If you’re Singaporean, then you know the equivalent for “Will you marry me?” is “Let’s get a BTO together!”. But what if you can get more than that? Here’s how you can afford your own $1.5 million property with your significant other:
Haus It Going
99.co’s event on 25th May has taught me this: non-millionaires can invest in million-dollar properties. With a few smart calculations, we can figure out how much a young couple will need to buy their own property at 35 years old.
Taking a page out of Alex Goh’s book, one of the speakers at Haus It Going, we’ll look at the amount of CPF you can take out and hard cash needed to buy a $1.5 million property.
How much do you need to pay for a $1.5 million house?
Assuming you qualify for the maximum LTV ratio (75 per cent), your total loan size can be $1.125 million. Your down payment will be $375,000. Of this amount, only five per cent ($75,000) needs to be in cash.
Let’s say you and your spouse both earn around $4,000 a month each. Your respective monthly CPF contributions – to your Ordinary Account (OA) – is $920. That means each of you are contributing about $11,040 per annum.
(That’s because 23 per cent of your monthly income is allocated to your CPF OA, in case you’re wondering).
Now, say you start earning this $4,000 a month at 25, and want to buy a house when you’re 35. As your OA compounds at 2.5 per cent per annum, you would have each amassed around $126,800 in your CPF by that point.
Combining your CPF OA monies, you’d have about $253,600 to use for the house. Subtracted from the down payment of $375,000, this comes to a shortfall of just $121,400.
But that’s such a huge amount!
Not if you think it through, and start planning early. Consider, for example, how much you’d need to save if you set aside cash from age 25.
To save $121,400 in 10 years, the both of you together would need to set aside around $1,012 per month. That’s a savings amount of about $551 each. If you can bear to make a few cutbacks (e.g. DON’T BUY A CAR), this probably won’t be impossible. You can also talk to a qualified financial expert, about various investment schemes with a targeted amount.
That being said, do consider if you’d rather start with a flat, and then upgrade later
Using a flat, you can get an HDB loan with an LTV of 90 per cent. The remaining 10 per cent can come from your CPF (so yes, it’s possible to pay nothing). For a five-room flat at $600,000, for example, the down payment is just $60,000, which can come from your CPF.
At HDB’s loan rate of 2.6 per cent, over a 25 year loan, this is a monthly repayment of just $2,450 per month. That’s $1,225 each, and you won’t feel the squeeze at the start. So do consider buying and holding and HDB flat for, say, the first 10 years or so – after which, it will probably be more comfortable to upgrade.
Think you can afford a million-dollar property now? Voice your thoughts in our comments section or on our Facebook community page.
Looking for a property? Find the home of your dreams today on Singapore’s largest property portal 99.co! You can also access a wide range of tools to calculate your down payments and loan repayments, to make an informed purchase.