Invest in Singapore property: affordability case study

Invest in Singapore property: Affordability case study

Mr. and Mrs Lim earns a monthly income of $3,100 and $3,250 respectively.

They have a car installment which has 5 years remaining and $800 each

month.

* 3100 + 3250 = $6,350

* Credit card liabilities = $0

* Car Liabilities = $800

* Net cash flow (incl cpf) = $5,550 Per month



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Their parents gave them $120,000, they have $90,000 of savings.

They are planning on buying a condominium: -

* Condo price = $ 875,000

* Loan amount = $ 700,000

* CASH AT HAND = $ 210,000

* Stamp duty = -$ 20,850

* Downpayment = -$ 175,000

* Cash left = $ 14,150


Based on a Loan Tenure of 30 years @ 2.5% interest rate

* 30 years = $2766 per month (295,704 interest paid out)


Based on a loan tenure of 35 years @ 2.5% interest rate

* 35 years = $2,502 per month (351,305 interest paid out)


Assuming a Debt servicing ratio to cash flow of 50%

(Note: this is just a guideline, different banks use different interest rates and slightly different DSR, buyers are encouraged to check with us to obtain an approval-in-principle home loan, call us at 6100-0608 or SMS us at 9782-8606 or email us at loans@propertybuyer.com.sg to check)

While they look for investment property in Singapore, they have to make sure that

their credit history is clean. Their income should qualify them for a loan amount of

$700,000.


They are thinking of using 30 years instead of 35 years.

Because the interest paid out would be less.

Of course if everything goes smoothly, they would be able to go for the 30

year tenure. But in case something goes wrong, i.e. an accident, loss of

income, etc. They will be really cash strapped.


There are other incidentals associated with owning a private condo, such as

the following: -


*** $300 per month maintenance fees or $3600 per year.

*** Property tax, estimated at $18,000 per year, i.e. at owner occupier status

@ 4% = $720 per year or $60 per month.


So the monthly extra commitment is $360 due to the property.

So if we re-compute the fixed liabilities, the net cash position is...

* income 3100 + 3250 = $ 6,350

* Liabilities = $ 800 car (for 5 years)

* Liabilities = $ 360 condo related

* Credit card liabilities = $ 0

* Net cash = $ 5,190


Based on a Net cash position of $5190, paying out $2766 a month will be a

bit too tight for Mr. and Mrs. Lim.

So we recommended that Mr. Mrs Lim take a 35 years loan instead of a 30

years loan. This would be more comfortable on their monthly expenses.


ARE CAREERS AS SAFE AS THEY USED TO BE?

As careers are shorter with the new economic dynamics with technology and

business disruptions, many people will expect to change many jobs and

even change industries in which they work in their life times. From 1985 to

2009, we have encountered recessions in 1987, 1997, 2003, 2009, a

working adult should see major disruptions at least once every 5 years in

their life time. There is no guarantee of employment and salary stability.


So what is safer way for the Home loan tenure?

So just using a safer measure, we use a 20 year loan tenure @ 2.5% to

compute...The monthly installment is $3709 per month. Therefore Mr. and

Mrs. Lim should ideally be earning around $7,418 + $800 + $360 = $8,578

to more comfortably afford the Condo of $ 875,000.


So based on their current income, how much can they AFFORD?

Based on their current earning capacity, they should really be looking at a

property that is no more than, $480,000 loan or $600,000 property, based on

a 20 year loan.



Why work through www.PropertyBUYER.com.sg for mortgage home loans?

We help property buyers to look through each property's valuation to

establish a valuation range for any given unit. We have a unique

methodology to evaluate bargains for properties, we usually charge a fee for

property buying analysis service, we are offering this service free until Dec

2009.

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advisor that helps individuals get the best fit Singapore Home loans or to

refinance their properties, not simply the cheapest Singapore Home loans.

You can come to us for your Singapore Home Loan needs and we will do the

research work to compare all the bank's packages as well as assess the

best fit for you.


Contact us

Tel: 6100 - 0608 sms: 9782 - 8606

Email: loans@propertyBUYER.com.sg

http://www.propertybuyer.com.sg/contactus.php

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