Like many things in life, there isn’t a manual that will guide you through buying a property. Some fortunate ones have family or close friends who have been down that road, and are willing to share their experiences, both good and bad. But for many others, they just charge ahead and learn from the university of hard knocks.
We want to save you from committing common house-buying mistakes, so we’ve talked to some homeowners and asked them to share their stories. We hope that by compiling some of their experiences here, you will be able to avoid the potential pitfalls, and have a fulfilling house hunting and buying journey ahead of you.
Buying a new house is an exciting time in your life but beware of the pitfalls
Mistake #1: Looking for the house before going to the bank
“I thought that you should at least narrow down the property you want before asking about the housing loan because you don’t even know the selling price of the property, so how can the bank calculate for you, right?” quipped David.
This is a common misconception among newbies. Being a Singapore permanent resident (SPR) without many close friends here, David and his SPR wife figured that they should go house-hunting first. They attended a good number of condo launches and viewed resale units that they found on website listings. They shied away from property agents who approached them because they preferred to go it alone.
When they finally found a unit that ticked all the boxes, they were disappointed to discover that they do not meet the loan requirements. Though they didn’t suffer monetary loss, they wasted much precious time. Many weekends and after-office hours were sacrificed with no concrete results in return.
Before going house-hunting, talk to your banker first
So, remember, go to your banker first before going for viewings, and not the other way around. Your banker will help you to calculate your Total Debt Servicing Ratio (TDSR) and Loan-to-Value limit (LTV). He will also calculate a possible loan amount and monthly instalments for you based on your CPF funds and cash in hand.
If you think you need more time to scout for a suitable house, then don’t get the Approval-in-Principal (AIP) for a bank loan. The AIP lets you know how much the bank is willing to lend you, and how much your monthly instalments will be, but it is valid for only 30 days. You can leave this to later when you’ve identified your dream house.
Mistake #2: Going to just one or two banks
“I went to only two banks to enquire about their housing loans because I was busy with work and since both banks quoted me similar figures, I concluded that all bank loans are about the same,” said Mohan wistfully.
If there’s anything you want to cut corners with in the house-buying process, it is not the bank loan part, if you want to get the best deal in town. Every bank will have its own mortgage schemes. Especially now in a high interest-rate scenario, you will need all the groundwork possible to find a bank loan that works for you for the next two or three years.
Many loan-servicing homeowners are now going for a fixed-rate loan instead of a floating-rate one. This means that you’ll be tied down for the near term (2 or 3 years). Just imagine servicing a not-so-favourable loan for that period of time. It certainly pays to do your homework now than to regret later.
Mistake #3: Not factoring in all the other expenses
“I don’t know about all these BSD, ABSD and whatnots,” said Li Na in Mandarin. The Chinese national intended to buy a condo in Singapore as an investment.
There certainly are many things that you have to get acquainted with when you want to buy property in Singapore. It’s not just about finding out how much the property costs and whether you can afford it or not. There are a lot of ancillary payments that will add up to quite a substantial sum.
Things like the buyer’s stamp duty (BSD), additional buyer’s stamp duty (ABSD) and legal fees must be factored in to your house purchase. Would-be house buyers just have to get schooled in all these details or engage a property agent to advise them.
Mistake #4: Falling in love with the show unit
“My wife loved the show unit so much that she insisted that I buy a unit at that property, but later we discovered that many things were not ideal for us, like the lack of suitable schools for our kids,” lamented Mr Tan.
It’s crazy but it’s true. People do fall for show units because they just can’t separate what they see and what they’ll eventually move in to (i.e. an empty unfurnished unit).
The only advice here is to set aside your emotions and be more rational. Seriously look into the details. Consider not just your own unit or the development itself, but also the surrounding facilities and community. Ask yourself if it matches your needs before making a hasty decision.
Show units are specially dressed up to impress
Mistake #5: Not checking resale units well enough
“We got conned. The previous owner showed us all the nice bits about their home, and hid the flaws from our view,” complained a disgruntled Mrs Wee.
Sad to say this but the onus is on you, the house buyer, to be excruciatingly thorough when checking a house you’re interested in buying. It’s only natural that the current owner wouldn’t point out its flaws to you. Hence, it’s a case of buyer beware.
Don’t let defects crack you up after the purchase
Do your homework. After all, a house is not an insignificant purchase that you can easily chalk up to experience. Check the unit for defects or you may end up with extra reparation costs. Besides this, ask among the neighbours if the house has a “history”, particularly if the owner is only too eager to sell it off, even below valuation.
Mistake #6: Buying without considering worst-case scenarios
“We were comfortably paying off our loans until my husband lost his job. His CPF is only enough to cover one year of payment, and I’m a homemaker,” Carol said.
Life is full of uncertainties. Nobody foresaw Covid-19 or the current inflationary market. In his recent pre-National Day address, PM Lee warned Singaporeans that “The world is not likely to return anytime soon to the low inflation levels and interest rates that we have enjoyed in recent decades”.
Don’t make big decisions based on the best-case scenario, but the worst. Make sure you’ve enough buffer funds to withstand a long-drawn-out bad patch. Although a bigger down payment will mean less interest payments, don’t over-commit either. If you sink your last dollar into the down payment, how about having enough for life’s other priorities?
Mistake #7: Buying without thinking well ahead
“We were happily settled in as a couple. Our two-bedroom condo wasn’t super spacious, but it is cosy enough. But then we started to buy lifestyle items, such as a keyboard, baking equipment, a golf set, a Christmas tree, and we were fighting for extra room. The worse was when my overseas relatives stopped over for a holiday. We couldn’t accommodate them at all!” recalls Cindy.
Buying a house means not thinking of your present needs, but your future needs as well. Unless you’re a very diligent shopper who does not believe in hoarding anything, you must think ahead about the space you need for future physical items. Consider all things carefully before committing.
If you’re planning for a baby, make sure you buy a bigger unit even if you don’t need all that space now
Mistake #8: Committing too little down payment
“We were only in our twenties when we bought our condo. Since we have so many years ahead of us and both of us love travelling, we decided to put the minimum in down payment. True, we get to enjoy a lot of the good things in life, but we’ve wasted a lot in interest payments too,” lamented Mark.
Earlier we warned you against over-committing in your down payment. Well, the reverse can be true too. If you put the bare minimum for your down payment and stretch your loan period to the max, it doesn’t take a genius to figure out that your interest payments would be huge.
In case you think that the interest payments go hand in hand with your principal, you can’t be more wrong. In the world of loan financing, you always pay the interests first before starting to pay off your principal!
Too much or too little? Decide carefully how much down payment you’re comfortable with
Mistake #9: Preferring to DIY, don’t believe in having agents
“We didn’t use a property agent when buying our condo because we wanted to save on the commission. But on hindsight, we should have engaged one because it would have saved us a lot of hassle!” shared Martin.
From identifying your property to securing a bank loan, negotiating with a seller to stamp duties and legal fees, there’s much to do and know in the property-buying process. It’s easier if you have a professional on your side who has access to insider news, can draw from years of experience , and who has a network of professionals to tap on.
Engaging a property agent will not only save you a lot of hassle, it will also free up your time to handle more interesting aspects of home ownership such as the interior decoration and such.
In this article, we’ve highlighted the common pitfalls that homebuyers (typically first-timers) face. If you want to know more, schedule a visit with us or book a free consultation with our trusted and renowned representatives.
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