Buying a property in Singapore is an expensive affair. To be precise, it comes with a 6 to 7 digit price tag that will take you 20 to 25 years to finish paying it off. Sometimes, the cost gets even higher when you accidentally overpay for the property because (1) you aren’t savvy about property buying or (2) you fell too head over heels with the property you are eyeing.
To help new homeowners avoid rookie mistakes of overpaying for your dream, here are some useful hacks you will need.
1. Compare The Price Against Historical Transactions
How do you know that you are not overpaying for your home? Simple. The first thing you should check against when buying property is the historical transactions for properties that you are eyeing. And there’s a good reason for doing so.
Ceterus paribus (i.e. all else being equal), the price that you are quoted should be similar to the recent transactions of the same HDB/condo. For instance, if you are buying a 2-bedroom condo from the same block, the prices should be comparable to what it was transacted 3 months ago.
But wait, where can you find the prices of historical transactions of properties in Singapore? It turns out that the data is quite readily available.
For HDB, you can find the resale price transactions on data.gov.sg. For condo or private properties, you can find the price transactions of different condos from listing sites like EdgeProp, PropertyGuru or 99.co.
When using this method, do bear in mind that time is an important factor to consider. In fact, you can’t compare historical property transactions that are too far away from today. That’s because property prices in Singapore have been appreciating and continues to appreciate. Thus, property prices are probably going to be a tad higher than the historical prices that you find.
Getting a BTO instead? Find out “What’s next after bidding for BTO?”.
2. Compare The Price Against Existing Property Listings
In the past, property prices used to be information asymmetric. You wouldn’t know the price quoted by the seller until you call up their agent to indicate your interest.
But nowadays, with the rise of online property marketplaces, that’s no longer the case. Simply search on the listing sites and you will find the latest selling price of HDBs/condos that are in the vicinity of any area that you are keen.
Given that location is one of the key characteristics that determine the price of a property, you can compare price points of HDBs/condos that are in the same area. They should be selling at similar price points, given that they have access to the same amenities. This method helps you methodologically find out whether you are paying on the higher or lower range of the asking prices in the area.
One thing to note when using this hack is to keep in mind that price comparisons are not as straightforward as it initially appears.
For example, two condos with the same distance to amenities can be priced differently because of other factors such as how well renovated it is, the size of the property, the layout of the unit, etc. So, if you fall in love with the renovations that the previous owners did, you'd be more willing to pay extra for the property if you can justify it.
3. Get A Professional Valuer’s Opinion While Enquiring About A Home Loan
When buying a property, most people will need to obtain a home loan with the bank to finance the property purchase. Thus, enquiring about a home loan is a crucial step in ensuring that the property is financially affordable for you and your spouse.
In fact, there’s actually a hidden hack within this step that you can leverage on to ensure you are not overpaying for your home.
When enquiring about your home loan, you can show your banker the unit that you and your spouse are keen on buying. Your banker can bring the property to the bank’s professional valuer to determine how much the property is worth based on today’s property market. The property value determined by the bank’s professional valuer will decide the maximum loan quantum that the bank can loan to you for the property.
For example, the property owner is currently asking for $1.1m for the property you are eyeing. The bank’s professional valuer takes a look at it and decides that it is valued at $1m.
At a 75% loan-to-value (LTV) ratio, your banker can only loan $750k to you for property financing. You will need to make the judgement call on whether the property is worth the extra $100k cash over valuation (COV) which cannot be covered by your CPF or home loan.
An LTV change is one of the new cooling measures that the government introduced end-2021. Read “Property Cooling Measures 2021: What Changed Overnight, And What Excites Us” to find out more.
4. Limit Unnecessary Interest Payments On Your Home loan
Can you guess how much you are paying for when you take out a home loan for $1m at 2.6% interest rate over a loan tenure of 25 years?
The answer is $1.36m and this means that you paid a total of $360k in interest payments over a period of 25 years.
That’s why one of the most “dangerous” hidden cost of buying a property is the interest rate that banks charge on your home loan.
As a soon-to-be homeowner, the one thing you need to do is to refinance your home loan periodically. Whenever you are out of the lock-in period, make sure to check with mortgage brokers like Mortgage Master to find out what’s the latest interest rates that banks are offering for their home loans. If it is lower than your existing home loan package, it’s a sign that you should sign up for a new home loan package. Otherwise, you will be paying unnecessary interest payments on your home loan and reducing the gains on your property investment.
If you're about to purchase a new property, don’t forget to reach out to Mortgage Master to compare the latest home loan mortgage rates for you.
Where Can You Find The Latest Home Loan Package Information?
To avoid paying unnecessary interest payments, you need to keep updated with the latest news about home loans. But we know that it can sometimes slip your mind as you juggle your daily life between your career and loved ones.
At Mortgage Master, we know the latest home loan packages in the market and sometimes can even offer exclusive interest rate packages that you cannot get directly from the bank.
That’s why we are providing a monitoring service to help you with this. Simply fill up this enquiry form with your email and contact number so that we keep you informed of any changes in interest rate at the banks. Once your lock-in period is up, we will just drop you a reminder to refinance your existing home loan.