Can I afford to buy a private property worth more than a million?

To determine if you can afford to buy a private property worth over a million dollars in Singapore, several factors need to be considered:

Financial Preparedness

• Evaluate your gross monthly income and other sources of funds. The Total Debt Servicing Ratio (TDSR) limits your total debt obligations to 55% of your gross monthly income, which includes all your debt commitments, not just the potential mortgage.

Down Payment and Financing

• You will need a down payment of at least 25% of the purchase price, with 5% in cash and the remaining 20% can be paid using your Central Provident Fund (CPF) Ordinary Account savings. For a million-dollar property, this translates to a cash down payment of $50,000 and $200,000 from your CPF.

Additional Costs

• Consider the Additional Buyer’s Stamp Duty (ABSD) if applicable. However, as a first-time buyer who is a Singapore citizen, you are exempt from ABSD for your first property purchase.

Mortgage Loan

• Assess the mortgage loan terms. With a 30-year loan at a 2% interest rate, the monthly repayment for a $600,000 loan (assuming a 25% down payment) would be approximately $2,218. If you and your spouse are co-borrowers, this can be split to around $1,100 each per month.

Affordability Schemes

• Look into schemes like the Deferred Payment Scheme (DPS) or Progressive Payment Scheme (PPS) which can help spread out the payment milestones, reducing the immediate financial burden.

Executive Condominiums (ECs)

• If you are looking for a more affordable entry into private property, consider Executive Condominiums (ECs). These are priced lower than regular condos and offer similar amenities, with CPF grants available for buyers.

Rental Income Strategy

• If you opt for a smaller unit, you could consider renting it out to cover a significant portion of the mortgage payments while you live elsewhere, and then move in later when the unit has appreciated in value.

In summary, while buying a private property over a million dollars is a significant financial commitment, it can be made more manageable through careful financial planning, leveraging CPF savings, and utilizing various financing and payment schemes available in Singapore. It is advisable to consult with a financial advisor to ensure you have a comprehensive understanding of your financial readiness.