Flat Post 2 - Cash You Need To Start With

Here's what you need to figure out financially when you're buying a HDB resale flat as a single buyer.

Cost of flat: $X (usually in the few hundreds of thousands). Let's use $470,000.
Cash over valuation: $Y (in the tens of thousands). Let's use $30,000.

So one can't really haggle over the valuation price. Apparently isn't been calculated by certified professionals who have no additional incentive to determine how prices fluctuate. Hard to believe but hey, I am a buyer, so I complain.

If you're keen, put down the option fee. That's $1,000. This amount goes along with signing the Option To Purchase form whereby a deposit of maximum of $5,000 inclusive of the option fee has to be paid in cash. Ultimately, the deposit goes to part of paying $X.

Do keep in mind that if you engage a property agent to handle matters, that's 1% of the valuation price that has to be paid for services rendered. Agent fees, sigh. (One can go at it alone, like I did, save the few thousand for the kick ass TV or kitchen makeover)

Now, you'll need to engage a lawyer to settle the legal backend work that has to happen when one buys a property. The lawyer, well the legal assistant more likely, will also arrange matters between the seller's lawyers, the bank (if any) and the CPF folks. Legal fees can come out of one's CPF so no upfront cash required there.

The next cash whammie that'll hit a resale buyer is the stamp duty. No one really understands what this is for but the tax guys love racking it in. At this point, I googled and found this:

"Stamp duty is a tax on executed documents relating to properties or interest in properties and shares or interest in shares. Stamp duty is payable only on documents described in the First Schedule to the Stamp Duties Act (Cap 312). These documents include a lease, sale and purchase, gift or mortgage of property. It is not a tax on transactions. If the agreement is verbal and no document is executed (signed) for that agreement, then no stamp duty is payable. Liability arises once the document is executed. Hence, even if the transaction has been aborted, stamp duty is still payable on the document." Taken from IRAS website.

For property purchases, the rate is based on steps of $180,000 - 1% on the first 180k, 2% on the next, and 3% on the balance thereafter. So if your property's sale price (that's $X + $Y folks) is let's say $500,000, the stamp duty is $5400 (for the first $360k) + $(500,000 - $360,000) x 3% = $9,600.

Technically, this amount can come out of your CPF but apparently you can't make that transaction till the CPF management approves things, and that can't happen till your lawyer puts in the paperwork for the stamp duty. A bit of a chicken-and-egg situation there. So one pays cash first, then it's reimbursed after the amount is deducted from the CPF.

Somewhere along the way, there's a HDB application processing fee that's based ridiculously on the size of the flat purchased rather than the admin work being done. I paid $60.

If a bank loan is the desired means of mortgage payments, there's probably a processing fee for that too. I can't remember what I dished out but I think it's 0.1% of the loan amount.

Alrighty, here's the mandatory cash component deal when it comes to actually paying for the flat. The almighty HDB dictates the 80-20 rule: 20% of $X upfront and 80% can come from a loan. Out of the 20% - 5% must be in cold hard cash. 15% can come from one's CPF. So with a flat that costs $470K, the cash portion is $23,500. This amount includes the deposit amount, so that's a balance of $18,500.

To sum up, the cash you need ready upfront before you can even think of getting a resale flat bought at $500,000 is :
- agent fees $5,000
- option to purchase fee and deposit $5,000
- stamp duty $9,600
- 5% of valuation price less deposit $18,500
- cash over valuation, let's say $30,000 - that's what's averaging now for 4rm and larger flats
- processing fees - variable, around $500 perhaps
--> TOTAL - $68,600

Yikes eh. Especially if you're going at it alone. And that doesn't include the cost of renovation, furniture and appliances.

Given that the COV is close to 50% in the example, I am sure many will understand my wrath at property agents for asking for the sky, sellers thinking their crap flats deserve monetary exaltation and the gahmen for letting this madness go on.

Go get hitched, at least the burden is shared. And you might qualify for housing grants to offset costs too. United in debt, ever after.