|
Buying versus Renting?
What are the advantages of buying versus renting? Consider the pros and cons of each and whether your motivation to buy matches the lifestyle you have or want to have.
Why buy?There seems to be an inherent desire in most of us to eventually 'nest' and make our home somewhere. This usually means that buying a home is more desirable than renting and brings a sense of satisfaction and security that cannot be matched. Unfortunately, the rapid increase of values in the property market in recent years has pushed home ownership out of reach for some would-be first time buyers. However affordability does not necessarily equate with having a high income. Home ownership is a long-term goal, and requires planning, tight budgeting and saving strategies. Not everyone is willing to make the types of sacrifices this can sometimes require so it helps to consider some of the pros and cons of buying in order to examine your own priorities. Advantages: Security: Owning your own home brings a sense of satisfaction, security and stability. There are no lease conditions to worry about and you are no longer subject to the whims of a landlord who has control over the length of your tenancy and the cost of rent. Investment: As long as your home is appreciating or maintaining value, you are growing equity (ownership) in your home. This equity can be later used to secure further loans and will also provide security in retirement. Savings strategy: In a sense, making repayments is like a type of forced savings strategy. The more you pay off, the more of your home you will own. Furthermore, once you have paid off your mortgage, you will free up a large portion of your income which will lighten your financial responsibilities. Lifestyle: Choosing the style and type of home for your lifestyle (or changing it to fit) is a huge incentive for many people to become home owners. In rented premises, time, money and effort spent on decoration and gardening will not return to you beyond the length of your lease and in most cases, the landlord will be very particular about any modifications you make in the first place. Owning your own home not only provides the freedom to change and improve your house as you like, but the process can become a productive hobby which may increase the value of your property at the same time. Tax incentives: If you purchase a property for investment purposes, the interest on your mortgage payments is tax deductible. Likewise, an investor who lets their property to tenants can take advantage of the tax benefits of negative gearing. Status: The status of being a home owner is not only satisfying inwardly, but it provides other benefits from a financial viewpoint. As you make regular mortgage payments, you will establish a favourable credit rating with financial institutions which may be useful for future borrowing. Disadvantages:Struggle to save deposit: Depending on the market you are hoping to buy in, getting a deposit together can take several years of saving every spare cent of your income and changing your view of 'essential' spending quite severely. It can mean a lot more than taking cheap holidays, cutting out take-aways or limiting going to the restaurant. Buying in bulk, taking lunch to work, getting rid of credit cards and forgoing expensive outings might be just the beginning, not to mention switching to public transport if you have a second car or giving up expensive habits. High Costs: Home-ownership can be more expensive than renting because you are responsible for the maintenance and repairs of the property, insurance, paying conservancy rates, plus any improvements you want to make. If you have a large mortgage you may find more than half of your income going into repayments - a huge financial commitment. Price Depreciation: There is a risk in any investment that its value will depreciate. If this happens to your property you stand to make a loss in the event you decide to sell. Interest rates: If your mortgage is subject to a rise in interest rates, you may struggle to continue making your repayments if interest rates increase. While renters can also face rent increases, it is possible to negotiate this with your landlord - or otherwise move. Location bound: Some people are not settlers. They like to move around regularly. Whether it be for career or lifestyle reasons, the thought of being bound to one place seems boring or threatening to their sense of freedom. Moving regularly is expensive in itself, but the transaction costs buying and selling every few years is likely to cancel out any appreciation of the property. Procedure to Buy/Sell
