The Esta Condominium Specialist
2, 3, 4 rooms apartments and penthouses available.
- Freehold
- Asking from $840psf
- TOP date: End 2008.
- Address: 31, 33, 35, 37, 39 Amber Gardens
Call us at (65) 9691 9907 for a One stop Esta specialist. We have access to all units for sale in the market.
Visit the official The Esta website at www.TheEstaSingapore.com for information on market prices, transaction volumes and units on sale now!
Friday, November 7, 2008
Tuesday, November 4, 2008
We have moved to our new website! WWW.EASTLIVING.COM.SG
From September 2008, we have moved our property blog and property listings to our new website, www.EastLiving.com.sg.
Visit us now for MORE property listings, MORE Singapore property news updates and a MORE user friendly interface.
Visit us now for MORE property listings, MORE Singapore property news updates and a MORE user friendly interface.
Saturday, August 2, 2008
Borrow big to pay for your home? It may not be foolhardy
Aug 3, 2008
small change
Borrow big to pay for your home? It may not be foolhardy
Taking out a huge real estate loan seems risky, but it may sometimes
be a better option
By Dennis Chan, Deputy Money Editor
After my last Small Change column was published, a colleague came up
to me and said: 'Property isn't a high-risk investment.
'In fact, it appeals to a low-risk investor like me who doesn't know
enough to invest in stocks and shares. What- ever spare cash I have,
I use it to pay off my housing loan.'
I had argued in my column that property investment is a high-risk,
high-reward game, using the example of a $1 million home bought with
$100,000 cash and $900,000 borrowed.
If the price of the home rises by 10 per cent, it will be worth $1.1
million and the investor would have doubled his initial capital. But
if it were to fall by an equal amount, his capital would have been
wiped out.
So who's right?
Both of us are.
Residential property is a familiar investment to many Singaporeans
since home ownership became the cornerstone of government policy in
the mid-1960s.
Indeed, whether you are a sophisticated investor or one wet behind
the ears, you can't go wrong buying a home as a long-term investment
in land-scarce Singapore. Seen in this light, it is a safe
investment.
It becomes highly risky only when one buys a second, third or fourth
property leveraging on borrowings and relying substantially on rental
incomes to service the loans.
On reflection, I realise there are many people like my colleague who
pay down their housing loans very early, and take pride in doing so.
This sentiment is entirely understandable. Many of us take home
ownership for granted, thanks to the Government's hugely successful
public housing programme.
But for the older generation and the one before that, the fear of not
having a roof over one's head was very real.
To them, it's an achievement to own a fully paid-up home as quickly
as possible.
To these people, I say: 'Go ahead, if you can afford it.'
'What do you mean?' you may retort. 'If I take my spare cash to repay
my home loan, surely I can afford it.'
Not necessarily.
There is a cost in putting too much equity into a home purchase.
To illustrate, let's take the example of two young couples - X and Y -
who buy a Housing Board resale flat at the market valuation price of
$500,000.
Let's assume each couple have savings totalling $150,000 in their
Central Provident Fund Ordinary Accounts (OA) and a combined monthly
income of $6,000. Both are are entitled to an HDB concessionary loan -
currently at 2.6 per cent a year.
Under the rules, buyers are allowed to pay 10 per cent as down
payment and borrow the remaining 90 per cent to finance their
purchase.
Couple X, being very prudent, choose to use up all their OA balances
to pay for their home. They take out a 30-year, $350,000 loan to
finance the rest. For simplicity's sake, let's assume the entire
$150,000 goes towards paying the down payment. In reality, the actual
amount will be less, minus the money to pay stamp duty, home
protection scheme insurance and legal fees.
Couple Y, being more gung-ho, decide to pay the minimum down payment
of 10 per cent, which works out to $50,000. They, too, take a 30-year
loan but for a higher amount of $450,000.
Using a financial calculator, Couple X and Couple Y's monthly loan
instalments work out to about $1,400 and $1,800 respectively.
Couple X's monthly CPF OA contribution totalling $1,380 is almost
just about able to cover fully their monthly instalment whereas
Couple Y would have to top up an additional $420 in cash.
At the end of 30 years, Couple X will have paid a total of $504,000
to repay their $350,000 loan whereas Couple Y will have coughed out
$648,000 on their $450,000 loan.
Interest charges by Couple X and Couple Y over this period work out
to $154,000 and $198,000 respectively.
On the face of it, Couple X seem far better off. Their monthly
repayment is lower and they incur $44,000 less in interest charges.
On closer inspection, the benefits of borrowing less are not that
clear cut.
Firstly, one needs to take into account that Couple Y kept $100,000
of their OAs from the start. This means they get to earn annual
interest income, which Couple X will forgo until their CPF
contributions from income accumulate again.
Interest payment for OA balances is 2.5 per cent a year. For the
first $20,000, a higher interest of 3.5 per cent applies.
Insofar as the first $20,000 is concerned, it is better to leave the
money untouched and earning 3.5 per cent a year than to use it to pay
off an HDB loan that charges 2.6 per cent per annum.
As for amounts greater than $20,000, one doesn't lose much either
since the difference between interest payable on an HDB loan and
earned for money kept in the OA is a mere 0.1 percentage point (2.6
per cent - 2.5 per cent).
Secondly, keeping substantial savings in the OA can be an important
buffer to cope with a temporary loss of income.
The sum of $100,000 is equivalent to five years' worth of monthly
repayments. So even if one or both persons who make up Couple Y were
to stop working for some reason or quit to start a family or take a
sabbatical, they can continue to service their loan entirely from
their OAs for about five years while looking for their next job.
Couple X, on the other hand, will have no such luxury. They will be
forced to tap their cash savings immediately in similar
circumstances.
Thirdly, having some spare savings in the OA opens up investment
opportunities and flexibility.
Bear in mind that the HDB loan at 2.6 per cent is really cheap money.
Last year, insurer Aviva offered an endowment plan called Big e that
paid up to 3.5 per cent in interest a year. The plan, which
guaranteed a return higher than 2.5 per cent, has since been
discontinued.
However, such opportunities that offer low-risk returns based on
positive interest differential (3.5 per cent - 2.6 per cent) can be
expected to surface from time to time.
For those with a higher risk appetite, there are also numerous CPF-
approved investments that have a track record of generating annual
returns in excess of 5 per cent over the mid to long term.
