How much should you save to upgrade from a HDB to a private condo?

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With Singapore's property market in a long slump, some people now have an opportunity to upgrade from an HDB to a condo. In fact, property prices are down around 10.8 per cent since the peak in 2013, making this a rare opportunity. But can you afford to make the leap? Here are the numbers to consider:

Cost assumptions

For the purposes of this article, we will assume the cost of the condo is S$1 million. We will also make the following assumptions:

- You are selling your flat for S$500,000*

- The loan tenure for the condo does not exceed 30 years, and you will not be older than 65 at the time the loan ends

- You have lived in your flat for longer than five years (you are past the Minimum Occupancy Period)

- You do not have significant outstanding loans besides the mortgage you are going to take up for the new house

* The money from the sale of your flat will be refunded to your CPF Ordinary Account (OA), along with the accrued interest. For simplicity's sake, we are assuming S$500,000 has been refunded to the CPF account. Visit the CPF home calculator to determine how much will be refunded to your CPF, in your specific case.

Deduct the down payment

When you are buying private property, you cannot use an HDB concessionary loan. You'll need a bank loan instead. A bank loan is able to finance up to 80 per cent of the condo's price*.

Of the remaining 20 per cent, up to 15 per cent can come from your CPF OA. The remaining 5 per cent must be paid in cash. The down payment on a S$1 million condo is thus S$200,000. Of this amount, S$150,000 can come from CPF (we know there is enough in CPF, as S$500,000 was refunded from the sale of the flat). This leaves you with having to pay S$50,000 in cash, as a minimum down payment.

It is inadvisable to borrow this S$50,000, as doing so will affect your Total Debt Servicing Ratio (TDSR). Your monthly debt obligations cannot exceed 60 per cent of your monthly income; if it would, you will have to take a smaller loan.

* This amount will be less than 80 per cent, if you would be older than 65, at the end of the loan tenure.

Pay the Buyer's Stamp Duty

You have to pay the Buyer's Stamp Duty (BSD) for the purchase of your property. This amount is a percentage of the property price or value, whichever is higher*. It is as follows:

- First S$180,000 of property price or value: 1 per cent

- Next S$180,000 of property price or value: 2 per cent

- Remaining amount: 3 per cent

The condo is S$1 million. For the first S$180,000, you will pay S$1,800. For the second S$180,000, you will pay S$3,600.

The remaining value (S$1 million - S$180,000 - S$180,000) = S$640,000. 3 per cent of this remaining value is S$19,200.

As such, the total BSD you will pay is S$19,200 + S$1,800 + S$3,600 = S$24,600.

BSD is paid at around the same time you sign the Option to Purchase (OTP).

* The property value is determined by the formal valuation, whereas the price is whatever the seller sets. The two may not be the same. For example, if the property is valued at S$970,000 but the seller is charging S$1 million, the BSD applies to S$1 million (always use the higher of the property price or value).

Make sure you have cash for renovations

The cost of this varies, depending on what furniture you will buy, whether you will hire an interior designer, and so forth. Whilst you can take a renovation loan, it is always best to save up instead (the interest rate on a reno loan is around 3 per cent per annum).

We will assume the total cost of renovations would be S$30,000 (this is the standard amount quoted by most interior designers, as it is also the cap of most reno loans).

However, we'll say you pay about half this amount (S$15,000) by moving over most of your old furniture (we'll include the cost of moving in the S$15,000 you pay).

Pay your property agent

Most property agents charge 2 per cent of the property value. As common practice (and not a rule): If you buy from a developer, it is common for the developer to pay your agent's commission. If you buy a resale condo, it is common for the seller to pay, and then the seller's agent and your agent will work out the commission between themselves.

As such, we assume you pay no commission for the purchase of your condo. However, we will assume you pay a property agent for the sale of your flat. At S$500,000, this works out to a commission of S$10,000. But note that you are not required to use a property agent to sell your flat.

Pay monthly maintenance fees

The maintenance fees for condos are much higher than the conservancy charges you're used to. Expect to pay S$200 to S$300 per month, for your S$1 million condo.

Condos with a concierge service can run up charges of S$800 to S$1,500 per month, but these are normally found in luxury developments, not regular condos. Still, check before you buy. You might be shocked at the prices some management councils charge.

Total cost

Overall, you'll want to have around S$99,600 in cash before making the leap. After that, you will have to make the monthly loan repayments (this depends on what loan package you get), as well as the monthly maintenance fees.