Buying a property is usually an exciting process for many people. However, careful planning is necessary before one commits to buy a property. One of the most important areas to look out for is to plan your finances before committing to a purchase. The buyer should always ensure that he or she has enough reserves not just to pay for the immediate expenses, but also the unexpected expenses in the short term and the long run. There are six main categories of expenses (but not limited to) at the point of purchase. 1) Downpayment If you are going for your first mortgage loan, the maximum loan-to-value (LTV) amount will be 75% of the purchase price or valuation price, whichever is lower. That will mean that you will have to fork out monies for the 25% downpayment.
If you are going for a second mortgage loan, LTV will only be 45% and if it’s the third mortgage loan, LTV will only be 35%.
2) Legal Fees For a private property purchase, legal fees tend to be between $3,000 and $6,000, depending on how high the property price is. It also varies between law firms. 3) Stamp Duty For Singaporean citizens, Nationals and Permanent Residents (PR) of Iceland, Liechtenstein, Norway or Switzerland and Nationals of the United States of America, buyers’ stamp duty for the first residential property, the rates are computed as such:
1% of First $180,000 2% of Next $180,000 3% of Next $640,000 4% of Remaining Amount Please take note that if you are going for your second property purchase or more, and/or if you are a PR/foreigner in Singapore, additional buyers’ stamp duty applies.
4) Admin and Others There will be some small miscellaneous costs during the conveyancing period before completion of a project, such as for the valuation report, insurance etc. You may be required to pay agent fees in some instances, depending on the negotiation process.
5) Renovation Costs This varies from one property to another. It can be quite minimal for a small compact condominium which is nicely done up, but it can be pretty hefty for bigger purchases like a landed property.
For example, an internal full renovation of a terrace house can cost around $500,000, while a total rebuild of a 3,000 sq ft land size semi-detached can cost as much as $2,000,000. 6) Cash-Over-Valuation (COV) Most of the time, banks are willing to match the valuation price with the purchase price. However, there are instances where the purchase price is way above the recent transacted prices. Hence, there will be a COV component involved. For any amount that is above the valuation, buyers will have to top up by cash, as the COV amount cannot be financed using CPF monies or mortgage loans.
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