Although I used the HDB flat purchase as an example, the argument is
also valid for private property purchases, given the current low
interest rate environment.
Fourthly, if your flat is rented out, you can apply to the taxman to
offset your rental income with the interest paid on the loan. So the
bigger the loan amount, the higher will be the interest offset.
Finally, if all else fails and there is no reasonable opportunity to
earn a better return, there is always the option of using your OA
balance to pay down your housing debt at any time.
Bear in mind this option is irreversible. You can pay down a housing
loan but you cannot top it up.
Do note that if you take an HDB loan, you must 'invest' your excess
OA balance before your first appointment with the board.
That is because HDB will exhaust your OA for down payment - minus the
amount for stamp duty, legal fees and home protection insurance -
before granting you a loan.
In the earlier example, Couple Y would have to withdraw from their
OAs the sum of $100,000 - or an appropriate amount after taking into
account the 10 per cent down payment and ancillary charges - and put
it into a CPF-approved investment.
If the investment is meant to be a temporary one, choosing a low-
risk, low-return fund like DBS Enhanced Income Fund would be
appropriate.
After the first appointment, you may liquidate the investment and
return the proceeds to your OA.
Be aware that this 'round tripping' is not cost free as agent bank
fees and sales charges apply. These charges are nominal though.
To sum up, taking on a big housing debt is not necessarily a bad
thing. In certain circumstances, it may even be the prudent thing to
do.
Whether you choose to be Couple X or Couple Y, you must do your sums
and feel comfortable with the plan.
small change
Borrow big to pay for your home? It may not be foolhardy
Taking out a huge real estate loan seems risky, but it may sometimes
be a better option
By Dennis Chan, Deputy Money Editor
After my last Small Change column was published, a colleague came up
to me and said: 'Property isn't a high-risk investment.
'In fact, it appeals to a low-risk investor like me who doesn't know
enough to invest in stocks and shares. What- ever spare cash I have,
I use it to pay off my housing loan.'
I had argued in my column that property investment is a high-risk,
high-reward game, using the example of a $1 million home bought with
$100,000 cash and $900,000 borrowed.
If the price of the home rises by 10 per cent, it will be worth $1.1
million and the investor would have doubled his initial capital. But
if it were to fall by an equal amount, his capital would have been
wiped out.
So who's right?
Both of us are.
Residential property is a familiar investment to many Singaporeans
since home ownership became the cornerstone of government policy in
the mid-1960s.
Indeed, whether you are a sophisticated investor or one wet behind
the ears, you can't go wrong buying a home as a long-term investment
in land-scarce Singapore. Seen in this light, it is a safe
investment.
It becomes highly risky only when one buys a second, third or fourth
property leveraging on borrowings and relying substantially on rental
incomes to service the loans.
On reflection, I realise there are many people like my colleague who
pay down their housing loans very early, and take pride in doing so.
This sentiment is entirely understandable. Many of us take home
ownership for granted, thanks to the Government's hugely successful
public housing programme.
But for the older generation and the one before that, the fear of not
having a roof over one's head was very real.
To them, it's an achievement to own a fully paid-up home as quickly
as possible.
To these people, I say: 'Go ahead, if you can afford it.'
'What do you mean?' you may retort. 'If I take my spare cash to repay
my home loan, surely I can afford it.'
Not necessarily.
There is a cost in putting too much equity into a home purchase.
To illustrate, let's take the example of two young couples - X and Y -
who buy a Housing Board resale flat at the market valuation price of
$500,000.
Let's assume each couple have savings totalling $150,000 in their
Central Provident Fund Ordinary Accounts (OA) and a combined monthly
income of $6,000. Both are are entitled to an HDB concessionary loan -
currently at 2.6 per cent a year.
Under the rules, buyers are allowed to pay 10 per cent as down
payment and borrow the remaining 90 per cent to finance their
purchase.
Couple X, being very prudent, choose to use up all their OA balances
to pay for their home. They take out a 30-year, $350,000 loan to
finance the rest. For simplicity's sake, let's assume the entire
$150,000 goes towards paying the down payment. In reality, the actual
amount will be less, minus the money to pay stamp duty, home
protection scheme insurance and legal fees.
Couple Y, being more gung-ho, decide to pay the minimum down payment
of 10 per cent, which works out to $50,000. They, too, take a 30-year
loan but for a higher amount of $450,000.
Using a financial calculator, Couple X and Couple Y's monthly loan
instalments work out to about $1,400 and $1,800 respectively.
Couple X's monthly CPF OA contribution totalling $1,380 is almost
just about able to cover fully their monthly instalment whereas
Couple Y would have to top up an additional $420 in cash.
At the end of 30 years, Couple X will have paid a total of $504,000
to repay their $350,000 loan whereas Couple Y will have coughed out
$648,000 on their $450,000 loan.
Interest charges by Couple X and Couple Y over this period work out
to $154,000 and $198,000 respectively.
On the face of it, Couple X seem far better off. Their monthly
repayment is lower and they incur $44,000 less in interest charges.
On closer inspection, the benefits of borrowing less are not that
clear cut.
Firstly, one needs to take into account that Couple Y kept $100,000
of their OAs from the start. This means they get to earn annual
interest income, which Couple X will forgo until their CPF
contributions from income accumulate again.
Interest payment for OA balances is 2.5 per cent a year. For the
first $20,000, a higher interest of 3.5 per cent applies.
Insofar as the first $20,000 is concerned, it is better to leave the
money untouched and earning 3.5 per cent a year than to use it to pay
off an HDB loan that charges 2.6 per cent per annum.
As for amounts greater than $20,000, one doesn't lose much either
since the difference between interest payable on an HDB loan and
earned for money kept in the OA is a mere 0.1 percentage point (2.6
per cent - 2.5 per cent).
Secondly, keeping substantial savings in the OA can be an important
buffer to cope with a temporary loss of income.
The sum of $100,000 is equivalent to five years' worth of monthly
repayments. So even if one or both persons who make up Couple Y were
to stop working for some reason or quit to start a family or take a
sabbatical, they can continue to service their loan entirely from
their OAs for about five years while looking for their next job.
Couple X, on the other hand, will have no such luxury. They will be
forced to tap their cash savings immediately in similar
circumstances.
Thirdly, having some spare savings in the OA opens up investment
opportunities and flexibility.
