How to Save Money on a Property Purchase in Singapore

Purchasing a property is a major decision, and it requires proper planning for a few months. Saving enough money for your first purchase can seem like an impossible feat, but with the correct strategies in place, you can find an amazing place without having to spend all of your hard-earned savings. 

From saving for a down payment on your mortgage to choosing a property that will cater to all your needs while being financially viable, there are some key aspects you need to consider. Particularly in Singapore, the way in which housing and commercial property purchases work is vastly different. Let’s have a look at the most important factors you need to remember about purchasing a property in this Asian country.

Save on Your Down Payment

There is an old unwritten rule that you need a 20% down payment minimum before creditors will offer you a home loan. The reality is that this figure is for Westernized private mortgage insurance companies who want assurance that you won’t default on your payments. In truth, Singaporean creditors only ask for about three percent towards a down payment. 

Do a little digging and use an online calculator in your region to determine how much you need as a deposit on your new property. The 20% rule can save you money over the long term, but remember, you don’t physically need that amount in savings to be approved for finance in Singapore. It just makes the monthly installment amounts easier to manage.

Get In-Principle Approval

The first mistake most people make is to go with the first bank or lender that approves their application. If you don’t shop around for different options, you may miss a vital opportunity. You also cannot get an accurate picture of what other lenders have to offer. In Singapore, you need something called an in-principle approval (IPA) before buying any property. This means that as long as your documents are successfully verified, the bank or lender will give you the money as soon as you need it. It’s also a requirement for any migrant looking to work in Singapore.

Having the proper IPA documentation can speed up the process and help you negotiate the price of the property. Find out more about the in principle approval process in Singapore by checking out Property Guru. The company provides mortgage advice, tips to refinance your home loan, and the legal tax requirements for any property. Visit Property Guru’s website for more tips on buying a property and how you can save more money during the process. 

Choose a Shorter Term

The longer your payment terms on a mortgage, the more interest you will pay. It may seem impossible to pay the fees for a 15-year mortgage versus a 30-year one; however, you will not just save a little. You can save thousands of dollars and you would have paid off your home loan in half the time. The reality is that the difference between the monthly repayment costs is rather minimal. You can expect to save about SGD 50 per month. If you think about it, this can easily be achieved by cutting out non-essential purchases for a few years.

The payoff in 15 years will be well worth the additional monthly repayment, as you can save almost SGD 6000 in interest fees for paying it off 15 years earlier. This is a substantial amount of money which can be used to refurnish your property at a later stage. Better yet, keep it as a rainy-day fund in case you need repairs done on the property.

Use Your Central Provident Fund

If you are battling to get enough money together, consider taking a lump sum out of your CPF. In Singapore, CPFs are compulsory to force people to save for retirement. You have the option of using your CPF as a down payment on your property, but remember to replace it later. You just need a good law firm to help you with the process, but your CPF can be used for conveyancing fees and transfer costs. Singapore’s CPF has a guaranteed interest rate of 2.5 percent per year so you can make that money back relatively quickly.  

If you choose to use your CPF for any property purchase, be sure to choose annual raises in your contributions so that you can remain in line with inflation and market fluctuations.Once you are confident that you want to buy a property in Singapore, you need to keep these few points in mind. Buying a property can be an exciting adventure, but if you don’t plan for it and look out for options with multiple lenders, you’re just shooting yourself in the foot. Actively look for small ways that you can save on the additional costs, insurance, and home inspections.