Who Can Buy Private Property? All Singapore citizens and companies can freely buy any type of private residential property. However, there are HDB and CPF restrictions that may affect you when you buy a private property.For flats bought directly from HDB (including flats bought from the open market with CPF Housing Grant) a) The flats lessees must satisfy the required occupation period for the flat before acquiring the private propertyb) The flat lessees must continue to stay in the HDB flat after acquiring the private property unless having met the required occupation period allowing them to rent out the HDB flat.For flats bought from the open market without CPF Housing GrantThere is no need to satisfy the required occupation period for the flat before acquiring the private property. However, the flat lessees must continue to stay in the HDB flat after acquiring the private property unless having met the required occupation period allowing them to rent out the HDB flat.Foreigners or foreign companies can buy certain types of residential property according to the Residential Property Act.The Buying / Selling Process:1) Select an agentOptional, but recommended. A professional agent will not only help you to find the right property, but also ensure you get the right price, ensure all small details are covered prior to purchase, guide you through the process and make recommendations on financing and legal representation.2) Find your property and agree on a priceWhen reaching a preliminary agreement to buy, ensure that all important points have been discussed and agreed, including any repairs or changes prior to purchase, what stays and what goes, any special requirements from both sides and the anticipated transaction completion date.3) Sign an Option to PurchaseFor Private Property - The seller through their lawyer or agent will grant you an Option To Purchase sale contract for the property. At this point you are required to pay a non-refundable option fee (normally 1% of purchase price). The option period is usually 14 days.For HDB Property - Since 15 April 2003, the HDB standard Option to Purchase has replaced the Sale & Purchase Agreement as the form of contract to be used in resale flat transactions. Buyers and sellers should not enter into any other forms of agreement or supplemental agreements. Like private property, you are required to pay a non-refundable option fee (not more than SGD$1,000) when the Option To Purchase is granted to you. The option period is 14 days.4) Appoint a LawyerYou now need to appoint a lawyer to make legal enquiries on the status of the seller, the title of the property and the terms of the sale. 5) Arranging FinancingCompare interest rates and special terms when choosing your finance scheme. You can apply for withdrawal of CPF savings by completing an application together with a valuation report prepared by a licensed valuer who is on the CPF panel of valuers.6) Exercise the Option / HDB 1st AppointmentFor Private Property - If all is well you now sign the Option To Purchase sale contract as a form of exercising the option, and pay 5% of the purchase price (less the option fee). You also need to pay stamp duty within 14 days of the contract.For HDB Property - After getting HDB's Loan Eligibility (HLE) Letter or the bank's Letter Of Offer (LO), you are to exercise the Option To Purchse and pay not more than SGD$5,000 (less the option fee). The buyer and seller must then register the transaction with HDB. Registration allows HDB to check the eligibility of the transaction and arrange for a 1st Appointment – usually about 6 weeks after the registration.7) Legal Inspection & CompletionYour lawyer will carry out an investigation of title deeds and send requisitions to various government departments. The seller’s lawyer will also prepare the completion statement and send documents for stamping to effect completion.8) Settle Payment and Handover / HDB 2nd AppointmentFor Private Property - You now settle the outstanding balance of the purchase price. This might be 8 to 12 weeks after exercising the option. The seller’s lawyer will then handover the keys and title deed of conveyance, and you become the owner of your new home.For HDB Property - Completion takes place at the 2nd Appointment, usually about a 8 weeks after the 1st Appointment. The insurance and mortgage is arranged and stamp duty, legal fees and agent fees are paid. The sale is completed and arrangements are made for moving into your new home.Entire Process Time: Usually between 10 to 14 weeks
Foreigners Buying
The Residential Property Act of Singapore states that a foreign person cannot acquire or purchase restricted residential property unless he obtains prior approval. Such property includes:(a) vacant residential land;(b) landed property [i.e detached house, semi-detached house, terrace house (including linked house or townhouse)]; and(c) landed property in strata developments which are not approved condominium developments under the Planning Act. A foreign person is defined under the Residential Property Act to be:(a) any person who is not a citizen,(b) any permanent resident,(c) any foreign company or any converted foreign company,(d) any foreign society or converted society.
