So how much money does it take for you to start on your property investment journey?
It seems to alot of people that buying and renting out a property is a sure way to earn big bucks.
But in reality, is it so simple? How much cash do you really need to set aside to be able to buy one?
It boils down to mainly 2 different scenarios
- New buyer, wants to buy a new EC or Condo
- Own a property, wants to buy another EC or Condo
Take an example
You are interested in buying bedok residences, agreed price to purchase 1,200,000, pretty comparable to alot of condo prices as well. How much do you need?
Scenario 1
Total Cost
Assuming Singapore Citizen
Lowest case cash upfront
Cash needed = 12,000+48,000+500= $60,500
CPF needed = 180,000+30,600+500+2,500 = $ 213,600
Assuming PR
Lowest case cash upfront
Cash needed = 12,000+48,000+500= $60,500
CPF needed = 180,000+30,600+500+2,500+ (ABSD 5% of 1200000) =213,600 +60000 =$273,600
Assuming Foreigner
Lowest case cash upfront
Cash needed = 12,000+48,000+500= $60,500
CPF needed = 180,000+30,600+500+2,500+ (ABSD 10% of 1200000) =213,600 +120000 =$333,600
Note that you are borrowing 80% of the purchase price, so once you start paying the mortgage, the accrued interest will be higher than if you were to borrow lesser.
Scenario 2
In this scenario. there are 2 ways owning a second property with significantly different cash outlay.
1) Continue paying your mortgage loan on your first property
Note: For PR, there is no way you can hold on to your HDB while purchasing a second property, but if your first property is a condo then yes, you may own another
Cooling Measures to take Note!
TDSR - Total debt servicing ratio. The total TDSR cannot exceed 60%, meaning all your debt currently payable per month cannot exceed 60% of your monthly income. Debt inclusive of your mortgage, your credit cards and whatever debts you have taken on. This means that you may take up a lesser loan than required, your upfront cash may be higher.
LTV- Loan to value ratio. This ratio is limited to 50% if you are taking own a second loan while still having another existing loan on hand. It means for a 1.2m dollars property, at best the bank lends you 600k. The rest has to be fork out using CPF and Cash. If the loan tenure is more than 30 years or exceeds past the age of 65, then LTV is limited to 30%
CPF minimum Sum - This currently is stated as of Jan 17, the amount is 83000 has to be set aside before CPF can be used to purchase your second property.
In this scenario. there are 2 ways owning a second property with significantly different cash outlay.
1) Continue paying your mortgage loan on your first property
Note: For PR, there is no way you can hold on to your HDB while purchasing a second property, but if your first property is a condo then yes, you may own another
Cooling Measures to take Note!
TDSR - Total debt servicing ratio. The total TDSR cannot exceed 60%, meaning all your debt currently payable per month cannot exceed 60% of your monthly income. Debt inclusive of your mortgage, your credit cards and whatever debts you have taken on. This means that you may take up a lesser loan than required, your upfront cash may be higher.
LTV- Loan to value ratio. This ratio is limited to 50% if you are taking own a second loan while still having another existing loan on hand. It means for a 1.2m dollars property, at best the bank lends you 600k. The rest has to be fork out using CPF and Cash. If the loan tenure is more than 30 years or exceeds past the age of 65, then LTV is limited to 30%
CPF minimum Sum - This currently is stated as of Jan 17, the amount is 83000 has to be set aside before CPF can be used to purchase your second property.
Total Cost
Assuming Singapore Citizen
Lowest case cash upfront
Cash needed = 12,000+48,000+500+240000= $300,500
CPF needed = 30,600+500+2,500+84000+300000 = $ 417600
Assuming PR and Foreigner
Remember you have to hit a min sum of 83000 before you can use your CPF for the 2nd property, therefore it is very likely you will need alot of cash. Remember you are taking a 50% loan from bank, provided you meet the LTV and TDSR limiits.
2) Pay off your existing housing loan first before purchasing the 2nd property
This way the loan criteria is being freed up. The puchase will be similar to that of a new property, with the addition of the ABSD of 7% that is on top of the normal purchase. 10% for PR and foreigners. Again the drawback is having to pay off whatever leftover loan outstanding before recommitting to borrow at 80% of valuation of condo. Provided you satisfy for the LTV and TDSR limits. Cash flow wise, depending on the amount of outstanding loans, paying off loans may allow you to buy a condo with lesser upfront cash as compared to taking on both loans concurrently.
In summary
A quick rule of thumb to follow for the cost of the transaction in total, will be for singapore citizen about 10% (7% absd + 3% stamp duty - 5400 + other fees) , for PR and foreigners its about 13% ( 10% absd + 3% stamp duty - 5400 + other fees) of the purchase price of the property.
Cash outlay, if you have an existing loan, u need 25% cash and 25 CPF for down deposits. 50% LTV
if you don't, you need 5% cash and 15% CPF for down deposits. 80% LTV. Do note that the loan tenure does not exceed 30 years + sum of loan tenure and age of borrower at the time of applying for the loan does not extend beyond retirement age of 65 years. Do visit MAS website for more info on LTV
Assuming PR and Foreigner
Lowest case cash upfront
Cash needed = 12,000+48,000+500+240000= $300,500
CPF needed = 30,600+500+2,500+120000+300000 = $ 453600
Remember you have to hit a min sum of 83000 before you can use your CPF for the 2nd property, therefore it is very likely you will need alot of cash. Remember you are taking a 50% loan from bank, provided you meet the LTV and TDSR limiits.
2) Pay off your existing housing loan first before purchasing the 2nd property
This way the loan criteria is being freed up. The puchase will be similar to that of a new property, with the addition of the ABSD of 7% that is on top of the normal purchase. 10% for PR and foreigners. Again the drawback is having to pay off whatever leftover loan outstanding before recommitting to borrow at 80% of valuation of condo. Provided you satisfy for the LTV and TDSR limits. Cash flow wise, depending on the amount of outstanding loans, paying off loans may allow you to buy a condo with lesser upfront cash as compared to taking on both loans concurrently.
In summary
A quick rule of thumb to follow for the cost of the transaction in total, will be for singapore citizen about 10% (7% absd + 3% stamp duty - 5400 + other fees) , for PR and foreigners its about 13% ( 10% absd + 3% stamp duty - 5400 + other fees) of the purchase price of the property.
Cash outlay, if you have an existing loan, u need 25% cash and 25 CPF for down deposits. 50% LTV
if you don't, you need 5% cash and 15% CPF for down deposits. 80% LTV. Do note that the loan tenure does not exceed 30 years + sum of loan tenure and age of borrower at the time of applying for the loan does not extend beyond retirement age of 65 years. Do visit MAS website for more info on LTV
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