Bear in mind that the HDB loan at 2.6 per cent is really cheap money.
Last year, insurer Aviva offered an endowment plan called Big e that
paid up to 3.5 per cent in interest a year. The plan, which
guaranteed a return higher than 2.5 per cent, has since been
discontinued.
However, such opportunities that offer low-risk returns based on
positive interest differential (3.5 per cent - 2.6 per cent) can be
expected to surface from time to time.
For those with a higher risk appetite, there are also numerous CPF-
approved investments that have a track record of generating annual
returns in excess of 5 per cent over the mid to long term.
Although I used the HDB flat purchase as an example, the argument is
also valid for private property purchases, given the current low
interest rate environment.
Fourthly, if your flat is rented out, you can apply to the taxman to
offset your rental income with the interest paid on the loan. So the
bigger the loan amount, the higher will be the interest offset.
Finally, if all else fails and there is no reasonable opportunity to
earn a better return, there is always the option of using your OA
balance to pay down your housing debt at any time.
Bear in mind this option is irreversible. You can pay down a housing
loan but you cannot top it up.
Do note that if you take an HDB loan, you must 'invest' your excess
OA balance before your first appointment with the board.
That is because HDB will exhaust your OA for down payment - minus the
amount for stamp duty, legal fees and home protection insurance -
before granting you a loan.
In the earlier example, Couple Y would have to withdraw from their
OAs the sum of $100,000 - or an appropriate amount after taking into
account the 10 per cent down payment and ancillary charges - and put
it into a CPF-approved investment.
If the investment is meant to be a temporary one, choosing a low-
risk, low-return fund like DBS Enhanced Income Fund would be
appropriate.
After the first appointment, you may liquidate the investment and
return the proceeds to your OA.
Be aware that this 'round tripping' is not cost free as agent bank
fees and sales charges apply. These charges are nominal though.
To sum up, taking on a big housing debt is not necessarily a bad
thing. In certain circumstances, it may even be the prudent thing to
do.
Whether you choose to be Couple X or Couple Y, you must do your sums
and feel comfortable with the plan.
Er...what is confirmed list system?
Er...what is confirmed list system?
Aug 3, 2008
FINANCIAL QUOTIENT
Er...what is confirmed list system?
* Where do you see this?
In articles about property and Government announcements on the sale
of land.
* What does it mean?
It is a method of selling land that the Government employs.
Sites on the confirmed list are for outright sale, meaning they will
be tendered out on scheduled dates, regardless of whether developers
have indicated interest.
* Why is it important?
This is not a market-driven approach. But it allows the Government to
hasten the development of certain sites for planning and other
strategic reasons.
For instance, in its land sales programme for the second half of the
year, it offered a 3ha hotel site at Bukit Chermin Road under the
confirmed list.
The sale of the site, it said, is timed to coincide with the 2011
completion of Labrador Nature and Coastal Walk nearby. Together,
these developments will enhance the attractiveness of the area as a
premier leisure and recreation destination.
The Government also offered a site in Stamford Road comprising the
existing Capitol Theatre, Capitol Building, Stamford House and
Capitol Centre.
* So you want to use the term? Just say...
'The Stamford Road site with the conserved Capitol Theatre is on the
latest confirmed list. That means it should be sold soon. When it is
restored, the area will become more vibrant.'
Aug 3, 2008
FINANCIAL QUOTIENT
Er...what is confirmed list system?
* Where do you see this?
In articles about property and Government announcements on the sale
of land.
* What does it mean?
It is a method of selling land that the Government employs.
Sites on the confirmed list are for outright sale, meaning they will
be tendered out on scheduled dates, regardless of whether developers
have indicated interest.
* Why is it important?
This is not a market-driven approach. But it allows the Government to
hasten the development of certain sites for planning and other
strategic reasons.
For instance, in its land sales programme for the second half of the
year, it offered a 3ha hotel site at Bukit Chermin Road under the
confirmed list.
The sale of the site, it said, is timed to coincide with the 2011
completion of Labrador Nature and Coastal Walk nearby. Together,
these developments will enhance the attractiveness of the area as a
premier leisure and recreation destination.
The Government also offered a site in Stamford Road comprising the
existing Capitol Theatre, Capitol Building, Stamford House and
Capitol Centre.
* So you want to use the term? Just say...
'The Stamford Road site with the conserved Capitol Theatre is on the
latest confirmed list. That means it should be sold soon. When it is
restored, the area will become more vibrant.'
All about CPF for purchasing private properties
All about CPF for purchasing private properties
Central Provident Fund (CPF) usage in purchasing private properties in Singapore
Can I buy a private property using my CPF?
Yes. Under the Approved Residential Properties Scheme by the CPF Board, you can use your CPF savings for the following purposes:
1. Pay the purchase price of the property
2. Redeem a housing loan taken for the purchase of a residential property
3. Monthly installments of existing housing loan
4. Repay a housing loan taken for the purchase of land and the construction of a house on that land
5. Pay for stamp duty, valuation and legal fees on transfer or conveyance in the purchase or mortgage of a property
However, you cannot use your CPF savings for the deposit or down payment; monthly service and conservancy charges; property tax; renovations, and repair of your property.
How much CPF can I use to buy a private property?
You may use 100% of the existing savings in the Ordinary account, and 100% of your future monthly CPF contributions that are paid to your ordinary account.
When should I apply to the CPF Board if I intend to use my CPF to buy a private property?
You must do so as soon as possible because the CPF approval can take up to 3 weeks, and the Bank loan would only be released after the CPF has released the funds from your savings account.
My brother and I are buying a private property jointly, how much CPF can we use?
Immediate family members may jointly use up to 100% of their Ordinary Account balances to buy a property. However, the total amount (lump sum and monthly installments) cannot be more than the purchase price of the property.
What criteria must i fulfill to use my CPF to purchase private properties
The following conditions must be met when using your CPF savings for buying properties:
1. Leasehold properties bought cannot have less than 60 years left in the tenure.
2. Only immediate family members can combine their CPF savings to buy a property, and they can use up to 100 % of their Ordinary Accounts. However, the total amount (lump sum and monthly installments) withdrawn by all joint owners should not exceed the purchase price of the property.
3. The CPF Board must approve the sale of the property before the property is sold, mortgaged or transferred. After the sale of the property, all money withdrawn from your CPF account, must be returned to your CPF savings. The money return must include the principle sum withdrawn and the accumulated interest of the sum withdrawn.