Hence, even a permanent resident is categorised as a foreigner unlike in the case of purchasing a Housing and Development Board (HDB) flat, whereby a permanent resident could be the applicant or the authorised occupant of the said flat. However, it does not necessarily mean that all foreigners are restricted from purchasing restricted residential properties in Singapore. A foreign person can still buy resticted residential property caught under the Act if he/she had obtained explicit approval from:Land Dealings (Approval) UnitSingapore Land Authority8 Shenton Way#27-02Singapore 068811The approval will be looked upon favourably if: (a) the individual is a permanent resident(b) an individual who can provide economic benefits to Singapore or makes adequate contribution in Singapore; and(c) one who possesses professional or other qualifications or experience which are of benefits or advantageous to Singapore. Any foreigners who attained ownership of residential properties in Singapore prior to the commencement of the Act in 1973 can have the right to retain it. In the event the said foreigners are desirous to sell their properties, it shall have to be sold only to any Singapore citizen or approved purchasers as stipulated by the Act.Foreigners who are interested in purchasing restricted residential properties but have yet to attain explicit approval from the Land Dealings (Approval) Unit, the real estate agent can still have the foreigners to commit in the sale and purchase of the property concerned by spelling out clearly in the Option To Purchase documents by the insertion of a clause, i.e. “the intended purchase of the above mentioned property by the intending Purchases, namely one ___________ is subject to explicit approval from the Land Dealings (Approval) Unit, Controller of Residential Property, as stipulated by the governing Residential Property Act. In the event the approval is not validly obtained, it is hereby understood that the owners shall refund all monies without interests accrued to the said intending Purchaser and thereafter neither party shall have any claims, demands, proceedings, costs, expenses whatsoever against each other as pertaining to the said cancellation of intending sale and purchase of the said property concerned”.Foreigners can acquire or purchase in Singapore the following residential properties without a written approval:(a) An apartment in a building(b) A unit in an approved condominium development. (c) Any non-residential, commercial or industrial property.Note: A foreign person is not allowed to acquire all the apartments within a building or all the units in an approved condominium development without the prior approval of the Minister for Law.For restricted residential property such as vacant land, landed properties such as bungalows, semi-detached, terrace houses, townhouses and strata landed property, foreigners need to apply for approval from Land Dealings (Approval) Unit, Singapore Land Authority before buying. For more details on application, visit the Singapore Land Authority website. For HDB flats, HDB shop-houses and executive condominiums, eligibility is subjected to the Housing and Development Board.To buy a flat directly from HDB, you must be a Singapore citizen, must include another Singapore citizen or Singapore permanent resident to form a family nucleus. To buy a flat from the resale market, you must be a Singapore citizen or Singapore permanent resident. Include at least one listed occupier who is a Singapore permanent resident or Singapore citizen.Are there any restrictions on home loans for foreigners?Foreigners and permanent residents can borrow loans up to 70% - 80% of the purchase price of the property subjected to different banks criteria. Non-Singapore companies cannot be granted Singapore dollar loans to purchase residential properties.
What conditions must I fulfill if I am a Permanent Resident getting a home loan?To obtain a Singapore dollar loan, you have to provide a written understanding that you do not have outstanding housing loans from any other financial institutions in Singapore.
Engage ONE Agent Only
Professional property buyersWhile it is standard practice to pay an agent to sell your home, we have - until recently - been on our own when it came to inspecting properties and negotiating the best price. In many ways therefore, it makes sense to hire an expert to help you purchase a property. After all, if you are dealing with a professional selling agent who is trained to entice would-be buyers into paying their highest price for a property, why would you not want the services of a skilled property scout and negotiator who knows what you want and how to get it for you for a fair (or better than fair) deal. And that is exactly why and how buyer's agents have, for many people, become a hassle-free way of finding and buying their next properties. Qualifications and experienceBuyer's agents usually come from real estate agent backgrounds and have much knowledge and experience in the way their counter-parts are trained and operate. They may in fact still be practicing real estate agents - find out their background and qualifications to make certain you are dealing with someone who knows the business and can deliver what they promise. When looking into their services check out also their methods for determining the value of a property. Services offeredGenerally speaking, buyer's agents could be hired to search out suitable properties for their clients and/or to negotiate the purchase price of the property on behalf of their client, whether by private treaty or auction. Buyer's agents are also regularly used to bid for clients at auctions, thereby taking the stress out of the auction while also benefiting the buyer with their expertise in auction tactics. Time and money savedAccording to the services required, buyer's agents charges will vary from a set fee to a percentage of the purchase price, however, buyer's agents' services continue to attract their customers because of the time and money they save in the long run. As well as not having to spend the weeks (or months), of looking through newspapers, internet sites and driving around to open houses, the buyer's agent's experience in the industry and emotional detachment from the purchase and their confidence in the negotiation process have given their clients the right houses for the right prices.
