Ready to purchase your first residential property with your significant other? Before you do that, read about these common mistakes young couples make and avoid the pitfalls!
For many soon-to-be-married couples between the ages of 24 and 33, buying their first ever property is a rite of passage in life – and one of the BIGGEST decisions they will be making together.
It’s awfully easy to get caught up in the bliss of popping the question, saying “yes”, and basking in the celebration with family and friends. However, always remember that this lovey-dovey-ness is only the beginning. What comes after is way more important.
Whether your preferred love nest is a cozy BTO (Build To Order) flat, a homely resale flat, or a swanky EC (Executive Condominium), purchasing residential property for the first time is a MAJOR financial commitment. Do not simply rush into it under the pressure of hot markets, hot interest rates and endless pressure from friends. It will cost you big bucks in the long run!
In fact, before you jump the gun to collect your first house key, it’s advisable to be alert to possible pitfalls you might encounter as a virgin home owner.
Here are four common home-buying mistakes young couples make:
1) Are the interest rates “stable” beyond the initial years?
It is foolish to bank solely on the initial seemingly stable interest rates offered by mortgage brokers during your home buying process. Several factors such as employment level, property market changes, and general economic conditions may result in significant volatility in interest rates.
Choose the housing loan package that offers competitive rates even after the initial years, so that you are not at a disadvantage when you try to refinance your loan after its lock-in period has expired.
2) How to pay up for the house earlier and use CPF to save for the future?
Many Singaporeans and Singaporean PRs utilise their CPF to repay their housing loans. Things start to get tricky when you are approaching the age of 55 and you are still financing your housing loan using CPF. This is where a lot of people overlook the limitation of using CPF – in order to continue using your CPF beyond valuation limit; up to the withdrawal limit, you need to meet the basic retirement sum (BRS) in your special account (SA), which includes the amount withdrawn for investment and ordinary account (OA).
Most young couples overlook one critical step when applying for their BTO flat, which leads to burning a huge chunk of their CPF on their first property. This ultimately prevents them from achieving their desired retirement scenario.
Try the Ultimate BTO Portfolio Planning and learn how to protect your CPF funds and retire worry-free by avoiding the costly mistake.
3) Taking Financial Overextension for Granted
The Singapore government has capped the MSR (Mortgage Servicing Ratio) for HDB flats at 30%, and the TDSR (Total Debt Servicing Ratio) at 60% for all properties. Hence, if you have a strained credit score, you will find it extremely challenging to overextend your debt obligations.
When doubling down on a property, it is highly important to be wary of factors like lifespan of low interest rates, future pay scale, post-childbirth financial planning etc.
4) Not budgeting for closing costs and insurance
Your mortgage payment is just the beginning of your expenses when you own a home. All kinds of fees will come at you fast, starting with closing costs, followed by expenses caused by property damage, fixtures and fittings, wear and tear etc. Always make sure to include homeowner’s insurance in your home-buying budget.
WANT TO FULLY PAY UP FOR YOUR HOUSE IN 15 YEARS AND STILL HAVE SAVINGS FOR THE FUTURE?
Fact 1: Too many Singaporeans flush a crazy amount of money (up to $250,000!) down the drain on interest rates and mortgage insurance alone, thinking that these are compulsory things to pay for their flat. It is wrong thinking.
We will teach you a little-known trick to get all that money back and literally save thousands of dollars (we’re looking at least $144,000 here), so that you can spend it more effectively elsewhere on home renovation works, your wedding banquet, or honeymoon.
Fact 2: The reality is, most people take about 25 to 30 years to repay their loans.
You don’t want to be one of them. We’ll show you the way to fully pay up for your house in just 15 years and end up with extra savings for the future. Even better news? You don’t need a managerial salary to do this!
Simply CLICK HERE and we will let you in on the secret. We’ll get back to you on a FREE, step-by-step guide on how you and your partner can avoid the common mistakes others make.
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