Financing An Executive Condominium
Buying an Executive Condominium (EC)
is a long term financial commitment. Moving past the
issue of 'Should I Buy an EC Now?', the next logical step for potential homebuyer is to check whether it is
within their means to buy an EC unit.
1. Consider What is
Besides the need to know an estimate of how much monies is needed in
totalilty, homebuyers should be familar with the payment timeline. In addition, what other cost
will be involved such as stamp, legal fees and applicable regulatory
Unlike buying a BTO unit from HDB, there is no HDB housing loan
for the purchase of EC unit.
Applicants are advised to check on their loan
eligibility from banks or financial institutions licensed by the Monetary Authority of Singapore
before committing to a purchase of an EC
In general, following would be required for
the purchase an EC unit under construction. For specific details, please check with the bank or
solicitor regarding financing matter.
Consider Your Available Resources
a. Monies in CPF Ordinary Account - The saving in the CPF Ordinary Account (including Housing Grant, if any)
can be used to pay for remaining 15% downpayment.
Only the applicant and co-applicants can use their CPF monies for
the purchase of the EC unit. Occupiers listed in the aplication are not allowed to use their monies for this
|Login here with your
Singpass to check the CPF Ordinary Account balance
(CPF website –> My Statement -> Section A)
b. Cash - The minimum cash amount needed is the Option Fee of 5% of purchase price.
This is based on the assumption that applicant(s) can secure the maximum 80% loan from bank and
there are enough CPF monies in the applicant(s) account to pay the
balance downpayment of 15%, the legal and stamp fees. If not, any of these shortfall would need to
be paid in cash.
For applicant(s) who plan to use their CPF for the 15% downpayment, you must be able to
secure 80% bank loan for the property of your choice. If the bank loan is less than 80%, your
current CPF amount will be reserved against the shortfall from 80% loan as the sequence of payment
is "Cash first, CPF later" and not "CPF first, cash later". So, do the sum correctly,
the minimum cash amount could be substantially higher if your CPF cannot be used for the
balance downpayment and stamp duty as it has been reserved for later
c. Bank Loan. It is advisable to get an In
Principle Approval (IPA) done with at least one bank before you do a booking. IPA is an
amount that bank is potentially prepared to lend based on the borrower's income, credit
history and prevailing regulatory control measures. IPA is not a guarantee, but it does
give the applicants an indication how much they can stretch to find a unit that best meet
Different banks may offer different interest rates packages and IPA
limit. However, with the 60% Total Debt Servicing Ratio (TDSR) framework (MAS Notice 43 29 June 2103)
and the 30% Mortgage Servicing Ratio (MSR) public housing alignment, bank is taking longer to process and
are now more stringent in offering mortgage loan.
About Home Loans - Key Questions to Ask the Bank Before Taking a Home
d. Existing Flat. This is an useful asset that can be used to
finance the purchase of an EC unit. For 2nd timer applicant, there is no resale levy to be paid for the purchase on
an EC whose land was bought before 9 Dec 2013. As EC unit are meant for owners' occupation, buyers and essential
occupiers listed in the application must sell their exisiting flat within 6 months from the date of Temporary
Occupation Permit (TOP).
+ When should the existing flat be sold?
e. Monthly CPF contribution. Buyer can use their savings and monthly CPF
contribution to the Ordinary Account to service their mortgage loan. Under the CPF Board's
requirements (since 1 January 2008), the CPF withdrawing limit for a housing loan obtained from a bank or
financial institution is set at the lower of 120% of the Valuation Limit or the Available Housing Withdrawal
Limit (AHWL). Once the CPF withdrawal limit is reached, mortgagors will have to pay their monthly instalments
The current CPF contribution rate is based on salary (cap at $6000/mth) and age
group. Do note that the CPF contribution rate decreases with the age, with marked reduction in
contribution rate at 50 years of age.
CPF Contribution and Allocation
3. Finally, put the financial numbers together.
The outcome here is obvious. Applicants should only go ahead with the booking
if they have the financial resources to cover all the required payments before bank
disbursement of loan and am comfortable with the monthly payment to service the
It can be a daunting task for some to get the calculation and numbers work out. Imagine the
effort if numerous tweaks and/or 'what if'
scenarios for different loan quantum and tenure need to be work out in order to determine the best
comfort zone. This is where the value of a
competent agent is appreciated.
(I have spend a great number of hours programming an Excel spreadsheet to compute these
numbers effortlessly. Read my Estimation Report if you need assistance
in this area.)