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How a single executive or a young couple can afford Sengkang Grand Residences

Updated: Nov 23, 2019

For readers who have visited the show units of Sengkang Grand Residences and agree that this integrated development offers a great value proposition, you might be tempted to buy a unit for investment or for your own stay with family. The questions you may ask, “Can I afford a unit at Sengkang Grand Residences”? “How much cash and/or CPF do I need?”

I provide two simple scenarios from the perspective of an investor and a couple for own stay to analyse the affordability of Sengkang Grand Residences.

Scenario 1:

Ethan wants to buy a 1 bedroom + study (474 sqf) unit at S$800,0000 with 75% loan-to-value (LTV). This will be his first property.

At 30 years old, he has accumulated S$110,000 in his CPF ordinary account after working for six years and was disciplined enough to save up S$115,000 in cash.

Let us work out the financial plan for buying the 1 BR + Study unit.

What Ethan has to fork out in cash is the booking fee of S$40,000 at the time of booking as well as the buyer’s stamp duty of S$18,600 two weeks after signing the S&P (He may subsequently apply for a one-time reimbursement from his CPF account). Eight weeks from the booking date, the 15% exercise fee will be due, which he will pay partially in cash (S$50,000) and the rest using his CPF (S$70,000). Upon completion of foundation work, S$40,000 (5%) will be paid from his CPF. Based on 75% LTV, Ethan will take up a home mortgage loan of S$600,000.

He needs to also set aside cash for legal fees, typically at about $2,500 to $3,000. It seems he has no problem here with his cash surplus of S$6,400.

Ethan’s loan eligibility

Now, let’s look at Ethan’s eligibility for a bank loan. His current basic salary is $6,000 per month. He charges approximately S$500 to his credit card every month. He does not have any car loan to service.

Under MAS’ total debt servicing ratio (TDSR) framework, monthly repayment of all debts cannot exceed 60% of Ethan’s monthly income. Based on 60% TDSR, the amount of income which the bank uses to determine the loan amount is S$3100. Ethan is able to go for a loan tenure of 30 years and if we assume an interest rate of 2.5%, the maximum loan amount which the bank will approve is about S$784,569 (> S$600,000 based on 75% LTV for the unit he is eyeing). Hence, Ethan can certainly afford to purchase the 1BR + Study unit at Sengkang Grand Residences. In fact, his budget can go up to about S$982,000 if he uses all his savings and take the maximum eligible loan.

Scenario 2:

Joshua (35 years old) and Adele (33 years old), both Singaporean, want to buy Sengkang Grand Residences 3 bedroom (936 sqf) unit at S$1,600,000 as their matrimonial home. They currently do not own any property. They have a combined cash savings of S$280,000 and CPF OA savings of S$190,000.

This is how the financial plan for buying the 3BR looks like:

What they have to fork out in cash is the booking fee of S$80,000 at the time of booking as well as the buyer’s stamp duty of S$48,600 two weeks after signing the S&P (they may subsequently apply for a one-time reimbursement from one of their CPF account). Eight weeks from the booking date, the 15% exercise fee will be due, and they will pay partially in cash (S$130,000) and the rest using CPF (S$110,000). Upon completion of foundation work, S$80,000 (5%) will be paid from their CPF. Based on 75% LTV, they will take up a home mortgage loan of S$1,200,000.

They need to also set aside cash for legal fees, typically at about $2,500 to $3,000, which doesn’t seem like a problem here with their cash surplus of S$21,400.

Joshua and Adele’s loan eligibility

Next, we estimate the maximum amount of loan that Joshua and Adele may obtain from the bank. Joshua earns a basic salary of S$7,000 per month while Adele’s self-employment income is S$8,000 per month on average. They have a combined debt obligation of S$1,000 per month.

The amount of income used to determine the maximum eligible loan for this couple, taking into consideration TDSR, works out to be S$6,560. Their income weighted average age allows them to go for the maximum loan tenure of 30 years. Again, using the prudent interest rate assumption of 2.5%, we estimate that Joshua and Adele are able to take up an S$1,660,251 loan (>S$1,200,000 based on 75% LTV for the unit they are eyeing). In fact, their budget can go up to about S$2,059,000. Sengkang Grand Residences 3 bedroom at S$1,600,000 is not an issue.

The above scenarios are very straight forward cases and simply give you an idea of the amount of savings and income that a buyer would have in order to fulfill his or her aspiration of buying a unit in this integrated development. It is worth highlighting that since the project is a Building-Under- Construction (BUC), the drawdown of the mortgage facility will be progressive and the monthly mortgage repayment will be low at the beginning of the construction period.

A property financial plan for your own unique scenario

Everyone has his/her unique circumstances – You may be waiting for PR approval, or are already a PR. You could already own a property and are looking to invest in a second one. You could be waiting to sell your HDB and are weighing your options. Or perhaps, you are looking at “de-coupling” and are not sure whether it is financially feasible.

There are solutions for every individual circumstances and it is a good idea to do detailed property financial calculation in order to know the options available for you. And before you decide to purchase a property, always obtain an approval-in-principle from a bank.

If you would like to have a free property financial consultation for your own unique scenario or would like to know the monthly mortgage repayment from year 1 for the two scenarios above, feel free to drop me a note.