Buying a house is definitely one of the bigger milestones when it comes to #adulting. After all, it’s one of the costliest purchases you’ll make in your life! With such a hefty price tag, it’s natural that many new homeowners are concerned about how much cash is needed for the upfront payment. Let me share with you what you need to budget for – and whether you can use your CPF!

Stamp Duty

No, we’re not talking about the stamps you put on your letters. The Buyer’s Stamp Duty (BSD) is a tax of up to 6% incurred on buyers when purchasing a property in Singapore.

The amount that you’ll pay will be a cumulative percentage of the purchase price. If you’re acquiring the property through non-purchase methods, like decoupling or receiving it as a gift, the market price will then be used to calculate the stamp duty.

How much you pay is, admittedly, a little tricky to calculate. First, you need to know the property’s price. Then, the taxes are 1% of the first $180,000, 2% of the next $180,000 and 3% of the next $640,000 and so on.

Too much math? Just use the Inland Revenue Authority of Singapore (IRAS) stamp duty calculator to estimate the amount of stamp duty you need to pay!

You can pay your BSD directly with CPF, but only for newly launched properties! For resale properties, you are given 14 days to pay your stamp duty. While it’s technically possible to use CPF for payment, some buyers may prefer to pay in cash first to meet the deadline. Don’t worry, though—you can still apply for a one-time reimbursement of the BSD from your CPF later.

If all this sounds a bit confusing, I’m here to help you navigate the process of paying your BSD entirely with CPF, so you won’t need any cash upfront!

Legal Fees

At some point of your purchase, you’ll need to involve a lawyer to handle all the legal paperwork such as transferring the ownership title, background checks etc. The legal and conveyancing fees in Singapore can range between $2200 to $5000 and above, depending on the property’s purchase price and complexity of the process. You can hire a private lawyer as well but their fee may vary.

The bad news is that legal fees are mandatory in any property transaction and you can’t escape it. The good news is, you can use CPF! You will just have to apply through HDB if you are taking an HDB loan, or through your lawyer if you are taking a bank loan.

Fire Insurance

If you’re taking a HDB loan, then you’ll need to pay a mandatory fire insurance every year. Don’t worry, it’s quite affordable — ranging from $1.63 for a 1-room flat to $8.18 for an executive/multi-generational flat. For condos, private apartments, or bank loans, most banks will also require fire insurance from their designated provider.

Fire insurance is only payable by cash, so keep that in mind to avoid any surprise deductions from your bank. Fire insurance is also necessary for most properties. This is to insure your houses in case of a fire (touch wood) before you’re able to fully repay the HDB or bank loan.

Fire insurance also covers only the external part of your house such as fixtures and fittings and doesn’t cover damage to internal belongings such as furniture. To cover your belongings, consider getting home insurance!

Deposit

A deposit acts like a booking fee in a property purchase, like how some restaurants need you to place a deposit for your reservation in case of a no-show. Once accepted by the seller, this means that both the buyer and seller are now entering a legal commitment on the property. This deposit is usually paid in cash or a cashier’s order. 

For HDB flats, the deposit ranges from $1 to a maximum of $5,000. Generally, the usual amount is $1,000 first, then a $4,000 exercise fee for the Option to Purchase (OTP). For private properties, the price can vary from 1% to 10% of the purchase price. While a 1% deposit is common, it’s not set in stone. The deposit amount can vary depending on the details of the transaction and what you and the seller agree upon.

Technically, it is possible for a deposit to be as low as $1, but that’s more theoretical than practical. A higher deposit is usually required when the buyer needs more time to complete the purchase and needs to give the seller a peace of mind. Think of it this way – as a seller, would you trust someone who places a $1,000 deposit or a $10,000 deposit more?

Although the deposit can be a little pricey, it’s actually part of the purchase price. So, you’re not paying anything extra!

Downpayment

Now comes the biggest chunk of your initial property purchase. Your downpayment is the outstanding value from your maximum loan amount. For HDB loans, you’re only allowed to borrow up to 75% of the property’s value, which means that the minimum downpayment is 25%. This amount can be paid with your CPF.

For bank loans, the amount is the same – 75% loan, 25% downpayment. However, 5% of the downpayment must be paid for in cash, while the rest is CPF-deductible.

Navigating your Property’s Finances

Phew, that was quite a long list! You may be feeling a little overwhelmed right now, but don’t worry too much! Finding the right consultant can make all the difference. They’ll guide you through the entire property purchase process and help you understand what hidden costs there are. 

With their expertise, you can budget your finances effectively and ensure that buying your dream home stays within reach. At the end of the day, we want you to succeed in getting that perfect place!