[Article from PropWise]
Before you make the trip to that swanky new launch condominium showflat, it is useful to first determine your financial strength. Your purchasing power is not just limited by your income, but also by the number of existing properties under your name. Moreover, the maximum amount of money you can loan from the bank is also restricted by the combined sum of your monthly financial commitments.
To simplify matters, here is a comprehensive to-do list before you make the trip to the show flat.
- Check on how much CPF you are able to use for the property purchase
- Speak to a banker to find out how much you are eligible to loan based on your current property portfolio and monthly financial commitments
- Know exactly which ABSD bracket you fall into
- Understand how the Normal Progressive Payment Scheme works
- Understand how the Balloting system works
1. Check how much CPF you can use for the property purchase
If you are a first time property buyer, the maximum amount of CPF you can use is your entire Ordinary Account (OA) funds. If you are purchasing your second property, you will have to ensure that you fulfill the minimum sum of $75,000 (as of 01/07/2013) in your combined OA and Special Account (SA).
Below is an illustration of your allowable CPF usage for your second property.
2. Get Your Housing Loan Approval-in-Principle
This is one of the most important things to do that buyers often overlook. Getting a loan approval-in-principle (AIP) is now one of the most essential requirements when it comes to purchasing a property. Without it, you will be unable to properly set your property purchase budget.
With an AIP, you will know exactly how much the bank is willing and able to lend you for your property purchase. Best of all, it is absolutely free to get it done and takes approximately three working days for the bank to process your request.
Here are the set of documents you will require.
- Copy of NRIC or passports of all purchasers
- All your latest Credit Card Statements
- Application form
- Declaration form of all credit facilities
- HDB page to show your HDB status (HDB loan / do not own any HDB / did not take up a loan with HDB)
- Latest 3 months payslip and IRAS Tax Assessment Return (For Employed)
- Latest 12 months of CPF contribution (For Employed)
- Latest 1 year of IRAS Tax Assessment Return (For Employed and Self Employed)
3. Know Your ABSD Bracket
Knowing which Additional Buyer Stamp Duty (ABSD) bracket you fall into is another important consideration in today’s market. For Singaporeans, your first property will be free of any ABSD. However, your second and third property purchases will be taxed 7% and 10% on the purchase price respectively.
For Permanent Residents (PRs), your initial property purchase will be taxed 5% on the purchase price. Subsequently, your property purchases will be taxed 10% on the property transacted price. For Foreigners and Entities, your property purchases will be taxed 15% on the price of each property.
Here is a helpful chart to illustrate which ABSD bracket you fall into:
Figure 1: ABSD rates
4. Understand how the Normal Progressive Payment Scheme (NPS) works
The NPS is currently the standard payment scheme used in almost all new launch condominium projects. Understanding the progression of payments will be helpful in planning your cash-flow for your property purchase.
Upon selection and confirmation of your choice unit,
- A payment of 5% in cash has to be made in favor of the developer’s project account in exchange for the Option To Purchase (OTP)
- Within 2 weeks, the developer will send the Sales and Purchase Agreement (S&P) to your correspondence address
- Upon date of receipt of the S&P, you will have 3 weeks to exercise the contract at your solicitor’s office. If the contract is not exercised, 75% of the initial Option Fee paid will be refunded to your account.
- After exercising the agreement, the Stamp Duty and ABSD will be payable within 14 days from the date of exercise.
- The remaining 15% of the down payment is payable within 8 weeks from the initial OTP date
Here is a timeline to illustrate the payment process.
Figure 2: Timeline of payments
5. Understand how the Balloting Process works
Prior to the launch of a new condominium, a preview period of one to two weeks will be allocated for you to preview the showflat and have a feel of the unit sizes and prices. Buyers who preview the showflat during this period are given the opportunity to register for a non-obligatory seat during the launch date.
This registration allows you to be eligible to ballot for units before the public launch where units are sold on a first-come-first serve basis. Very often, early bird discounts are also given for purchasers who purchase during the launch day.
To register for the balloting, a few documents are required.
- A copy of the registrant’s NRIC
- An Expression of Interest form (EOI) filled and signed
- A cheque addressed to the developer project account
In the event that you decide not to purchase any unit during the launch, the full set of documents will be returned to you.
Frequently Asked Questions (FAQ)
What if I am only eligible for a maximum loan of 50% of the property price? When will the loan start to take effect?
After your initial 20% down payment, the developer will call for payment in cash or CPF after each stage of the development is completed.
- 10% after the foundation works
- 10% after the concrete framework
- 5% after the partition of walls
- And another 5% after the completion of roofing of the units
After which, the loan will start to take effect.
[Article from PropWise]