There are a lot of important decisions to make before you can move into your first home. While it may be overwhelming to keep track of all of these issues, neglecting to do so can end up costing you thousands of dollars.
We strongly recommend keeping an eye out for the following missteps in order to comfortably enjoy your new home.
Not Creating a Feasible Budget
Before you even start visiting homes, it’s important to have a good idea of how much you can afford to pay for your new place. With that in mind, there are two cost categories to consider as a prospective homeowner.
First, it is important to understand the upfront cost of a down payment. Those choosing to use a home loan from a bank will have to make a downpayment of at least 25% of their home’s value, including a cash payment of at least 5% of the home’s value. HDB loans, on the other hand, only have to make a down payment of 20%, but are only applicable for HDB flats.
Minimum Down Payment by Home Value and Loan Type
| Home Price | HDB Loan Minimum Downpayment | Bank Loan Minimum Downpayment |
|---|---|---|
| S$200,000 | $40,000.00 | $50,000.00 |
| $500,000.00 | $100,000.00 | $125,000.00 |
| $750,000.00 | $150,000.00 | $187,500.00 |
| $1,000,000.00 | $200,000.00 | $250,000.00 |
On top of the down payment, prospective homeowners must consider the ongoing costs of homeownership. As a general guideline, experts recommend that prospective homeowners spend 30-40% of their gross monthly income on housing. For homeowners, this includes mortgage payments, utilities (e.g. gas and electricity bills), homeowners insurance and maintenance costs.
To calculate your monthly mortgage payments, you can use ValueChampion’s free home loan calculator below.
Find the Cheapest Home Loans in Singapore
Confusing HDB & Bank Loan Options
Choosing a home financing option is one of the more complicated aspects of becoming a homeowner. Before even comparing the different rates available, individuals must consider HDB loans vs. bank loans.
Recently, bank loans have been a the less affordable choice as they tend to charge higher interest rates than the Housing & Development Board. However, banks have fewer eligibility requirements and allow borrowers to purchase private residences.
Related: Best Home Mortgage Loans in Singapore 2024
Failing to Negotiate on Sale Price
New home buyers can also fall victim to real estate agents that are incentivised to close deals quickly. These agents may try to rush home buyers into making a quick decision, which ends up in a higher sales price than is optimal for the buyer.
Our advice on this topic is to thoroughly research similar properties before viewing a flat and engaging in negotiations. Once you have a feel for the average cost of a similar home, you’ll have a good idea of whether you are receiving a fair offer.
Average Resale Price of 4-Room Flats in Singapore by Town in Q1 2024
| TOWNS | AVERAGE PRICE |
|---|---|
| ANG MO KIO | $531,500 |
| BEDOK | $514,000 |
| BISHAN | $706,500 |
| BUKIT BATOK | $591,500 |
| BUKIT MERAH | $895,000 |
| BUKIT PANJANG | $528,000 |
| CHOA CHU KANG | $510,000 |
| CLEMENTI | $600,000 |
| GEYLANG | $588,000 |
| HOUGANG | $563,500 |
| JURONG EAST | $483,400 |
| JURONG WEST | $495,000 |
| KALLANG/WHAMPOA | $848,000 |
| PASIR RIS | $570,000 |
| PUNGGOL | $633,000 |
| QUEENSTOWN | $897,500 |
| SEMBAWANG | $565,000 |
| SENGKANG | $580,000 |
| SERANGOON | $604,500 |
| TAMPINES | $600,000 |
| TOA PAYOH | $834,000 |
| WOODLANDS | $512,000 |
| YISHUN | $535,000 |
Forgetting Renovation Expenses
Unless you’re purchasing a brand new home, you may end up deciding to renovate. Depending on the scale of your plans, renovation projects can be expensive.
Our research suggests that the average home renovation for a 4-room HDB flat is around S$55,000. Due to this high cost, households often opt for renovation loans to make their projects feasible. If you’re interested in a home renovation and may need a loan, it is worth researching the best loans and promotions available, in order to cut down on the total cost of project.
Learn More About Personal LoansFind Out More
Not Shopping Around for Home Insurance
Finally, for those that choose to protect their homes with homeowners insurance, it is important to understand all of your options before signing up for a policy.
While the cost of home insurance may seem like a drop in the bucket compared to other expenses in this article, it is possible to save as much as 35-50% on a home insurance policy, without sacrificing protection, if you do your research. For this reason, we recommend comparing the best deals in order to save several hundred dollars over the course of your home ownership.
Compare The Best Home Insurance Plans in SingaporeFind Out More
Avoid Costly Mistakes with Careful Planning
Your new home will not only be your residence, it will be an investment in your future. As with any investment, it is easy to make costly mistakes that eat into your finances. Keeping clear of these common mistakes will help ensure the highest return possible on your purchase.
Start your home ownership journey by learning more about the best home loans at our results page below.
Find All The Best Home Loans in SingaporeFind Out More
Read More:
- Stamp Duties, Renovation and Furniture: What are the Other Costs for Your First Home in Singapore?
- How To Find The Best Mortgage As A First-Time Homebuyer In Singapore
- Home Loan Terms To Understand Before Taking Up A Mortgage
- 4 Myths About Home Loans in Singapore Debunked
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