How Much Should You Save for A BTO?
Getting a BTO flat with their significant others has become an essential step in the relationships of many Singaporean couples. Even before you get hitched, you and your partner may feel tempted to ballot for a flat in advance because of the significant waiting time.
However, buying a flat is not a decision to be made lightly. We understand that it can be overwhelming for first-timer couples, so we’ve enlisted the help of Mr Joseph Tan, Financial Services Manager, to give you some basic tips on how you can start saving for your BTO and how much you should put aside!
Decide on what you want
There are many factors that should go into your decision-making process before applying for a BTO flat. These will affect the amount that you need to save for, and some essential considerations before deciding on a flat include:
One important discussion that you and your partner needs to have before deciding on a flat should be about the housing loans that both of you want to take.
In order to choose a loan, you first have to be aware of the slight differences between HDB loans and housing loans from banks. Be sure not to gloss over this, as certain banks have severe penalties for those who wish to change their loan plans later on.
One example of such differences is how HDB loans have lower downpayment requirements (10% of the purchase price) than bank loans (25% of the purchase price). In this case, an HDB loan would result in a smaller immediate financial burden on a couple. You and your partner can then pick between various repayment periods (capped at 25 years max) for HDB loans, and this will affect the amount of interest charged!
Generally, a loan that takes longer to pay off would also mean more interest to pay off overall. In a scenario like this, you and your partner should make sure that you can afford to make the necessary payments regularly.
Grants & subsidies
Another factor that you and your partner should take into account is the various grants and subsidies that you are eligible for. If both of you are first-time applicants for a BTO, you should be aware of the Additional CPF Housing Grant (AHG) and the Special CPF housing grant (SHG).
Depending on your combined household incomes, you and your partner may be eligible for up to $80,000 in grants, which can greatly ease the financial burden on both of you!
Bearing these points in mind, how then, should you save? To put it simply, there are basically two main ways to go about saving – you either save to “get what you want”, or “get what you can afford”:
1. Getting what you want
For the go-getter couples who already have an ideal housing situation in mind – perhaps a 5-room flat in Central Singapore – it would be prudent to sit down together and draft out a plan that can help you work towards your goals.
In the event that you and your partner take an HDB loan, paying for the downpayment of your flat with your CPF is a viable solution. However, if the amount in your combined CPF accounts is less than 10% of the purchased price of the flat, you will need to fork out cash for the downpayment instead.
To determine how many years you need to save in order to be able to afford the downpayment and the loan repayment from there onwards, take your shared income as a couple and project forward to when your salary enables you to save at a comfortable rate. Then, divide your downpayment by that rate, and you’ll be able to draft out a timeline to stick to in order to save up and purchase your dream home!
2. Getting what you can afford
For couples who value pragmatism, safety, and cannot wait to move in together in a house of your own, assess your available resources together, such as your combined income. You and your partner can then choose a flat that is of a suitable location or size within your means, depending on your personal preferences.
The benefits of this method ensure that you and your significant other will be able to reduce costs significantly. By spending well within your means, you will also have more financial freedom, which you can allocate as you deem fit.
Whether you’ve got your eyes set on a 5-room flat, a BTO in a new estate, or if you’re still undecided between a BTO or resale flat, you and your partner should be able to mutually agree upon the best approach to purchasing your new home with these tips. If you need more advice on tips for saving for a BTO as a couple, reach out to Financial Services Manager, Joseph, at 9853 0208!