Buying Property Tips

Before buying a property, consider whether your motivation to buy matches the lifestyle you have or want to have. Most of us have the desire to eventually ‘nest’ and make our home somewhere that brings a sense of satisfaction and security that cannot be matched. Home ownership is a long-term goal, and requires planning, budgeting and saving strategies.

Advantages of owning your dream home:
Security: Owning your own home brings a sense of satisfaction, security and stability. There are no lease conditions to worry about and you are no longer subject to the whims of a landlord who has control over the length of your tenancy and the cost of rent.

Investment: As long as your home is appreciating or maintaining value, you are growing equity (ownership) in your home. This equity can be later used to secure further loans and will also provide security in retirement.

Savings strategy: In a sense, making repayments is like a type of forced savings strategy. The more you pay off, the more of your home you will own. Furthermore, once you have paid off your mortgage, you will free up a large portion of your income which will lighten your financial responsibilities.

Lifestyle: Choosing the style and type of home for your lifestyle (or changing it to fit) is a huge incentive for many people to become home owners. In rented premises, time, money and effort spent on decoration and gardening will not return to you beyond the length of your lease and in most cases, the landlord will be very particular about any modifications you make in the first place. Owning your own home not only provides the freedom to change and improve your house as you like, but the process can become a productive hobby which may increase the value of your property at the same time.

Tax incentives: If you purchase a property for investment purposes, the interest on your mortgage payments is tax deductible. Likewise, an investor who lets their property to tenants can take advantage of the tax benefits of negative gearing.

Status: The status of being a home owner is not only satisfying inwardly, but it provides other benefits from a financial viewpoint. As you make regular mortgage payments, you will establish a favourable credit rating with financial institutions which may be useful for future borrowing.

The Buying / Selling Process:

1) Select an agent
Optional, but recommended. A professional agent will not only help you to find the right property, but also ensure you get the right price, ensure all small details are covered prior to purchase, guide you through the process and make recommendations on financing options and legal concern.

2) Find your property and agree a price
When reaching a preliminary agreement to buy, ensure that all important points have been discussed and agreed, including any repairs or changes prior to purchase, what stays and what goes, any special requirements from both side and the anticipated schedule.

3) Obtain an Option to Purchase
This is obtained from the seller through their lawyer or agent. At this point you are required to pay a non-refundable option fee (normally 1% of purchase price). The option period is usually 14 days.

4) Appoint a Lawyer
You now need to appoint a lawyer to make legal enquiries on the status of the seller, the title of the property and the terms of the sale.

5) Arrange Purchase Financing
Compare interest rates and special terms when choosing your financial scheme. You can apply for withdrawal of CPF savings by completing an application together with a valuation report prepared by a licensed valuer who is on the CPF panel of valuers.

6) Exercise the Option
If all is well you now sign the Sale & Purchase Agreement, and pay 5% of the purchase price (less the option fee). You also need to pay stamp duty within 14 days upon signing the Sale & Purchase Agreement.

7) Legal Inspection & Completion
Your lawyer will carry out an investigation of title deeds and send requisitions to various government departments. The seller’s lawyer will also prepare the completion statement and send documents for stamping to effect completion.

8) Settle Payment and Handover
You now settle the outstanding balance of the purchase price. This might be 8 to 12 weeks after exercising the option. The seller’s lawyer will then handover the keys and title deed of conveyance, and you become the owner of your new home.

Plan Before You Buy
Set your sights on the long term by being realistic in the immediate term. Look at what you can afford and make some compromises on what you want to get off to a sound financial start.