Invest in residential property – sufficient cash is required

Finding a right property at the right price requires you to do careful research and to view the property. Location of a property in Singapore determines its price relative to others. Similarly, factors like – near a MRT station, near to amenities, high floors, freehold property vs leasehold property – will also affect the price.


Investing in property requires a huge sum of money. You will probably have to rely on savings in your CPF Ordinary Account, personal cash and a mortgage loan from a bank to fund this purchase.


The use of CPF money has stringent requirements. You are advised to consult a reliable property agent or the property developer on such details. You can also read about it in the CPF Board website. There are limits to the total amount you can use from the CPF Ordinary account.


In the initial purchase of property, you will have to pay 5% cash towards the purchase price. The other 95% can be settled using CPF money and a mortgage loan from a bank.


Besides the purchase price of the property, you will need to pay stamp duty and the lawyers’ fees. (Legal fees range 0.5 to 1 per cent and stamp duty is up to 3 per cent of the purchase price. The stamp duty can be reimbursed from using CPF Ordinary Account.) It is advisable to have a lawyer to act on your behalf. Besides paying your own lawyer, you will have to pay the lawyers acting on behalf of CPF Board and the bank that you are borrowing from respectively.


So work the sum very carefully and decide whether you can afford buying an investment property. You will need to determine how you can pay the mortgage loan on a monthly basis, whether you have sufficient CPF money and your take-home pay/income to settle the loan repayment amount. (DBS Bank recommends total monthly debt servicing should not exceed 35% of your gross monthly income – The Sunday Times dated 28 January 2007.) The monthly loan repayment amount covers both the principal sum portion and the interest charge. The bank can advise you on the loan repayment schedule.


Written on 12/27/2006 12:57 PM


Copyright © 2006, the author known as LKT in Singapore.


The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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