6 Things First-time Home Buyers Must Know to Avoid Regrets

Don’t let buyer’s remorse mar the happiness of owning your first home. Here are six things every first-time homebuyer must know. 

Buying your very first home is both exciting and nerve-wracking. On the one hand, it’s the first real step into true adulthood and all the freedom that implies. On the other hand, you’ll be locked into perhaps the longest and costliest financial commitment of your life. 

Further raising the stakes is the very real possibility that could be stuck with long-term buyer’s remorse, should you fail to account for unforeseen issues or problems. 

To help make your first home just that little bit sweeter, remember these six tips. 

• Matching your budget
• Eligible subsidies
• Housing priorities
• Long-term planning
• Choosing the right house

Match your flat to your budget 

The number one source of regret for first-time homeowners is buying a home that is too costly for their budget. 

Yes, the government has seen fit to install a guardrail, ostensibly to help homeowners avoid overextending themselves – under the Mortgage Servicing Ratio (MSR) rules, your mortgage payments cannot exceed 30% of your gross income.

However, that doesn't mean that you should go ahead and max out your MSR, especially if doing so will mean having to cut down or delay other important financial needs, such as savings, investment and insurance. 

In particular, if you’re planning to use your CPF funds to pay for your mortgage, you are taking money away from your retirement nest egg. This could pose a problem later down the road. 

See also: How to Adjust Your CPF Payments For Your Housing Loan

Also, your MSR is calculated based on your income at the time you applied for your mortgage. If you should suffer a pay cut or retrenchment, you could find yourself struggling to keep up with your monthly mortgage payments.

As such, it is better to go with a more conservative budget, perhaps 25% of your income, which will give you more wriggle room during rocky times.

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Don't know which home loan is the best for your mortgage and renovation budget? Here is a comparison of the best home loans available in Singapore currently!

Compare Best Home Loans

Read more:
Cost to Buy Your First Home in Singapore
Average Cost of Home Renovations in Singapore (2022)

Take advantage of subsidies

Homeownership is a core national tenet, and to that end, the government offers several different subsidies to help first-timers afford their flats. 

By the government, I mean the Housing Development Board, which means housing subsidies are only for HDB flats. So for those of you with your heart set on a glitzy condo, hustle on!

Thanks to the granular approach favoured by the authorities, working out just which subsidies you may be eligible for can be quite the task. Visit this HDB page to find out the different schemes available. Alternatively, see the cheat sheet below:

HDB Housing Grants 

Enhanced CPF Housing Grant (Families)	Up to S$80,000 For first-timer families, couples, and multi-generational families Monthly household income ceiling: S$9,000
Step-Up CPF Housing Grant (Families)	Up to S$15,000 For second-timer families, couples and multi-generational families Monthly household income ceiling: S$7,000:
Proximity Housing Grant (Families)	Up to S$30,000 Eligibility:  Fiancé and fiancée Married couples and/ or parent(s) with child(ren) Multi-generation families Families with non-residents Monthly household income ceiling: N/A
Enhanced CPF Housing Grant (Singles)	Up to S$40,00 per applicant (can stack with another eligible single for S$80,000 total grant) Eligibility: First-timer applicants aged 35 or above who are buying: A flat from HDB on their own or with other first-timer single citizens A resale flat on their own, with other first-timer single citizens or with their parents First-timer applicants aged 21 or above who are buying a resale flat with their non-resident spouse Monthly household income ceiling: 2-room: S$7,000 3-room: S$7,000 or S$14,000 (depending on project) 4-room and 5-room: S$14,000
CPF Housing Grant for Resale Flats (Singles)	Up to S$20,00 per applicant (can stack with another eligible single for S$40,000 total grant) Eligibility: First-timer applicants aged 35 or above who are buying a resale flat On their own or with other first-timer single citizens With their parents First-timer applicants aged 21 or above who are buying a flat with their non-resident spouse Monthly household income ceiling:  S$7,000 if purchasing a flat on your own S$14,000 if purchasing a flat with your family or other singles
Proximity Housing Grant (Singles)	Up to S$15,000 Eligibility: First-timer applicants aged 35 or above who are buying a resale flat On their own or with other first-timer single citizens With their parents First-timer applicants aged 21 or above who are buying a resale flat with their non-resident spouse Monthly household income ceiling: N/A

Consider your priorities

As the old saying in real estate goes, it’s all about  “location, location, location!” Where your first home should be will depend pretty much on your priorities. Generally, you can break down your decision into three areas – proximity to your parents, your workplace, or downtown. 

Just because you’ve flown the coop doesn't mean you won’t miss your parents, or at least, home-cooked meals. If staying connected with your parents is a high priority for you, then you’ll want to choose a flat that is near them. 

Besides, doing so will also allow you to take advantage of the Proximity Housing Grant which can shave off up to S$30,000 from the price of your flat. However, note that this applies only to resale HDB flats. 

Another important consideration is proximity to your workplace. If your employer is fairly centrally located, then this would likely not be such a big deal. 

