With the market more fiercely competitive than ever, some of us are considering getting a resale condominium. However, the process to do so seems daunting and complex - to know what you need to do, here is a nifty timeline you can refer to:
Step 1: Set your budget
You might be already aware, but buying a condominium does not solely rely on the property purchase price. When it comes to home loans and monthly repayments, there are other restrictions put in place as well.
For example, you will need to make sure to adhere to the following:
Loan-to-Value (LTV) ratio
Total Debt Servicing Ratio (TDSR)
LTV ratio refers to the maximum amount an individual can borrow from a Financial Institution (FI) for a housing loan. It is usually a percentage of the property’s value, where the remaining amount will have to be paid entirely for
TDSR is the ratio where new mortgages cannot cause borrowers’ total monthly loan repayment to exceed a certain percentage of their total gross income. In the past, it was at 60%. However, with the recent tightening of the TDSR, the threshold has decreased from 60% to 55%.
There are also other costs that you must consider as well:
Buyer’s Stamp Duty (BSD)
Additional Buyer’s Stamp Duty (ABSD)
BSD is the tax payable on the property bought. The amount is determined to be the higher amount between purchase price or property valuation.
ABSD is another layer of tax payable on the property bought, and is increasingly higher depending on the number of properties you own. The percentage of ABSD will also depend on your residency status (e.g. Singaporean / Permanent Residents / Foreigners).
To know more details of the exact calculations you should make, reach out to us to get a comprehensive budget analysis and projections of your monthly payables.
Step 2: Secure your In-Principle Approval (IPA)
To get a good estimate of your maximum loan quantum, you can reach out to a Financial Institution to know how much they are willing to loan when you purchase a home. They will determine the amount based on your credit history, income, savings and more. The process can take as fast as a week or as long as a month. We encourage you to submit as many supporting documents as possible, so that the estimate will be accurate. This will let you have a good sensing of how much you can rely on loans, and how much you will have to fork out on your own.
If you are unsure of how to proceed with securing your IPA, you can also reach out to us to get our assistance to help you process this.
Step 3: Find your dream unit, but practice caution when picking one
At this point, with a clear budget on hand, you can go ahead to find a unit to your liking. If you are unsure of where to start, you can start by knowing what your needs are. How many rooms do you need for your family? What kind of amenities would you envision to have? What are the facilities (schools / hospitals) that you want to be near to?
Do your research on the above, and you will get a direction of where you should start looking at. After narrowing down your choices, pick the ones you are interested in to schedule for viewing. Schedule an appointment with the homeowners, and make sure to conduct a comprehensive viewing (both day and night!) to get a full understanding of how living there would be like.
Step 4: Kickstart negotiations and make an offer
With a preferred unit in mind, do your market analysis and know what the prices within the area are. Take the surrounding developments and future master plans into consideration, and get a rough understanding of how much you should offer. Once the negotiations conclude and the owner accepts your offer, you will be granted the Option to Purchase (OTP).
Step 5: Get professional help
From here on, you will need to exercise your OTP through the assistance of a lawyer. This is because there needs to be a legal transfer of home ownership from the original owner to you. If you are not sure which law firm to approach or lawyer to engage, you can also reach out to us and our professional team that will help you process these procedures.
Step 6: Pay option fee
Once the OTP is finalised, you will then need to make the payment of option fee (approximately 1% of the purchase price) to the seller. With this concluded, the seller will no longer be allowed to issue the OTP to other interested parties.
You will then have 14 days to exercise the OTP, and you will need to pay the subsequent 4% down payment. If you did not exercise it in time, the 1% previously paid will be forfeited and you will lose the OTP. Make sure to do this step promptly to avoid unnecessary delays.
Step 7: Pay all your dues
At this juncture, you will need to make a handful of payments:
Buyer’s Stamp Duty
Additional Buyer’s Stamp Duty
These payments will need to be made within 14 days from the exercise of OTP. Again, make sure to do this step promptly to avoid unnecessary delays.
Step 8: Congratulations on securing your dream home!
With the payments made and home loan disbursed, get your keys and get ready to enter your dream home!