{"id":4427,"date":"2016-02-11T09:02:02","date_gmt":"2016-02-11T01:02:02","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=4427"},"modified":"2022-07-01T04:00:10","modified_gmt":"2022-06-30T20:00:10","slug":"5-favourite-property-mistakes-that-singaporeans-love-to-make","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/5-favourite-property-mistakes-that-singaporeans-love-to-make\/","title":{"rendered":"5 favourite property mistakes that Singaporeans love to make"},"content":{"rendered":"
<\/div>

Property is a great investment, because it\u2019s not like this <\/span>whole country that is only one island <\/span><\/i>has a lot of space. By 2060 it will probably take a 25-year mortgage just to pay off your parking space. That said, overhyping the whole \u201cproperty is great\u201d angle leads to a lot of hasty property mistakes:<\/span><\/p>\n

1. Dabbling with shoebox apartments<\/b><\/h3>\n

If you\u2019re still living with parents, and have a high networth income, you might be tempted to play landlord by buying a shoebox apartment. In theory, it seems like a good idea: buy a luxury 500 square foot or smaller unit, and then rent it out to expatriates for side-income.<\/span><\/p>\n

The problem is, you now become the owner of private property. As in, you are no longer eligible to buy a HDB flat. And since you have an outstanding property loan in the form of that shoebox unit, you will only get 60 per cent financing on your next property loan \u2013 so buying a second house is usually out of the question.<\/span><\/p>\n

So what happens if, before the 25-year loan on your shoebox is up, you decide to settle down and raise a family?<\/span><\/p>\n

You can\u2019t do that in an apartment that can comfortably house maybe one Chihuahua. Owning a shoebox means marriage and children will have to wait until (1) you finish paying off the shoebox and can buy another property, or (2) you sell off the shoebox, and find something bigger.<\/span><\/p>\n

The problem with option (2) is that you don\u2019t know what the property market will be like. If it\u2019s during a downturn, you might sell at a loss (If you sell right now in Q1 2016 and don\u2019t make a loss, I will accuse your property agent of being a witch.)<\/span><\/p>\n

I understand the temptation to invest in property as soon as possible \u2013 but when it comes to shoeboxes, make sure you have somewhere viable to stay, or that you\u2019re dead certain you won\u2019t be settling down any time soon, before buying.<\/span><\/p>\n

2.\u00a0Signing the OTP before getting loan approval<\/strong><\/h3>\n

This is one of the most unnecessary property mistakes to make, which still manages to happen about three or four times a year. If you have never bought a house before, please pay close attention here. I\u2019m about to potentially save you a few thousand dollars:<\/span><\/p>\n

When you buy a house, the first step is to sign the Option to Purchase (OTP). This is a non-refundable deposit.\u00a0It’s usually 1% of the property\u2019s agreed purchase price. <\/span>On a $1 million unit, for example, you would look at a deposit of $10,000.<\/span><\/p>\n

Once the OTP is signed, you have three weeks to exercise the Option (make the rest of the payment), or 25 per cent of it is forfeited. In the above example, if you don\u2019t buy the house within three weeks you\u2019d flush $25,000 down the toilet.<\/span><\/p>\n

This means you need to have Approval in Principle (AIP) from a bank <\/span>before <\/span><\/i>signing the OTP. The AIP is a promise by the bank to give you the home loan you need, if and when you buy a house. Getting AIP is free, and AIP is usually valid for up to two weeks.<\/span><\/p>\n

So it\u2019s simple: get the AIP first, so you know how much a bank has pledged to lend you. After that, sign the OTP, and get the bank to give out the loan.<\/span><\/p>\n

If you sign the OTP first, and <\/span>then <\/span><\/i>find out the bank won\u2019t give you the loan, you\u2019ve pretty much lost the deposit.<\/span><\/p>\n

\"one<\/p>\n

3. Get a personal loan for renovations<\/b><\/h3>\n

A lot of Singaporeans still don\u2019t realise renovation loans exist. Because of that, they often like to take out personal loans to pay for interior design. <\/span><\/p>\n

The typical personal loan has an interest rate ranging between six to nine per cent per annum. The typical renovation loan has an interest rate of around three to five per cent per annum.<\/span><\/p>\n

And in some cases, banks have promotions \u2013 you might be able to get an interest free renovation loan (usually interest free for six months.)<\/span><\/p>\n

So if you have just bought a house, and seek to renovate, don\u2019t furnish with a personal loan. Start with a renovation loan, and tell the contractor or interior designer the budget is 20 per cent lower than that loan (they typically bust the budget by 20 per cent.)<\/span><\/p>\n

In the off chance that the renovation loan won\u2019t cover everything, you can get a personal loan to make up the difference. Or maybe just decide that some things are more important than parquet flooring, such as feeding your children for a year.<\/span><\/p>\n

4. Ask the mortgage broker first…\u00a0<\/b><\/h3>\n

Finding the right loan is important and while your well-meaning friends, family and other parties may try and tell you which loan is right for you, its worth getting some expert advice so you don’t end up making one of the most costly property mistakes.<\/p>\n

By expert, I am talking about a mortgage broker, and no one else. The thing is, banks offering home loans often have people indirectly working for them in the sense that they get referral fees when they direct a customer\u00a0to them.\u00a0That\u2019s not entirely in your interest, since you may be steered towards an expensive package if the banker pays out a bigger referral fee.\u00a0<\/span><\/p>\n

There are mortgage brokers who will \u2013 as a free service \u2013 compare the current home loan packages and find you the cheapest. And bear in mind, a difference of 0.1 per cent in your home loan can mean a difference of a few thousand dollars at the end of each year. <\/span><\/p>\n

So if you are still hunting for a loan, ask the mortgage broker first.\u00a0<\/span><\/p>\n

\"property<\/p>\n

5. Buy overseas property without checking the developer\u2019s history<\/b><\/h3>\n

Singapore has stringent regulations on developers \u2013 other countries may not. First time buyers of overseas property often miss this: they check out the site, they check out prices in the neighbourhood, and they factor in the amenities. All the basics of buying property.<\/span><\/p>\n

What they don\u2019t check is the developer\u2019s background; we\u2019re not used to doing that, because in Singapore we can safely assume the developer isn\u2019t a fly-by-night. But let\u2019s just say property developers are allowed more leeway in some other countries (no finger pointing.)<\/span><\/p>\n

Common problems include:<\/span><\/p>\n