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Complete Guide to Downpayment For A Condo in 2024

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For many first-time homebuyers in Singapore, purchasing a condominium is not just a major life milestone but also a significant financial undertaking. Navigating the complexities of condo financing, especially understanding how much you need for the downpayment, is crucial.

This guide will explore the requirements for the downpayment, the roles of different loan types, including bank loans for condos in Singapore, and how these financial dynamics play out for first-time condo buyers.

What is a condo downpayment?

A condo downpayment in Singapore is the initial upfront payment made by the buyer when purchasing a condominium unit. It represents a significant portion of the total purchase price. It signifies the buyer’s commitment to securing a condo loan in Singapore.

In Singapore, the size of the downpayment is influenced by the loan-to-value (LTV) ratio determined by the Monetary Authority of Singapore (MAS). The government enforces a Minimum Downpayment Regulation that dictates a minimum percentage of the property’s purchase price to be paid upfront.

Why is a condo downpayment important?

Having a substantial downpayment offers several advantages for first-time condo buyers:

  • Lower Loan Amount: A larger downpayment translates to a smaller loan amount needed from the bank. It reduces your overall debt burden and makes the monthly mortgage repayments more manageable.
  • Reduced Interest Costs: The total interest paid over the loan tenure will also be significantly reduced since the loan amount is lower. It translates to substantial savings in the long run.
  • Financial Stability: A larger downpayment demonstrates financial responsibility to lenders, potentially qualifying you for better interest rates and loan terms. It strengthens your financial stability and overall well-being.
  • Stronger Bargaining Position: A hefty downpayment can put you in a stronger position when negotiating with sellers. It shows your serious intent and commitment to the purchase, potentially making your offer more attractive.

What factors affect downpayment for condos in Singapore?

  • Property price: The higher the property price, the larger the downpayment required, directly impacting the buyer’s upfront financial commitment.
  • LTV ratio: This critical factor determines the maximum loan amount one can borrow, inversely affecting the downpayment size. A lower LTV ratio means a higher downpayment requirement.
  • Additional cash payment: Depending on the loan agreement, buyers may need to make additional cash payments alongside their downpayment.
  • Grants for first-time buyers: Eligible first-timers purchasing ECs can benefit from CPF housing grants, potentially reducing the downpayment amount required.

Can I use my CPF to pay for a condo downpayment?

Yes, you can use CPF Ordinary Account (OA) funds to pay for part or all of the downpayment on your condo, provided you meet certain conditions set by the CPF Board and the bank providing the condo loan in Singapore.

CPF funds are meant for housing and retirement purposes, making them a valuable resource for first-time condo buyers. CPF funds for a condo can also cover monthly mortgage payments, significantly easing the cash burden on buyers.

There are, however, limitations on how much CPF savings can be used for the downpayment, depending on the type of condo purchased:

New Condos: For new condos (directly from developers), you can utilise your entire CPF OA savings for the downpayment.

Resale Condos: For resale condos (existing units), the amount of CPF OA savings usable for the downpayment is capped at the purchase price or your total CPF OA savings, whichever is lower.

Bank Loan for Condo

For a bank loan for condo in Singapore, the minimum downpayment typically stands at 25% of the property’s purchase price, with the LTV limit capped at 75%.

Minimum Cash Requirement: At least 5% of the purchase price must be paid in cash.

Using CPF Funds: Up to 20% of the purchase price can be covered using your CPF Ordinary Account (OA) savings.

Condo Housing Loan Variations

Condo Loan with a longer tenure: If you opt for a loan tenure exceeding 30 years (or extending past the age of 65), the LTV ratio is further reduced to 55%, increasing the downpayment to 45%.

Effects of Outstanding Loans: If you have other outstanding loans, your LTV ratio might be further reduced, impacting the amount needed for the downpayment.