4. There must be a lapse of 1 year from the date of the signing of the Sale & Purchase agreement before CPF members can re-use their refunded CPF savings and accrued interest. However, this rule does not apply to those who are upgrading from HDB flats to private properties.
Central Provident Fund (CPF) usage in purchasing private properties in Singapore
Can I buy a private property using my CPF?
Yes. Under the Approved Residential Properties Scheme by the CPF Board, you can use your CPF savings for the following purposes:
1. Pay the purchase price of the property
2. Redeem a housing loan taken for the purchase of a residential property
3. Monthly installments of existing housing loan
4. Repay a housing loan taken for the purchase of land and the construction of a house on that land
5. Pay for stamp duty, valuation and legal fees on transfer or conveyance in the purchase or mortgage of a property
However, you cannot use your CPF savings for the deposit or down payment; monthly service and conservancy charges; property tax; renovations, and repair of your property.
How much CPF can I use to buy a private property?
You may use 100% of the existing savings in the Ordinary account, and 100% of your future monthly CPF contributions that are paid to your ordinary account.
When should I apply to the CPF Board if I intend to use my CPF to buy a private property?
You must do so as soon as possible because the CPF approval can take up to 3 weeks, and the Bank loan would only be released after the CPF has released the funds from your savings account.
My brother and I are buying a private property jointly, how much CPF can we use?
Immediate family members may jointly use up to 100% of their Ordinary Account balances to buy a property. However, the total amount (lump sum and monthly installments) cannot be more than the purchase price of the property.
What criteria must i fulfill to use my CPF to purchase private properties
The following conditions must be met when using your CPF savings for buying properties:
1. Leasehold properties bought cannot have less than 60 years left in the tenure.
2. Only immediate family members can combine their CPF savings to buy a property, and they can use up to 100 % of their Ordinary Accounts. However, the total amount (lump sum and monthly installments) withdrawn by all joint owners should not exceed the purchase price of the property.
3. The CPF Board must approve the sale of the property before the property is sold, mortgaged or transferred. After the sale of the property, all money withdrawn from your CPF account, must be returned to your CPF savings. The money return must include the principle sum withdrawn and the accumulated interest of the sum withdrawn.
4. There must be a lapse of 1 year from the date of the signing of the Sale & Purchase agreement before CPF members can re-use their refunded CPF savings and accrued interest. However, this rule does not apply to those who are upgrading from HDB flats to private properties.
All about Tax Issues When Buying Singapore Property
All about Tax Issues When Buying Singapore Property
Tax issues when purchasing and investing in a Singapore property
What is property tax?
Property Tax is a tax on properties in Singapore. These include HDB flats, houses, apartments, factories, shops, offices and land. The amount of Property Tax payable per year is computed based on a percentage (tax rate) of the Annual Value of the property.
What is the property tax rate?
The tax rate for owner-occupied residential property is 4% of the annual value of the property and the tax rate for not owner-occupied residential property is 12% of the annual value of the property.
Foreigners who own landed properties have to pay a surcharge of 10% of the annual value.
Can I be granted the owner-occupied residential rate for all my properties if I reside in 3 different properties?
No. You can only be granted the owner-occupied rate for only 1 property.
Can I choose to have the owner-occupied residential rate of 4% if I own a HDB flat and a private apartment?
No. The owner-occupied residential rate can only be for your HDB flat. If you own 2 or more private properties, you can choose to have the owner-occupied residential rate for any of them.
What is the residential property tax rate for companies with ownership of the property?
Companies with ownership of the property is not owner-occupied residential property hence that tax rate is 12% even if the company maybe using the residential property as employees' lodging.
If the seller did not pay for the outstanding property tax after I had purachased his/her property, am I liable to pay for him/her?
The Inland Revenue Authority of Singaoire (IRAS) looks at the property and not the owner for property tax. Therefore you are liable to pay his/her property tax.
How do I know if the Seller has paid for the property tax?
You can ask your lawyer to request the seller to produce the receipt for property tax or the Confirmation Note issued by the Comptroller of Property Tax.
How do I find out the amount of tax for the property that I am buying?
You can request the Seller for his current property tax bill.
Tax issues when purchasing and investing in a Singapore property
What is property tax?
Property Tax is a tax on properties in Singapore. These include HDB flats, houses, apartments, factories, shops, offices and land. The amount of Property Tax payable per year is computed based on a percentage (tax rate) of the Annual Value of the property.
What is the property tax rate?
The tax rate for owner-occupied residential property is 4% of the annual value of the property and the tax rate for not owner-occupied residential property is 12% of the annual value of the property.
Foreigners who own landed properties have to pay a surcharge of 10% of the annual value.
Can I be granted the owner-occupied residential rate for all my properties if I reside in 3 different properties?
No. You can only be granted the owner-occupied rate for only 1 property.
Can I choose to have the owner-occupied residential rate of 4% if I own a HDB flat and a private apartment?
No. The owner-occupied residential rate can only be for your HDB flat. If you own 2 or more private properties, you can choose to have the owner-occupied residential rate for any of them.
What is the residential property tax rate for companies with ownership of the property?
Companies with ownership of the property is not owner-occupied residential property hence that tax rate is 12% even if the company maybe using the residential property as employees' lodging.
If the seller did not pay for the outstanding property tax after I had purachased his/her property, am I liable to pay for him/her?
The Inland Revenue Authority of Singaoire (IRAS) looks at the property and not the owner for property tax. Therefore you are liable to pay his/her property tax.
How do I know if the Seller has paid for the property tax?
You can ask your lawyer to request the seller to produce the receipt for property tax or the Confirmation Note issued by the Comptroller of Property Tax.
How do I find out the amount of tax for the property that I am buying?
You can request the Seller for his current property tax bill.
All about the Option to Purchase when buying properties in Singapore
All about the Option to Purchase when buying properties in Singapore
The Option To Purchase contract - Purchasing of private property in Singapore
What is Option to Purchase?
It is an irrevocable offer made by the seller to the buyer which prevents the seller from offering another buyer of the same property within the agreed time period (usually 14 days). To ensure that a contract is enforceable the buyer pays the Option Money to the seller.
When an Option to Purchase is presented, what should I do?
