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For those who intend to get a house or flat soon, the initial
move towards home ownership and a housing loan begins not
with a trip to the real estate agent or bank, but with a hard
look at your finances. How much can you afford to pay? Banks
and mortgage lenders will scrutinise every facet of your expenses
to judge just how much of a mortgage you can handle. Most
lenders aim for 40 per cent of your gross monthly salary.
You should be aware that since May 15, 1996, the loan quantum
for housing loans has been capped at 80 per cent of the purchase
price or valuation of the property, whichever is the lower.
This includes CPF funds to be withdrawn for the purpose of
financing your property. (Note that your CPF savings may finance
only freehold land or leasehold land with a remaining lease
of at least 60 years at the time of application for withdrawal
of CPF funds).
This means you will need the remaining 20 per cent in cash
to pay the developer or seller when the sale and purchase
agreement is signed. Say you plan to purchase a $1 million
property, you will then need $200,000 cash in hand.
In addition, you should factor in roughly 5 per cent of the
property price (or $50,000 in this case) for incidental costs
such as legal fees, documentation charges, government stamp
duties and valuation of property. On top of this, you are
likely to be required by your lender to buy some basic fire
insurance. This is just the purchase costs. If you want to
upgrade, renovation costs is another heavy expense to consider.
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