House purchase can be a huge undertaking, which will drain the savings of most. For instance, the median price of a 4-room flat in Singapore ranged from $357,000 – $667500 last quarter, depending on location. In contrast, the median Singaporean household monthly income was $8290. Generally speaking, the purchase of one’s first property will require a down payment of 20%, of which a minimum of 5% must be in cash and the rest can be paid in CPF savings. However, if one is purchasing a HDB flat with a HDB loan/without a loan at all, one just needs to pay a down payment of 10%, which can be done entirely with one’s CPF savings.
Mortgage
A mortgage is essentially a loan which is secured upon the borrower’s property. This gives the lender (usually a bank or the HDB) an interest in the property, and provides it the right to repossess the property should the borrower be unable to repay the loan. These loans will be usually be paid through monthly instalments over a period of up to 30 years. The mortgage must be registered with the SLA as an encumbrance on the title. Before signing any mortgage agreement, do seek legal advice to ensure that the terms are equitable and not misleading.
CPF
Singaporean citizens and PRs who have CPF savings can use it to help finance their purchase. For one’s first property, one can use up to 100% of one’s valuation limits (the lower of the purchase price and valuation at time of purchase) or even up to 120% of the valuation limit (known as the withdrawal limit) if half the prevailing Minimum Sum is met, if one finances it with a bank loan. The limit of CPF that can be used is also dependent on the remaining lease of the property. For real estate with leases of less than 30 years, CPF may not be used to finance the purchase.