You should not rush to pay the Option money until you agree with all the terms on the contract. You should:
Consult a solicitor before taking any action
If you want any amendments to be made to the Option, you should ensure that the Seller does so before you pay for the Option
Make sure that any amendment is made with the Seller's consent, because the Seller is not legally obligated to make any amendments.
Who prepares the Option to Purchase?
It is usually prepared by the Seller's solicitor. Some real estate agencies also provide their clients with the agency's Option to Purchase documents.
What is "exercising" the Option to Purchase?
It means that the Buyer is complying with all the terms in of the Option made by the Seller for selling his/her property. A binding contract is created, and the Buyer will also pay for the next 4% of the purchase price of the property.
How much Option money should I provide?
1% is the usual practice for the purchase of private properties. The standard option money for HDB flats is up to S$5,000.
What happens if I did not exercise the Option which I had paid before/on the agreed due date?
If you do not exercise the Option within the validity period stated, the Option would expire and your seller is entitled to forfeit the option money and sell the property to another buyer.
What are the main terms to look out for to make the Option valid?
The key items are:
the description of the property and the price
the validity period within which the Buyer must exercise the option in order to purchase the property.
the names of the parties involved in the transaction
Will I be able to get my deposit back, if the Seller did not complete the contract?
Yes.
The completion of the property that I am purchasing is due before my return to Singapore? What should I do?All you need to do is to appoint somebody to sign these documents on your behalf and/or do all the things that are necessary to complete your purchase. You have to do this by signing a legal document called a 'Power of Attorney'.
The Option To Purchase contract - Purchasing of private property in Singapore
What is Option to Purchase?
It is an irrevocable offer made by the seller to the buyer which prevents the seller from offering another buyer of the same property within the agreed time period (usually 14 days). To ensure that a contract is enforceable the buyer pays the Option Money to the seller.
When an Option to Purchase is presented, what should I do?
You should not rush to pay the Option money until you agree with all the terms on the contract. You should:
Consult a solicitor before taking any action
If you want any amendments to be made to the Option, you should ensure that the Seller does so before you pay for the Option
Make sure that any amendment is made with the Seller's consent, because the Seller is not legally obligated to make any amendments.
Who prepares the Option to Purchase?
It is usually prepared by the Seller's solicitor. Some real estate agencies also provide their clients with the agency's Option to Purchase documents.
What is "exercising" the Option to Purchase?
It means that the Buyer is complying with all the terms in of the Option made by the Seller for selling his/her property. A binding contract is created, and the Buyer will also pay for the next 4% of the purchase price of the property.
How much Option money should I provide?
1% is the usual practice for the purchase of private properties. The standard option money for HDB flats is up to S$5,000.
What happens if I did not exercise the Option which I had paid before/on the agreed due date?
If you do not exercise the Option within the validity period stated, the Option would expire and your seller is entitled to forfeit the option money and sell the property to another buyer.
What are the main terms to look out for to make the Option valid?
The key items are:
the description of the property and the price
the validity period within which the Buyer must exercise the option in order to purchase the property.
the names of the parties involved in the transaction
Will I be able to get my deposit back, if the Seller did not complete the contract?
Yes.
The completion of the property that I am purchasing is due before my return to Singapore? What should I do?All you need to do is to appoint somebody to sign these documents on your behalf and/or do all the things that are necessary to complete your purchase. You have to do this by signing a legal document called a 'Power of Attorney'.
All About Home Insurance When Buying Property In Singapore
All About Home Insurance When Buying Property In Singapore
Home Insurance policies in Singapore
Is home insurance policy compulsory?
If you are taking out a mortgage with a bank, then you must have the fire insurance policy for your home. Some banks are offering this policy free for the first year if you take out a mortgage with them.
What are the types of home insurance policies available for private properties?
There are two main types of policies: a standard fire policy that covers losses caused by fire, lightning and explosion; and a home insurance policy that covers destruction to a building, home contents and any renovations carried out.
Which policy should I buy?
The decision to buy an insurance policy for your home is similar to buying a life insurance policy. You have to consider your budget, and your exposure to risks in your daily activities. If your estate is prone to vandalism, burglary then you should include these items as contents to insure against.
What are covered under the home insurance policy?
In addition to the damages caused by fire, explosions and lightening, the home insurance policy also covers against fire, flood, burglary, vandalism and damage by vehicles, aircraft and other aerial devices.
What are covered under the fire insurance policies?
They cover damages caused by fire, explosions and lightning.
What should I look for in the policies?
Items covered : Does the policy cover personal accident and liability, loss or damage to valuables outside the home premises, in addition to the building, renovation and home contents.
First loss or average clause : Does the policy cover the full or only a percentage of the loss if you have under-insured your property? First Loss Policies are policies that owners don't have to fully declare the total value of the contents and building but they would be paid for risks such as fire, theft, busting of pipes etc. Average Clause is a Clause that states that owners have to fully declare the total value of the home contents and building to be paid the full loss in the event of a claim. If not, only a percentage of the loss would be paid.
Definition of terms : How are the risks defined in the policy? This is because different insurance companies define risks differently would pay different amounts in the event of a claim.
Excess clause : There is a minimum amount you must bear for yourself for every loss except in the event of fire. As the amount can be from $50 to $200 for each item, it would be advisable for you clarify with your insurance agent.
How do I make a claim for my insurance?
To make a claim, you have to provide the following documents:
as a police report in the event of a break-in;
receipts if items of a certain value are lost or damaged, and
invoices of renovations done on the property
Should I over-insure or under-insure?
Generally, it would be better to over-insure than under-insure. This is because some insurance companies penalize owners for under-insuring. Moreover, it makes sense to over-insure by about 5-20% of the potential costs reconstruction as one tends to add new the contents to a home.
How much should I spend on insuring my home?
You should use the potential cost of reconstructing your home as a guideline. The cost of reconstruction should include the cost for renovations and the home contents. However, do bear in mind that the less you insure, the less you can claim if a mishap occurs.
Do I need to review my policies annually?
Yes. You should try to review the policies annually to accommodate any changes to the contents in your home, or renovations to the property.
Home Insurance policies in Singapore
Is home insurance policy compulsory?
If you are taking out a mortgage with a bank, then you must have the fire insurance policy for your home. Some banks are offering this policy free for the first year if you take out a mortgage with them.
What are the types of home insurance policies available for private properties?
