4 Must-Know but Overlooked Factors When Buying a Condo

This article (video) will help you understand the top 4 must-know but commonly overlooked factors: Income requirements, Maximum loan amount, Renovation budget, Maintenance fee and Property tax when buying a private property (condo)

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     Table of Content

  • Why IPA is Important?
  • The Devil is in the Monthly Mortgage
  • How Much to Spend on Renovation?
  • Monthly Maintenance & Yearly Tax

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📌1. Why IPA is Important?

  • You need a minimum of 5% cash to buy a condo.
  • The remaining 20% can come in the form of CPF or cash. The remaining 75% from a bank loan.
  • Many first-time buyers overlook the importance of In-Principle-Approval (IPA).
  • An IPA from a bank will let you to know the maximum amount of loan you can take.
  • You may not be able to get the maximum 75% loan allowed if you do not meet the income requirements. Hence, it is important to get the IPA right from the start.
  • How much cash do you need?
  • What is the property price range you can afford?
  • The above questions can only be answered after an IPA is done.
Overlooked Factors When Buying a Condo

📌2. The Devil is in the Monthly Mortgage

  • From my experiences, the down payment is usually the easy part.
  • Assume you qualify for a $1million loan (30 years Tenure, 1.5% interest rate), your monthly mortgage will be $3450 
  • Refer to my article, “Everything about Income Requirements or Loans for Your 1st Condo!” for details
  • The commitment to pay the monthly mortgage for the next 30 years is usually what drives many young buyers away
  • Buying a condo may not be for everyone.
  • For singles, you will need the determination to work hard to service your loan
  • For couples, you will need support from each other
  • You may have to sacrifice by cutting down on unnecessary expenses
  • Property is a good and stable investment and a hedge against inflation.
  • Without a doubt, taking a mortgage will add some stress to your life.
  • But it can also motivate you to work harder and save more.
  • Your wealth will grow from 2 sources: (1) condo’s Capital Appreciation and (2) Forced Savings
  • With a loan to service, you will less likely be tempted to splurge on branded watches or bags.
  • These forced savings will translate into a substantial amount of money in future. 
  • Without the stress of servicing the mortgage, you may change jobs whenever you like.
  • Now you will have to work harder and in doing so, may even get a promotion.
Overlooked Factors When Buying a Condo

📌3. How Much to Spend on Renovation?

  • How much you should spend on renovations will depend on how long you intend to stay in the property.
  • As a general guide, try not to spend more than $100k ($50-80K is ideal).
  • If you intend to sell within 3-5 years, then invest more in furniture and appliances.
  • These can be removed to your next home easily.
  • It is highly unlikely that you can recoup 100% of your renovation cost.
  • Changes in taste happen fast. What is trendy today may be obsolete 5-10 years later.
  • The more money spent on renovations mean less net profit when you sell.
Overlooked Factors When Buying a Condo

📌4. Monthly Maintenance & Yearly Tax

  • Other fees include monthly condo maintenance and yearly property tax.
  • The monthly maintenance fee is between $300-400 for mass market condos
  • This is paid quarterly in advance to the management office.
  • Property tax is an annual tax levied on property ownership.
  • Between 2023 and 2024, owner-occupied and non-owner-occupied rates will be raised.
  • These changes will have less impact on the suburban condos.
  • This change is targeted more on high end condos.
  • For more details on latest property tax, check out this government site link.
Overlooked Factors When Buying a Condo

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Dennis Lim

Dennis has more than a decade of experience investing in real estate. Like many fellow Singaporeans, he grew up in a HDB flat with dreams to live in a condominium. Through careful financial planning & hardwork, this became a reality when he was 30. He now owns 3 private properties in Singapore and has helped hundreds of Singaporeans to achieve their goal of upgrading their homes in land-scarce Singapore.

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