Perhaps you are in your twenties or thirties, and you are looking to invest in your first property. You have been reading up all you can on the best property investments. You are really keen on purchasing your first property, but you are unsure what you can afford.
Here’s a breakdown of what the numbers look like:
If you are still confused after reading this, don’t worry. Let us go through a detailed breakdown.
buyer stamp duty
When you buy a property in Singapore, you will need to pay to IRAS (Inland Revenue Authority of Singapore) what is known as Buyer Stamp Duty. Without boring you with the calculations, for a $1,000,000 property purchase, this works out to a buyer stamp duty of $24,600.
(If you’re interested, you can read more about buyer stamp duty here.)
This brings the financial outlay for a $1 million property to:
$1,000,000 + $24,600 = $1,024,600
bank loan (75%)
Your next question might be: How much does my loan cover?
Long story short. A home loan normally covers 75% of the property purchase price.(Assuming you have an in-principle approval from the bank that covers 75% of the purchase price)
Eligibility for a loan is a key consideration in a property purchase. This is why it is so important to make an appointment with a banker to make an assessment before making any property purchase. If you are unsure where to begin, drop us a message here.
For a $1 million property, the loan covers:
$1,000,000 x 0.75 = $750,000
remainder (25% + Buyer stamp duty)
This leaves us with a remaining amount of:
$1,024,600 – $750,000 = $274,600
This remaining amount of $274,600 has to be covered with either cash or your CPF Ordinary Account (OA). At least 5% of the property price must be covered with cash. This means you cannot pay the remaining amount fully with CPF OA even if you had enough to do so.
Let’s look at a few possible combinations of Cash + CPF:
Scenario 1: Adam has $50,000 in cash and $224,600 in his CPF OA.
In this case, Adam has just enough to meet the “minimum of 5% in cash” criteria. And happens to have this huge sum of money in his CPF waiting to be spent on a property.
Scenario 2: Belinda has $274,600 in cash and $0 in her CPF OA.
In this case, Belinda has no issue as well, being so cash rich.
Scenario 3: Chris has $137,300 in cash and $137,300 in his CPF OA.
In this case, Chris has enough from his cash on-hand and in his CPF OA to cover exactly what’s needed for the remaining amount.
Scenario 4: Denise has $40,000 in cash and $300,000 in her CPF OA.
In this case, Denise is not ready to make the $1 million property purchase. While she has more than enough cash + CPF for the purchase, she does not have enough cash to make up 5% of the property purchase price. She is sadly, $10,000 short.
Can I use my cpf oa to pay for the buyer stamp duty?
Yes! You can use your CPF OA to pay for the buyer stamp duty if you do not have sufficient cash to do so.
I hope this helps you in your calculations when deciding whether you are ready to make a property purchase. If you would like to have a full and detailed analysis of your financials and property options, drop us a message here and we would love to help.