Most of us would love to get our own homes and move out as soon as we get married. In our enthusiasm to get our own space, and still being young and ignorant, we may make a few mistakes in the course of getting our first home.
Getting a BTO is a little more straightforward, but if you’re looking at resale flats, private properties or condominiums, the process gets more complicated. To mitigate the chances of making a blunder, arm yourself with knowledge and don’t make these 4 common mistakes.
4 common home-buyers’ mistakes that you should not be made after reading this
1. Mistaking valuation of home as the total cost of ownership
Whenever we as newly married couples think about getting our first home, we tend to focus on the cost of our home alone. However, the cost of our home might not represent the total cost of ownership.
If you are planning to get a resale flat or private property, there are a few things you should consider. Otherwise, you may end up underestimating the total cost of homeownership.
Buyers’ stamp duty fee
Apart from paying for your new home at the valuation that you were quoted, you also have to pay for stamp duty fees.
The stamp duty fee is 1% of your home cost for the first S$180k valuation. For the next S$180k valuation, you will have to pay 2% stamp duty fee. If you are buying one that costs more than S$360k, you will need to pay 3% stamp duty fee for the valuation exceeding S$360k.
Moreover, the Singapore government recently announced a higher quantum of buyer’s stamp duty for properties above the $1 million valuations. For the value of your property that exceeds $1 million, you will now need to pay 4% buyers’ stamp duty.
|Purchase Price / Market Value of the property||BSD Rates for residential properties (After Budget 2018)||BSD Rates for residential properties (Before Budget 2018)|
This means that if you had bought a new home that is valued at S$500k, you will need to pay S$9,600 stamp duty fees. And if you are thinking of relying on the bank to lend you an additional S$9,600 for the stamp duty fees, you might be disappointed. You will need to pay for the stamp duty out of your own pocket in cash or CPF.
Unless you are getting a fully furnished home, you will need to spend a sizeable amount to furnish your new home. This includes fixing the lightings, buying electrical appliances and getting new furniture.
Even for fully furnished homes, you might have to spend some money to refurbish your new home and replace worn out pipes and appliances.
The renovation cost would set you back by another S$25k-S$60k depending on your renovation, furniture and appliances choices.
2. Not getting your home loan pre-approved
Before you start searching and planning on which home to get, you should start with one thing: Getting an in-principle approval. An in-principle approval, or AIP, is a non-binding agreement between you and the bank that states how much the bank is willing to lend to you. The AIP will let you know the loan quantum that you are eligible to loan as well as the monthly repayment amount.
With an AIP in hand, you will be able to narrow down your search for a new home that you can afford. This will help you avoid viewing homes that you are unable to afford.
Moreover, it will make your negotiation process with resale homeowners easier as sellers and their agents are more willing to engage you.
3. Thinking that big homes are always better
Singaporeans treat homes as our biggest assets. It is no wonder why the homeownership rate among Singaporeans is 90.7%. The rate of homeownership has stayed above 90% in the past two decades, except 2010 where home ownership was 87.2%.
If you are a Singaporean, you are likely to subscribe to the age-old belief that was passed down from your parents: The bigger the home, the better it is.
However, a bigger home comes with greater responsibility, i.e. more monthly mortgage that you have to pay. If you are burdened with a large loan amount, you might find yourself in a tight situation, especially when interest rates go up.
4. Failing to establish a black-and-white agreement
When you’re buying a house from someone else, there might be instances when disputes may arise. So make sure you have someone experienced who can advise you on contractual agreements. It might sound like a hassle, but it can be a great protection for yourself in the event of an ugly situation.
It is hard to establish a case based on verbal agreements between you and the seller. You might end up going through a dreaded litigation and still fail to get your desired outcome eventually. The simplest way is to create an inventory list and attach the relevant photographs together with the seller’s acknowledgment.