Buyer Service Pledge
We are dedicated to providing you with service that is professional, courteous and responsive in helping you find a property. To fulfill this commitment, I agree to provide you with the following services:1. Dedicate ourself to making the process of buying your next property as easy and as smooth as possible.2. Respect you, your needs and be honest and forthright. 3. Hold your best interests in the highest regard throughout the process.4. Value and respect your time, being as efficient and effective as possible.5. Understand your needs and respond quickly.6. Consult with you to determine your particular real estate wants and needs.7. Use our base of experience, knowledge, tools and the most up-to-date training to best serve you.8. Explain each step of the process and act as a guide to help you make most informed decisions.9. Disclose material facts known about the property and respond to questions concerning the property.10. Help determine your purchasing power, while explaining alternative methods of purchasing and/or financing.11. Provide an action plan for locating the right property, at the right price and terms, in an acceptable time frame.12. To the best of our ability, continuously show you new properties that fit your needs.13. Provide a Home Search Plan for locating the right property for you, only showing you properties that will best meet your needs and in accordance with housing regulations and ethical real estate practices.14. Use the most comprehensive database of listings in the area, to help you find the home that best meets your needs, whether that be the Multiple Listing Service and/or other methods.15. Use our knowledge and expertise to promote the most valuable purchase on your behalf. We will assist you in evaluating the market value of properties that are of interest to you and help you obtain the most advantageous price and terms.
Plan Before You Buy
Set your sights on the long term by being realistic in the immediate term. Look at what you can afford and make some compromises on what you want to get off to a sound financial start.Compromise - Needs and wantsFor those who do desire to become home owners, images of coming back to a welcoming home after a day at work, spending time with the family within the sanctity of its walls and pottering in the garden bring feelings of security and happiness. However, it can be tempting to want it all now, and with that desire comes the danger of over borrowing and getting into more debt than you can comfortably repay. It therefore pays to consider what your needs really are and what you would be willing to live without. For example, if you are part of a couple with no children and no need to work from home, could you live without a third bedroom and large garden? On the other hand, if you have a young family would you consider moving to an outer suburb for the extra space it would afford rather increasing an existing mortgage in order to maintain an inner city address? Make a list of the factors that are most important to you, taking into consideration the length of time you intend to live in the house and changes (such as starting a family) to your future circumstances. Making these choices will mean compromising on some things, but you will be better off making sacrifices now rather than struggling to make repayments later or finding there is no extra cash to take care of repairs or much needed renovations.Setting a budgetOnce you have decided on the type of home you need, it is helpful to set a budget. While the amount you can borrow will be limited by your earning capacity, assets and existing debts, lifestyle expenses and so on, do not make the mistake of using this amount as a price guide for your home. Your budget should also include hidden costs such as mortgage and building insurance, stamp duty, legal fees, searches and reports, furnishings and fittings, repairs, maintenance and conservancy rates. Be aware that even high salary earners can and do lose their jobs, so do not use this factor alone to determine the size of your mortgage. Take into account possible future lifestyle changes such as periods out of work, or moving from a double to a single income household with the arrival of a new family member. If you are making a first step into the property market you may have to accept that your first home will not be everything you dreamed of but remember that even the humblest of homes can be beautiful with a few personal touches. Your aim should be to buy a home you can comfortably afford to repay over the long term with the goal of being debt free in the shortest possible time.
Your preferred areaMost people decide on a preferred area based on their budget and lifestyle. Others may have a few areas in mind, and are just waiting for the right property to come along. There are several factors to look out for in selecting the right location. Look at the vitality of the estate: Is there a sense of community spirit? Are there recreational and sporting grounds, libraries, shopping centres, good schools and public transportation. This is important for the sake of the house maintaining its value should you need to sell in a difficult market and is especially true if you intend to live in the home for many years. Buying cheaply when you do not like the home area is going to make you miserable in the long run and negate any of the benefits you had hoped for in savings. The right home should be more important than a cheap price unless you have the vision and personality to put up with less than desirable circumstances in order to accomplish a long term goal such as anticipating that an undesirable area will become 'in vogue'
Be Financially Prepared
Many buyers begin looking for a property without even knowing what they can afford to spend. This can be a big mistake as many buyers can end up disappointed when having found their dream home only to find out that they do not have the borrowing capacity to purchase it.
