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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 Needed

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 measures.

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 unit.    

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.

 

 
 

2.  Next, 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 purpose.

Login here with your Singpass to check the CPF Ordinary Account balance
(CPF website –> My Statement -> Section A)
 CPF Logo

 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 stage payment.   

 

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 their needs.

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 Loan

 

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 in cash

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 Rates 

 

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 loan.  

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.) 

 

Do you want a one-page financing estimation report?

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 Testimonial

"Thank you for patiently taking your time to show us the mock-up flats, explaining the orientation of the scale models and providing us with valuable insights into the project and financing options.

Both myself and my wife really appreciate your effort."

 -- Hairul
 

"Among the agents I have come across so far, you are one of those few whom I feel at ease and comfortable speaking to. This is my frank and sincere opinion.   You truly live up to your words “Honesty and Integrity”

-- Chee Kin

"Thanks for your very kind and helpful adivce.  The testimonials were very true indeed. Another agent from xxxx is trying to make me appoint him as sole agent for EC, but did nothing much to advise like you did.  I really appreciate it"

-- J Ong

From a satisfied client who was referred by his friend. 
Read full transcript

"He gave us good advice based on our requirements. ....
He paid details to every single stage of the process and returned all phone calls, texts and emails the same day.  We never felt neglected or unimportant."

-- Sean Lee

 

 

 

  

 

  

 

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