However, if you’re forced to journey from one end of the island to the other every day just to get to and from work, that will quickly get old. You may then be forced to buy a car, which will impact on your other financial goals. 

Given Singapore’s diminutive land mass, you may think it’s ok even if you stay far away from town. You can just hop on a bus, train or cab for your downtown trips whenever you need to, right?

Well, I once moved all the way up north to Woodlands, as my new office was literally in the same neighbourhood. The thing is, my gym was located in Bugis, which I visit on the weekends.

This would entail a 45-minute MRT ride each way (this was during the dark days before the Thomson-East Coast Line was available) – which meant sacrificing at least 90 minutes every Saturday and Sunday – precious time that could have been better put towards sleep, Netflix, or any other leisure activities.

After a while, I resorted to taking a cab home every once in a while, but at around S$25 per trip, that option soon became untenable. 

Happily, I now reside at MacPherson, which is a breezy 20 mins away from town. The difference is staggering.

Read more:
Where to Stay While You Wait For BTO and How Much It'll Cost
What HDB Flats Can Singles Buy?

Decide between an HDB loan or a bank loan

If you’re buying a private property, you will only be able to use a bank loan, and not an HDB loan.

In that case, be ready to get familiar with the different mortgage packages out there because you will need to regularly refinance your home loan to pare down your interest rates as much as possible. 

And yes, home mortgage rates are approaching 20-year highs right now, but the storm will pass, sooner or later opening up the way for homeowners to enjoy low-cost home financing once more. 

If, however, you are buying an HDB flat – and thus have a choice between an HDB loan and a bank loan – you will want to choose carefully. Firstly, bear in mind that you can only switch from an HDB loan to a bank loan and not the other way around. That means, if you start off with a bank loan, and want to change to an HDB loan, you will not be allowed to do so. 

This wouldn’t be a problem when bank mortgage interest rates are at lower levels than HDB loans (which stay at a virtually-fixed 2.6% per annum) – as seen between 2008 and right up to October 2022.

However, at present, home mortgage rates are threatening to hit 5% per annum or more, significantly outstripping HDB loans and leaving homeowners with some hard decisions to make.

Given the current situation, homeowners should play it safe by going with an HDB home loan, as that would offer more predictability.

Should home mortgage rate once more fall to breezy sub-2% per annum levels during your mortgage tenure, you’ll have the option to refinance to a bank loan to unlock potential savings.

Read more:
Getting a Bank Loan For HDB vs. HDB Housing Loan
HDB Loan vs. Bank Loan: Which One Should You Go For?
Loan-to-Value (LTV) Ratio & Limits in Singapore

Choose your unit wisely

The choice of your unit can play a huge factor in the satisfaction you feel towards your home, so be sure not to be rash or impatient. The giddy euphoria of finally getting your own home can cast a rosy view of certain features and characteristics, which you may slowly come to hate as time goes on. 

For instance, a basketball court or playground behind your block may create some space between you and the next block, it will also attract crowds of noisy children and teenagers cutting loose in the evenings, and sometimes well into the night. 

Similarly, while coffee shops and sundry stores located downstairs offer convenience, they may also force you to navigate crowded and cluttered conditions every evening on your way home. 

Units on higher floors are said to fetch higher prices (the veracity of that statement is often highly situational), but you will have to spend longer waiting for lifts – and god help you if there’s ever a lift breakdown. 

The orientation of your windows can also affect your quality of life; those with an east-to-west orientation will bear the brunt of sunshine and heat, quickly turning your home into a literal sweatshop.

We could go on, but you get the idea. The point is not to be hasty when choosing your unit, anticipate the potential issue that could arise, and ask yourself if they would be a problem for you or your family members. 

Plan for the long term

Your first home need not be yours forever, especially for younger buyers. But still, it would be beneficial to have a long-term plan when embarking on your home ownership journey.

There are two reasons for this.

One, your first property would likely be the largest financial investment of your life.

And two, the resale value of your property contributes significantly to your net worth, and can be instrumental in helping you move up the socio-economic ladder. 

Just think of those who had the foresight (and luck) to win a BTO ballot slot for The Pinnacle @ Duxton, which debuted at an initial launch price of S$340,000. Units there are transacting for between S$800,000 to S$1.2 million today. 

See also: S$1 Million HDB Flats in Singapore: Are They Worth The Hype?

Of course, not everyone wants to sell their million-dollar flat; they’re content enough just to live in one. And no matter how long you end up staying in your first home, be cognizant of the financial importance of purchasing your own property – the right choice can pay off handsomely down the line.

💡 Pro-tip: If your HDB loan's interest is too costly for your budget, consider refinancing it into a personal loan from a bank in the future! 

Read these next:
November BTO Launch 2022 --- What to Look Out For?
HDB BTO November 2022 Bukit Batok Review
HDB BTO November 2022 Tengah Review 
HDB SBF (Sale of Balance Flats) 2022: Everything You Need to Know

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