There are two main types of policies: a standard fire policy that covers losses caused by fire, lightning and explosion; and a home insurance policy that covers destruction to a building, home contents and any renovations carried out.
Which policy should I buy?
The decision to buy an insurance policy for your home is similar to buying a life insurance policy. You have to consider your budget, and your exposure to risks in your daily activities. If your estate is prone to vandalism, burglary then you should include these items as contents to insure against.
What are covered under the home insurance policy?
In addition to the damages caused by fire, explosions and lightening, the home insurance policy also covers against fire, flood, burglary, vandalism and damage by vehicles, aircraft and other aerial devices.
What are covered under the fire insurance policies?
They cover damages caused by fire, explosions and lightning.
What should I look for in the policies?
Items covered : Does the policy cover personal accident and liability, loss or damage to valuables outside the home premises, in addition to the building, renovation and home contents.
First loss or average clause : Does the policy cover the full or only a percentage of the loss if you have under-insured your property? First Loss Policies are policies that owners don't have to fully declare the total value of the contents and building but they would be paid for risks such as fire, theft, busting of pipes etc. Average Clause is a Clause that states that owners have to fully declare the total value of the home contents and building to be paid the full loss in the event of a claim. If not, only a percentage of the loss would be paid.
Definition of terms : How are the risks defined in the policy? This is because different insurance companies define risks differently would pay different amounts in the event of a claim.
Excess clause : There is a minimum amount you must bear for yourself for every loss except in the event of fire. As the amount can be from $50 to $200 for each item, it would be advisable for you clarify with your insurance agent.
How do I make a claim for my insurance?
To make a claim, you have to provide the following documents:
as a police report in the event of a break-in;
receipts if items of a certain value are lost or damaged, and
invoices of renovations done on the property
Should I over-insure or under-insure?
Generally, it would be better to over-insure than under-insure. This is because some insurance companies penalize owners for under-insuring. Moreover, it makes sense to over-insure by about 5-20% of the potential costs reconstruction as one tends to add new the contents to a home.
How much should I spend on insuring my home?
You should use the potential cost of reconstructing your home as a guideline. The cost of reconstruction should include the cost for renovations and the home contents. However, do bear in mind that the less you insure, the less you can claim if a mishap occurs.
Do I need to review my policies annually?
Yes. You should try to review the policies annually to accommodate any changes to the contents in your home, or renovations to the property.
All About Home Financing and Loans in Singapore
All About Home Financing and Loans in Singapore
Home Financing Bank Loan and Mortgages in Singapore
Do I quailfy for a Singapore dollar housing loan if I am a foreigner?
Unless you are a Permanent Resident, you are entitled to one Singapore dollar housing loan.
What are the ways for me to finance a property purchase?
There are several ways for you to finance your purchases. Basically, you can either use your CPF and/or loan from commercial banks/finance companies. Often, a combination of different types of loans and savings from your CPF is used. From 19 July 2005, the maximum housing loan for private properties and HDB flats should not exceed 90% of the purchase price or valuation of the property, whichever is lower.
What are the key factors that will affect my housing loan application?
Since the main concern for banks would be whether the borrower would have money coming in the future date to repay a loan, your bank will usually examine the current market value of the property (if any); your income; your employment history; your assets and liabilities; the total equity which you are committing to the property, and your age.
What are the charges in taking a bank loan?
Each Bank has its own set of charges, but generally the following applies:
Processing fee: for processing a loan application
Pre-payment fee: for repaying part of or the full loan ahead of schedule
Third-part charges: for the valuation fee, legal fee (including the fee for the lawyer to act behalf of the bank), stamp duty, and insurance
Others: Some banks also charge for making changes to the original loan application or for canceling a loan offer after you have accepted it.
Is there any other loan that will help me to pay for the down payment of a property?
Yes, you may use a bridging loan, which is a short-term loan designed to tide the borrower over a period when he needs cash. However, because bridging loans are usually available for those taking up a housing loan from the same bank. Some people also use this type of loan while waiting for the release of his CPF funds.
What are the documents I need to produce a housing loan?
Most financial institutions require the following items:
Latest CPF statement for CPF withdrawn under the Residential Property Scheme (for refinancing loans)
Tenancy agreement (if any)
Latest 6 months to 2 years housing loan statements from current financier (for refinancing loans)
Latest income tax Notice of Assessment/ last 3 moths pay slips or the Notice of Tax Assessment for those self-employed
Latest CPF statement of account
Option to purchase (if any)
When should I repay the full bridging loan?
You have to do so upon completing the transaction of purchasing the property (usually 3 months), subject to a maximum of 6 months.
How is the bridging loan interest calculated?
It is calculated on a day to day basis and is payable every month.
Is there any type of loan available for me to rebuild my bungalow?
You can apply for a reconstruction loan.
Can I use an overdraft to rebuild my bungalow?
You can use an overdraft to rebuild your property, but a reconstruction loan has a lower interest rate, and you only need to pay for the interest rates on the amount you have used.
Should I refinance my property with another bank with much lower interest rates?
It all depends. This is because you must take into account the pre-payment penalties involved in redeeming your mortgage earlier than the maturity date. Therefore, you have to compare the monthly installments offered by each bank and include the penalties for terminating the original loan. Also, it would be not be sensible to refinance at the end of a loan period since the interest gain in the new bank would be minimal.
Can I redeem my mortgage?
It may be redeemed any time, however, but you may have to pay a fee for early redemption. The fee is known as the pre-payment penalty, and is based on the mortgage loan amount or outstanding amount.
How can I redeem my mortgage?
You may do so by giving a notice of redemption to your Bank. Your lawyer will prepare a "total discharge of mortgage". He will then arrange with the Bank's lawyer to execute the Total Discharge of Mortgage, and register it at the Registry of Land Titles. You then pay off the mortgage loan in exchange for the signed "total discharge of mortgage" or "deed of reassignment".
What happens if I default on my mortgage loan?
The following are the actions the Bank can take:
Sell your property to recover the money lent to you;
Appoint a receiver, that is to appoint a person to take charge of the property if the bank wishes to obtain rents from your property;
Insure your property against fire and other fortuitous accidents, and
Refuse to allow you to redeem the mortgage of another property if you have mortgaged more than one property.
Can I sue the Bank if my property which I defaulted on the mortgage loan is sold at a very low price?