Number of active housing loansLTV limit  Minimum cash payment for the condo
075% or 55%*5% (for LTV of 75%); 10% (for LTV of 55%)  
145% or 25%*25%
2 or more35% or 15%*25%
Table 1. LTV Ratio

*Only opt for the lower LTV limit if the loan tenure surpasses 30 years (or 25 years for HDB flats) or if the loan term extends beyond the borrower’s age of 65.

HDB Loans for EC

Applicable only for ECs, HDB loans offer a more lenient LTV ratio of up to 80%, thereby reducing the downpayment requirement to 20%. You can pay the downpayment from your CPF OA account or cash, or a mix of both.

However, the availability and criteria of HDB loans for EC purchases necessitate a careful review, with distinctions from conventional bank loans playing a critical role in the decision-making process.

Navigating the financial prerequisites for purchasing a condo in Singapore, especially as a first-timer, requires diligent preparation and a keen understanding of the market dynamics and loan mechanisms.

Whether opting for a bank loan for condo or exploring HDB loan options for ECs, buyers must strategically plan their finances to meet the downpayment requirements, ensuring a smooth journey towards owning their dream condo.

Comparing Condo Downpayment for First-Time vs. Subsequent SC Buyers

Scenario 1: A first-timer couple is looking at a resale condo priced at $800,000.

  • Minimum Downpayment: Following the regulation, they need to pay a minimum downpayment of 25% of $800,000, which amounts to $200,000.
  • Minimum Cash Component: Out of this $200,000, at least 5% ($40,000) must be paid in cash.
  • Utilising CPF for Downpayment: Assuming the first-timer couple has a combined CPF OA savings balance of $160,000 (remaining downpayment after cash), they can use this amount for downpayment. It equates to 20% of the purchase price.

But hold on! Do you have $160,000 in your CPF account? A regular salaried employee earning a decent monthly salary of $4,000 would take over eight years to accumulate that amount in your Ordinary Account. That’s quite a stretch.

Therefore, if your CPF OA balance isn’t quite up to that mark, you might find yourself forking out more than $40,000 in cash for your condo downpayment.

Scenario 2: A couple with an existing home loan looking to buy a $800,000 resale condo.

Subsequent buyers may face stricter requirements, such as a larger cash component if they have an outstanding home loan. The LTV for subsequent loans can decrease, increasing the overall downpayment requirement.

  • Minimum Downpayment: With an existing home loan, the LTV ratio available to the couple is reduced to 45%. It means they must come up with a downpayment of 55%, which for an $800,000 condo, totals $440,000.
  • Minimum Cash Component: At least 25% of the property price, or $200,000, must come from cash. It ensures that borrowers are not overly leveraged on their second property purchase.
  • Utilising CPF for Downpayment: The couple can then use their CPF OA savings to cover the remaining downpayment of $240,000. We presume that the couple has sufficient CPF funds after considering their first property’s ongoing mortgage, which may also be drawing from their CPF.

Additional Costs to Consider

The downpayment is just one piece of the financial puzzle when buying a condo. Owning a condo comes with some additional costs, which you must factor in:

  • Stamp Duty (BSD and ABSD): This is a tax levied on all property purchases and an extra cost you must factor in when purchasing a condo. The amount varies depending on your citizenship status and whether it’s your first property purchase. Check the current BSD and ABSD rates below.
  • Mortgage Servicing: Monthly mortgage repayments are a primary expense, determined by your loan amount, interest rate, and loan tenure.
  • Agent Fees: If you’re using a property agent, expect to pay commission fees for their services.
  • Legal Fees: Legal fees are associated with conveyancing and other legal processes involved in the purchase.
  • Monthly Maintenance Fees: These are recurring charges that cover the upkeep of common areas and facilities in your condo complex.
  • Renovation Costs: Upgrading or customising your new condo can significantly enhance its comfort and value, but it requires a substantial initial investment, depending on the condition of the condo and your desired updates.
  • Homeowner’s Insurance: It protects against potential damages and losses, ensuring financial security in unforeseen circumstances.

