For every young individual, owning their dream house is one of their major goals and it is an investment they should consider early on. To have one’s dream home is a testament to how far they have come since they started working and it will be a step closer for them to get settled in the future.
Unfortunately, purchasing a house in Singapore can be quite difficult considering the high cost of living in the country. Prospective buyers would also have to consider the location of the house, how large it is, what type of property it is, the budget they have, and their current financial standing.
When they do reach the part about their financial standing, Singaporeans would then think “When should I invest and make a downpayment on my dream home?” The answer to this question varies per person; however, experts say it is better to purchase the home after one gets married because they have a higher chance of getting better home loan deals.
If you will be seeking out a personal loan from a moneylender to support your funds to get that dream house, here are three great tips that would help you make your home loan downpayment.
Save Up and Plan Ahead
For young individuals in Singapore who are starting out on their own, it is very difficult to save up money considering how expensive things are in the country. For some who do not have any debt liabilities and family expenses to consider, they would most likely spend their paycheck in one go without considering to save some of it for emergencies and major goals.
It is ideal for those who wish to buy their own homes to maximize their bank account’s potential and regularly save up because your bank account can showcase your trustworthiness to moneylenders once you apply for a loan.
You should also be clear of any debt before applying for a personal loan because any debt can reflect on your credit history. If you have a clear credit history free from credit and bank accounts regularly deposited on, you will have a better chance in getting a good home loan program and a repayment scheme that you can definitely manage.
Any credit which you have not paid, paid late or defaulted, as well as any closed bank accounts, can be a negative mark in your loan application. If you have a lot of loans still active, it may also prevent you from getting a loan since moneylenders may think you are borrowing too much money.
Pick the Right Downpayment Rate that Matches Your Capability
Just like other personal loans, the value of the home loan that can be granted to you depends on your financial status. One’s financial status is determined by various factors and it must pass the scrutiny of the moneylender you are planning to borrow from. For Singaporeans, their CPF Ordinary Account savings and their own savings from other banks can easily cover their home loan downpayments easily.
The rate for house loan downpayments varies depending on what you purchased: whether you purchased an HDB or a private property.
Here’s a quick guide to give you an idea on how it is computed:
- For HDB loans – 10%
- If you do not have any outstanding loans and you plan to loan for an HDB flat or private property for less than 25 years loan term – 20%
- If you do not have any outstanding loans and you plan to loan for an HDB flat or private property for more than 25 years loan term – 40%
- If you have one outstanding loan and intend to loan for an HDB flat and pay it in less than 25 years – 50%, if it is private property, it is 70%
- If you have one outstanding loan and intend to loan for an HDB flat and pay it for more than 25 years – 60%, if it is private property, it is 80%.
It is important to take note that moneylenders do offer flexible loan programs in case the normal loan programs do not match your current financial capacity. However, it is also important to remember that your circumstance must be valid because moneylenders may deny your request. You must also ask about it first because once you sign with the moneylender, you will not be able to modify your loan’s terms easily
Once your loan repayments start and your expenses increases, it will be difficult to save up some money especially if you tend to spend a lot of money on the side. Further financial problems may also happen if your salary is just enough to cover everything.
Fortunately, Singaporean banks have the perfect solution to your problem as they have programs like “Save As You Earn”, which would cut a fix portion of your salary and put it on your savings account.
You can also check into share building plans offered by banks if you want to invest money and get good results. The Dollar Cost Averaging program is good if you are not that familiar with investments, but still get a good profit without too many risks. You will be able to save and pay off your home downpayments easily. Stock markets usually lead the real estate market by 3 to 7 months, you will be able to purchase your dream house for a cheaper price if you will be able to manage your stocks and sell them at a higher value.
While we are young and earning, it is best that we consider the things we will need in the future and start investing in them. If we want to own our dream home, we must do our research before we take in a personal loan or two just to acquire it.
Remember: If we rushed it, we might bite off more than what we can chew. Be an informed borrower and prepare wisely. Once you do, your dream house would no longer be just a dream.