of the article and hope the information is useful. Do share it with your friends and families. Till next time.
Disclaimer
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