Remember, these additional costs can add up significantly. It’s crucial to maintain an emergency fund that covers 6-12 months of living expenses, including mortgage payments, to safeguard against unforeseen circumstances.

Purchase price or market valueBSD (Residential)BSD (Non-residential)
First $180,000         1%1%
Next $180,0002%2%
Next $640,0003%3%
Next $500,0004%4%
Next $1.5 million5%5%
Over $3 million6%5%
Table.2 Current Buyer’s Stamp Duty Rates
Singapore Citizen buying first propertyNo need to pay ABSD
Singapore Citizen buying second property20%
Singapore Citizen buying third & subsequent properties    30%
Singapore Permanent Resident (SPR) buying first property5%
SPR buying second property30%
SPR buying third and subsequent properties35%
Foreigners buying any property60%
Entities (company or association) buying any property65%
Housing developers for any residential property       35% ((additional 5% if the entity is housing developer; non-remittable)
Trustee buying any residential property65%
Table.3 Current ABSD Rates

Practical Tips And Strategies To Save For Condo Downpayment

Budgeting and Goal Setting: Emphasise creating a detailed budget to track income and expenses. Once you have a clear picture of your finances, set realistic savings goals for the downpayment. Consider factors like the desired purchase timeframe and target condo price to determine the amount you need to save each month.

Automate Savings: Set up a dedicated savings account and automate transfers on payday to build your downpayment fund.

Reduce Expenses: Temporarily cut back on unnecessary expenses like dining out, subscriptions, and impulse purchases and redirect those funds to your downpayment savings.

Increasing Your Income: Explore various strategies for increasing income, such as side hustles, career advancements, or leveraging existing skills.

CPF Top-Ups: Singaporeans can make voluntary top-ups to their CPF OA accounts to maximise their CPF savings available for the condo downpayment. Consider setting aside a portion of your monthly income for CPF top-ups to accelerate your savings for downpayment.

Government Grants: Research any relevant government grants and subsidies for first-time condo buyers. These grants can provide some financial assistance and ease the downpayment burden. Check with the HDB or relevant government websites for current grant information.

Some may ask, “How long does it typically take to save enough?”. Well, the time required to save enough for a downpayment can vary widely based on your income, expenses, and property price. On average, it might take a few years to accumulate the necessary funds.

Considerations Beyond the Downpayment

While the downpayment is a significant hurdle, securing a condo purchase goes beyond that initial payment. Here are some additional factors to consider:

Loan Eligibility

Obtaining a bank loan to finance the remaining purchase price requires meeting specific eligibility criteria set by banks. These criteria typically include minimum income requirements and a healthy Total Debt Servicing Ratio (TDSR).

Your TDSR measures your existing debt obligations (loans, credit card payments) relative to your income. A lower TDSR indicates a stronger ability to manage additional debt, making you a more attractive borrower for banks.

Interest Rates

The interest rate offered on your mortgage significantly impacts your monthly repayments. Higher interest rates translate to higher monthly payments and a greater total cost of ownership over the loan tenure. Shop around and compare interest rates offered by different banks to secure the most favourable deal.

Long-Term Affordability

Remember, the condo purchase is a long-term commitment. Don’t solely focus on saving for the downpayment and overlook long-term affordability. Consider potential expenses like property taxes, maintenance fees, and interest rate fluctuations while making a decision. Ensure the monthly mortgage repayments remain comfortable within your projected budget even with these factors accounted for.

Conclusion

Understanding the intricacies of financing, particularly the size of the downpayment required, is crucial for first-time condo buyers in Singapore. Whether securing a bank loan for a condo or utilising your CPF funds, it’s essential to plan meticulously and understand all associated costs.

By adopting prudent financial planning with a clear understanding of the loan and downpayment requirements, you can navigate the path to condo ownership more smoothly and confidently.

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