Unless you can prove that the Bank has acted carelessly or recklessly in selling your property at a much lower price that what the market is willing to pay, the Court will not interfere.
After the Bank sells my house, will I be entitled to any money?
Yes, provided that there is any left after the Bank recovers the money lent to you, including all other expenses in selling your house.
If the bank's lawyers delayed their preparation of a mortgage which consequently required me to pay interest to the Seller, what should I do?
Unfortunately you will not have any course of action against the bank since the bank does not bind itself to you to provide the loan before the completion date. The bank's lawyers also do not represent you, therefore you will also have no recourse against them.
While awaiting for my Permanent Resident pass, I am buying a house with my sister who is a Singaporean. Will we be able to obtain a Singapore dollar loan from banks?
Each bank has its own loan criteria. Generally, banks are able to grant you a loan for Singapore citizens, if your immediate family members meet their required age and income.
If I am a Permanent Resident getting a home loan, how can I obtain a home loan?
To obtain a Singapore dollar loan, you have to provide:
a written undertaking that you do not have outstanding housing loans from any other financial institutions in Singapore
you are buying the property for owner-occupation
Home Financing Bank Loan and Mortgages in Singapore
Do I quailfy for a Singapore dollar housing loan if I am a foreigner?
Unless you are a Permanent Resident, you are entitled to one Singapore dollar housing loan.
What are the ways for me to finance a property purchase?
There are several ways for you to finance your purchases. Basically, you can either use your CPF and/or loan from commercial banks/finance companies. Often, a combination of different types of loans and savings from your CPF is used. From 19 July 2005, the maximum housing loan for private properties and HDB flats should not exceed 90% of the purchase price or valuation of the property, whichever is lower.
What are the key factors that will affect my housing loan application?
Since the main concern for banks would be whether the borrower would have money coming in the future date to repay a loan, your bank will usually examine the current market value of the property (if any); your income; your employment history; your assets and liabilities; the total equity which you are committing to the property, and your age.
What are the charges in taking a bank loan?
Each Bank has its own set of charges, but generally the following applies:
Processing fee: for processing a loan application
Pre-payment fee: for repaying part of or the full loan ahead of schedule
Third-part charges: for the valuation fee, legal fee (including the fee for the lawyer to act behalf of the bank), stamp duty, and insurance
Others: Some banks also charge for making changes to the original loan application or for canceling a loan offer after you have accepted it.
Is there any other loan that will help me to pay for the down payment of a property?
Yes, you may use a bridging loan, which is a short-term loan designed to tide the borrower over a period when he needs cash. However, because bridging loans are usually available for those taking up a housing loan from the same bank. Some people also use this type of loan while waiting for the release of his CPF funds.
What are the documents I need to produce a housing loan?
Most financial institutions require the following items:
Latest CPF statement for CPF withdrawn under the Residential Property Scheme (for refinancing loans)
Tenancy agreement (if any)
Latest 6 months to 2 years housing loan statements from current financier (for refinancing loans)
Latest income tax Notice of Assessment/ last 3 moths pay slips or the Notice of Tax Assessment for those self-employed
Latest CPF statement of account
Option to purchase (if any)
When should I repay the full bridging loan?
You have to do so upon completing the transaction of purchasing the property (usually 3 months), subject to a maximum of 6 months.
How is the bridging loan interest calculated?
It is calculated on a day to day basis and is payable every month.
Is there any type of loan available for me to rebuild my bungalow?
You can apply for a reconstruction loan.
Can I use an overdraft to rebuild my bungalow?
You can use an overdraft to rebuild your property, but a reconstruction loan has a lower interest rate, and you only need to pay for the interest rates on the amount you have used.
Should I refinance my property with another bank with much lower interest rates?
It all depends. This is because you must take into account the pre-payment penalties involved in redeeming your mortgage earlier than the maturity date. Therefore, you have to compare the monthly installments offered by each bank and include the penalties for terminating the original loan. Also, it would be not be sensible to refinance at the end of a loan period since the interest gain in the new bank would be minimal.
Can I redeem my mortgage?
It may be redeemed any time, however, but you may have to pay a fee for early redemption. The fee is known as the pre-payment penalty, and is based on the mortgage loan amount or outstanding amount.
How can I redeem my mortgage?
You may do so by giving a notice of redemption to your Bank. Your lawyer will prepare a "total discharge of mortgage". He will then arrange with the Bank's lawyer to execute the Total Discharge of Mortgage, and register it at the Registry of Land Titles. You then pay off the mortgage loan in exchange for the signed "total discharge of mortgage" or "deed of reassignment".
What happens if I default on my mortgage loan?
The following are the actions the Bank can take:
Sell your property to recover the money lent to you;
Appoint a receiver, that is to appoint a person to take charge of the property if the bank wishes to obtain rents from your property;
Insure your property against fire and other fortuitous accidents, and
Refuse to allow you to redeem the mortgage of another property if you have mortgaged more than one property.
Can I sue the Bank if my property which I defaulted on the mortgage loan is sold at a very low price?
Unless you can prove that the Bank has acted carelessly or recklessly in selling your property at a much lower price that what the market is willing to pay, the Court will not interfere.
After the Bank sells my house, will I be entitled to any money?
Yes, provided that there is any left after the Bank recovers the money lent to you, including all other expenses in selling your house.
If the bank's lawyers delayed their preparation of a mortgage which consequently required me to pay interest to the Seller, what should I do?
Unfortunately you will not have any course of action against the bank since the bank does not bind itself to you to provide the loan before the completion date. The bank's lawyers also do not represent you, therefore you will also have no recourse against them.
While awaiting for my Permanent Resident pass, I am buying a house with my sister who is a Singaporean. Will we be able to obtain a Singapore dollar loan from banks?
Each bank has its own loan criteria. Generally, banks are able to grant you a loan for Singapore citizens, if your immediate family members meet their required age and income.
If I am a Permanent Resident getting a home loan, how can I obtain a home loan?
To obtain a Singapore dollar loan, you have to provide:
a written undertaking that you do not have outstanding housing loans from any other financial institutions in Singapore
you are buying the property for owner-occupation
All About the Role of a Lawyer in Property Transactions
All About the Role of a Lawyer in Property Transactions
Role of a conveyancing lawyer for property transactions in Singapore
What is my lawyer's responsibility when I purchase a property?
