There are four important factors that you should understand before you decide to put your money into your first property investment, and your subsequent property investments: the current property market scene in Singapore, your eligibility, factors that might affect your investment decision, and factors to note to maintain this mid- to long-term property investment.
Let’s focus on the second factor: your eligibility, and how to prep for it. The government set forth the TDSR measure a couple of years back, to ensure people do not over-leverage and over-commit into a property investment. The TDSR measure is the Total Debt Servicing Ratio, which considers your eligibility of making a property investment, after taking into account your income, age and debt obligations.
There are three criteria in making a property investment:
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Down payment + Buyer stamp duties
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If this is your first property, you can loan a maximum of 75%, and pay the rest of the 25% as down payment yourself.
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If > $1m, buyer stamp duties =4%Price -15,400
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If < $1m, buyer stamp duties =3%Price -5,400
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Proof of income for mortgage loan
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Clear ability and plan to hold the property, in the mid- to long-term, should the market not be favourable to you
Take a look at the chart above. The necessary down payment of 25% to buy a $1million property is $250,000. The buyer stamp duty is applicable as well.
If you are in the age category of thirty-five, the maximum loan tenure that the bank will allow for your mortgage loan =65-your age. This maximum loan tenure is generally capped at 30 years.
Let’s say, currently the monthly instalment is at an average of 2.5% across various banks. You invest at age 35, and pay approximately $2963 in monthly instalments. In order to qualify for this loan, assuming you have a car loan installment of about a thousand dollars a month, you will have to be earning a monthly income of $7500 seven thousand five hundred dollars to be able to loan close to the 75% mark.
However, as you age it will play a factor in all these numbers. The older you are, the shorter the tenure that you can loan for, the higher the monthly instalment payable, and the higher the required monthly income (while still having the $1000 car loan instalment, payable monthly).
So as a buyer, what does all this mean for you? Everyone aims to enter the property market at the right time, but on the other hand time is something we cannot buy back. Some interested investors keep waiting for the right opportunity to come, and end up never making the investment.
Henceforth, it is important to find the right balance, which depends on your current age, current income ability, your understanding of the right property that you want to enter into, and various other factors.