On the other hand, buyers can restrict themselves to a certain price range without knowing that their real borrowing capacity which could fulfill more from their wish list.
It is wise to seek financial advice from a lending institution or mortgage broker to determine your actual borrowing capacity before you commence your home search.
Find the Right Mortgage
Choosing the right mortgage is not just important for your needs, but could make the difference of thousands of dollars in the long term. There are so many products from so many financial institutions all with differing interests rates and a plethora of features and fees. So where do you start? Aside from seeking help from a financial advisor (which may be a very wise decision), there are some ways to begin narrowing down which loan is right for you.Purpose and requirements of the loanFirst consider the purpose of the loan. The next step is to decide what type of loan will best suit your needs. For example, do you want the flexibility to pay off more than your scheduled payments or offset your mortgage against your regular transaction account thereby saving on interest expense? Would you like a credit facility on your account for personal purposes such as purchasing a new car or making home improvements? Would you prefer a fixed or variable rate? If you and your spouse intend to start a family in the future will you need a period of time where you will be able to reduce your repayments? Over what term (how long) do you intend to repay the loan?Loan FeaturesBe familiar with the features of several loan products. Keep in mind too that many banks will also allow you to split your loan amount over more than one type of loan to meet your needs. The following lists of features are typical of those offered by many loan products (most of which incur one-off or ongoing fees).Additional repayments: Making extra payments when you can save thousands and cut years off your loan. Portability: If you move house, this feature will allow you to keep the same loan. This may incur a fee but will still be less than establishing a new loan. Credit facility: Rather than take out a separate loan for personal finances such as renovations a credit facility on your loan increases the credit limit on your existing loan. This is subject to approval and other lending criteria. Consolidation of accounts: An account which merges your transaction, savings and credit accounts may simplify your banking and save you interest on your loan with every dollar you deposit into the account while still giving you access to funds through the usual facilities. Long term expensesTry to prioritize your preferred features in a loan (some banks have online questionnaires to help you with this) and calculate the long term costs of the options you are considering. If you make the most of the features of the loan, will you save more than if you chose the loan without the features even though its interest rate is slightly lower? This may depend on how disciplined you are with budgeting, your family's lifestyle and your future plans. Think about these things as well in order to forecast as accurately as possible your ability (and limitations) to repay your loan. Word of Advice: A mortgage is a guarantee or pledge to repay the loan you take to buy real estate. The word mortgage comes from a French word 'mort' (death) and means 'agreement until death'. Keep this in mind when reading the terms and conditions of the mortgage you are entering!