The duties of your lawyer are the following:
* BEFORE YOU PAY THE OPTION MONEY AND SIGN THE OPTION TO PURCHASE
Title Search : to verify and confirm the property's ownership before advising you whether or not to pay or sign the option to purchase
Bankruptcy or winding-up & judicial management search : to check that the seller is not in the bankruptcy list or winding up judicial management list
Option or Sale Contract Check : to make sure that the terms of the contract are fair and agreeable to you
* AFTER YOU SIGN THE OPTION TO PURCHASE
Caveat Lodge : to make sure that another person cannot make any deals with your property.
Official enquiry on the Title with the seller's lawyer : a detailed check is made on the Title of your property to ensure that it is in order.
Send official enquiries to various government departments : to find out whether there is any legal obstacle on the property.
Transfer documentation : prepare the transfer in your favour, send them to the seller's lawyer for approval, and then engross the document.
Preparing or vetting the mortgage loan and/or CPF Board documentation : contact your banker & the CPF Board for the necessary documents .
Notify the Management Corporation : (if a strata titled property is purchased) the MC will be notified, and particulars of the maintenance and service charges obtained
Completion Account : inform you that you have to get ready the necessary payments.
Completion : after making a final search to confirm that that the Title is free from any encumbrances, your lawyer will arrange and meet all parties involved to exchange the documents, payments and keys.
Can I change my lawyer before the transaction is completed?
Yes, the outgoing lawyer has to hand over to the newly appointed lawyer all the relevant papers. However, you will have to pay the outgoing lawyer for any work already done. If not, the outgoing lawyer may exercise his right of possession and thus delay the handing over process.
Can I engage the same lawyer as the seller?
Yes. There is no law in Singapore that prohibits a lawyer from acting for both the vendor (except if he is a developer) and purchaser concurrently.
Are there benefits from getting my Buyer to use the same lawyer as I for the sale transaction?
You will only need to pay ¼ of the scale costs instead of ½ the scale costs [the legal fees payable to Lawyers for property transactions, because the fees are fixed by law to a scale] if the both of you use the same lawyer. However, this is not advisable since a conflict of interest could arise.
Can you estimate the amount of money I have to fork out for legal fees?
The legal fees are currently based on a scale which is dependent on the selling price of the property. In general your legal fees should not exceed 1% of the selling price of your property.
Find out more on legal cost - pdf file - download Adobe® Acrobat Reader
Can my lawyer also act as my estate agent and receive a commission on the transaction?
No, he may not do so.
Can my lawyer give a discount for my legal fees?
Strictly speaking - no. Giving discounts may be seen as a marketing gimmick to attract business unfairly.
Is my lawyer entitled to charge additional fees on top of the prescribed scale costs?
Yes, your lawyer may charge you an additional fee for situations that require "special exertion" and has to be executed within an exceptionally short time.
My buyer's lawyer requested for my lawyer to hold a part of my sale proceeds as stakeholder after completing the sale transaction of my property. Should I agree to this? Why?
This request from your buyer's lawyer is fairly common because you are liable to pay for all property tax up to the very day of the sale completion. To ensure that your buyer doesn't end up paying your property tax for you, you should agree to the request.
Role of a conveyancing lawyer for property transactions in Singapore
What is my lawyer's responsibility when I purchase a property?
The duties of your lawyer are the following:
* BEFORE YOU PAY THE OPTION MONEY AND SIGN THE OPTION TO PURCHASE
Title Search : to verify and confirm the property's ownership before advising you whether or not to pay or sign the option to purchase
Bankruptcy or winding-up & judicial management search : to check that the seller is not in the bankruptcy list or winding up judicial management list
Option or Sale Contract Check : to make sure that the terms of the contract are fair and agreeable to you
* AFTER YOU SIGN THE OPTION TO PURCHASE
Caveat Lodge : to make sure that another person cannot make any deals with your property.
Official enquiry on the Title with the seller's lawyer : a detailed check is made on the Title of your property to ensure that it is in order.
Send official enquiries to various government departments : to find out whether there is any legal obstacle on the property.
Transfer documentation : prepare the transfer in your favour, send them to the seller's lawyer for approval, and then engross the document.
Preparing or vetting the mortgage loan and/or CPF Board documentation : contact your banker & the CPF Board for the necessary documents .
Notify the Management Corporation : (if a strata titled property is purchased) the MC will be notified, and particulars of the maintenance and service charges obtained
Completion Account : inform you that you have to get ready the necessary payments.
Completion : after making a final search to confirm that that the Title is free from any encumbrances, your lawyer will arrange and meet all parties involved to exchange the documents, payments and keys.
Can I change my lawyer before the transaction is completed?
Yes, the outgoing lawyer has to hand over to the newly appointed lawyer all the relevant papers. However, you will have to pay the outgoing lawyer for any work already done. If not, the outgoing lawyer may exercise his right of possession and thus delay the handing over process.
Can I engage the same lawyer as the seller?
Yes. There is no law in Singapore that prohibits a lawyer from acting for both the vendor (except if he is a developer) and purchaser concurrently.
Are there benefits from getting my Buyer to use the same lawyer as I for the sale transaction?
You will only need to pay ¼ of the scale costs instead of ½ the scale costs [the legal fees payable to Lawyers for property transactions, because the fees are fixed by law to a scale] if the both of you use the same lawyer. However, this is not advisable since a conflict of interest could arise.
Can you estimate the amount of money I have to fork out for legal fees?
The legal fees are currently based on a scale which is dependent on the selling price of the property. In general your legal fees should not exceed 1% of the selling price of your property.
Find out more on legal cost - pdf file - download Adobe® Acrobat Reader
Can my lawyer also act as my estate agent and receive a commission on the transaction?
No, he may not do so.
Can my lawyer give a discount for my legal fees?
Strictly speaking - no. Giving discounts may be seen as a marketing gimmick to attract business unfairly.
Is my lawyer entitled to charge additional fees on top of the prescribed scale costs?
Yes, your lawyer may charge you an additional fee for situations that require "special exertion" and has to be executed within an exceptionally short time.
My buyer's lawyer requested for my lawyer to hold a part of my sale proceeds as stakeholder after completing the sale transaction of my property. Should I agree to this? Why?
This request from your buyer's lawyer is fairly common because you are liable to pay for all property tax up to the very day of the sale completion. To ensure that your buyer doesn't end up paying your property tax for you, you should agree to the request.
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