Upfront and Monthly Costs
Costs are a big part of buying a home. MoneySense says your upfront costs alone would include the following:
- The option fee
- Your initial deposit on the property. This is also more commonly known as down payment. Payment in cash and from your CPF savings is largely affected by the market price as well as type of property you buy.
- Stamp duty on the sale transaction
- Legal costs like the stamp fees
- Fees for the real estate agent or a commission for the sales person, if you used either services
- Other miscellaneous expenses need to be factored in too
After the upfront costs, you have your monthly payments which should include the following:
- Your utility bills
- Your housing loan
- Fire insurance
- Term insurance that reduces your mortgage
- Management fee
- Property taxes
One of the many costs that have home owners stumped is stamp duty. What is it? In some countries like Scotland, it’s known as a land and building transaction tax, informs Money Saving Expert. However, in Singapore, stamp duty specifically refers to the tax put on documents involving any immovable asset or property. This also includes stocks and shares. Some of the documents include the lease or tenancy agreement for properties as well as the transfer documents for properties.
When it comes to property mortgages, you’ll need to sign documents when you get a loan from a bank or lending institution. The stamp duty, in this case, is the fee you pay based on the loan amount. Don’t know how to calculate for yours? No worries. With a stamp duty calculator from PropertyGuru Singapore, you can figure out how much money you need to spend on those dues.
Given all the costs involved, you’ll need to be wise and careful about spending your money. Here are some of the best ways you can do that:
- Don’t overspend. This tip is a mainstay on many financial checklists for a reason: it works. By constantly telling yourself not to overspend, you get to save a lot on time, trouble and expense. How? Some mortgages last for as long as 30 years. Imagine paying for a mortgage for that long. If not, for at least 10 or 20 years. When you overspend on a home, you’re not just overspending for a month. You’re overspending for the entire life of your loan. Imagine overspending for 20 years just to keep up with your mortgage payments. If you can’t imagine how the kind of constraints, burden and limitations that would put on your financial resources, you need to start thinking about them now.
- Be practical. It’s a tip that goes well together with the first one. Most home owners don’t think it’s overspending when they believe they’re spending it on their dream home. But your dream home shouldn’t put you in debt for years. So be practical about the property you’re looking for. No matter how wonderful it seems, if it isn’t within your budget, suck it up and move on.
- Decide with your head, not heart. Some home owners would rather listen to that voice telling them to “go for it!” But buying a home simply because you fell in love with it at first sight isn’t the best way to acquire property. So don’t let emotions rule your head and get in the way of your decisions. If the property appeals to you, take the time to check if it’s a fit for all your needs. Is it the right size for you and your family? Too cramped or roomy? What about the location? Does it allow you and your loved ones to get to where they’re going fast and convenient? If it’s a fit for all those and it matches your budget, then lucky you. However, if it’s got a hefty price tag, is a bit too far from where you work or where the kids go to school, or just isn’t the right size for you and your family, then let it go. There are plenty of other homes you can choose from.
- Don’t rush. They say good things come to those who wait and in this case, it might be true. For instance, given the weak residential property market in Singapore these days, it’s likely that property prices are going to take a sharp dive. Bide your time. If there’s a particular property you like that’s been on the market for months, try your best to wait it out instead of offering for the asking price, first thing. That way, when it does drop its price, you’ll be there waiting to pounce and make the most of that opportunity.
- Use an agent. Some skip this, thinking they can save on the fees. But just consider the advantages to having one. An agent knows all the right people in the industry. S/he can get you in touch with owners, realtors, sellers, buyers and other professionals in the field. Plus, she knows how it all works so you have someone to handily guide you through every step of the process. From filing paperwork to getting it signed, your agent’s help would be invaluable.
- Don’t forget about hiring a lawyer. A lawyer should help you get the legal documents drafted and sent over. You’ll also need to sign a lot of documents so having legal representation with you makes it easy to check and review the files for legal minefields or loopholes. You can also ask your lawyer to help you negotiate for better terms and conditions by writing your requests down in legal form and including it in contract for the approval of the other party. With a lawyer, you save time, trouble and money in the process.
It can be tough to monitor the costs and stay on top of all the necessary details when you buy a home. But hopefully, these tips would remind you what things to keep, front and center.