Start House Hunting
What features make one house better than another? Discover what to look for in the right house and how to avoid some of the common pitfalls of purchasing.The right home You have loan approval and an idea of where you want to live. You've made a list of your needs and wants in a house, and have begun to study the property market in the areas you like. When you do inspect a house, take a big notepad with you and write down everything about the house you like and dislike. It may be helpful to prepare a checklist of criteria beforehand so that you can more easily compare the properties you view. Some of the things to consider will include: The investment perspective: Will it continue to increase in value, will it require high maintenance costs, does it have potential for improvements to suit your future needs? Is the location an improving area with good access to town centres or is it becoming rundown and neglected? Your family's lifestyle: If you are looking to buy in an area that is some distance from where you currently live, is public transport still readily available and how will the location effect traveling times to work or school? Are there any local shops within walking distance or a short drive away? The position and situation: If you are buying a house with a view, what are the rules to protect it from being built out? If you are looking at closely built units or houses, will you have sufficient privacy from your neighbours, both physically and in terms of sound carrying over into your house? The aspect and block: Will your house capture the sun? North and North-East facing houses usually give better energy efficiency. Is the house situated on a sloping block and will this limit its use? Does the block lend itself to becoming a suitable play space for children or pets? Access and parking: If you are unsteady on your feet or have small children who need to be carried from house to car and vise versa, how will you cope with a flight of steps or a steep climb? If you do not have private parking, will it be a challenge to find a parking lot nearby? Special features: Does the house offer any special features such as a pleasant view, delightful interior, charming courtyard or unique design? A house that stands out in some way from the rest may give it the edge over other houses on offer and is likely to have better resale value if the feature is an integral part of the house. Renovations/Redecoration: If any work is needed on the house, either to match your tastes or suit your lifestyle, how much will this add on to the purchase price? Would you be better looking for something more closely suited to your needs given the added cost and inconvenience of taking on the projects in question? Helpful tips and wise cautions When it comes to house hunting, being prepared with a good knowledge of the property market and knowing your priorities are two of your best weapons. However, even for the more experienced buyer, choosing the right property is rarely a level headed decision because it is hard not to feel emotionally involved. Albeit, with a little common sense, forward thinking, and some sound advice, the would-be homebuyer can be confident that their final decision is the right one. Who is buying the property? When you go to see a house, always take whoever else who is involved in the purchase. It may be tempting to split up with the reasoning that you can see more properties in less time, however if you have an idea that the property may be suitable, make the effort to see it with your spouse or partner. By going together you can both get a feel for the place and if you like it, you will be in the position to put in an offer straight away. If only one of you attends the initial inspection, not only will you have to arrange a second viewing for your partner if you are interested (during which time someone else's offer may be accepted), but the selling agent may not see you as a serious contender if they realise only one of the buying party is present. Don't assume that taking a friend or relative to see a property is a suitable substitute as their opinion - while important to you - may be distracting and will not hold to the same priorities as yours.
Making an Offer
If you've been house hunting for awhile you might feel confident that you understand the market value of houses in your area, but it's not unusual for even seasoned home buyers to feel a bit queasy when it's time to make a formal offer. Use these tips to begin investigating your local real estate market.
Attend Open Houses
Attending open houses helps you track the actual condition of homes on the market--insight you won't get by looking only at recorded stats. Keep the handouts you are given at open houses and then watch for the For Sale signs to come down. Do research on its sales price.
Find Home Sales Prices
Advertising gives you a feel for the average asking prices of homes, but asking prices are often inflated. Your focus should be on the sales prices of similar homes that have sold recently.
You might find that records for your area are available on disk or online. Use records to help you see where prices are now, but don't make the mistake of basing an offer on the amount a current owner paid for a property--it doesn't usually work. Value has nothing to do with a previous sales price if real estate prices have escalated since the sale.
Valuation Report
It will slow you down, but you can probably order a valuation report before making an offer. Make sure the results will not be shared with others and keep in mind that the opinions of different valuers often vary.
Low vs. High Offers
Come in too low and you'll run the risk of alienating the seller. That's fine if low is all you'll go, or if the property is truly overpriced, but it can create problems with future negotiations if the seller interprets your offer as a personal insult. She may not be as anxious to deal with you as she would have been had you made a more realistic first offer.
Come in too high and you probably won't find the seller's low point, but if you really want the house, and if competition is swift, an offer near or above the asking price might be a must. Learn as much as possible about your real estate market before you make a move.
Factors that Can Affect Seller Motivation:
- How long has the house been on the market? If only a short time the sellers might not be ready to lower the price.
- How does the house compare with others for sale in the same neighborhood? Too high or too low? Can you determine why?
- Is the house in need of repairs or massive updates? Updating items such as insulated windows, plumbing and electrical systems, kitchens, and baths can be costly.
- How many more years should it last?
- What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Bottom LineAnalyze each home's condition and compare it to others on the market, but realize that your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you've been searching for a home for a while, you will probably know the answer to that question the minute you walk in the door.
Pre-Settlement Inspection
Visit the property on the day of settlement to be sure there are no surprises. Be absolutely positive that the property was left exactly as you had agreed upon in the contract.
Email ThisBlogThis!Share to TwitterShare to FacebookShare to Pinterest
|
|
14x
|
|