- Does the property fit your objective?
Do ask yourself, what is the intention of you buying the property. Is it for own stay, for investment purposes or for legacy purposes (accumulation for the next generation) etc. Different objectives will determine the different types and kind of property that will suit you.
For example, if you are buying a property for own stay, the property size, and the numbers of bedrooms of the property could be one your most important considerations. However, if you are buying for investment purposes; rental yield, rentability and capital gain potential could be your most important considerations instead. Therefore, ask yourself, what is your objective in getting this property.
- Is your loan approval amount correct?
Unless you are buying a property and paying it in full, you will need to get a loan for the purchase. One of the first steps you should take before buying a property is to assess how much loan you are eligible for with the bank. If you are taking a HDB loan, you should apply for your HLE to determine your loan amount. Once you have determined the loan amount that you are eligible for, you can now determine if the property you intend to purchase is affordable to you.
Do not make the mistake of putting down the deposit for a property and then finding out that you are not eligible for any loan or the loan amount you are eligible for is not sufficient to finance the purchase. You may loss the deposit monies paid.
- Have you done your buying financial plan?
In the purchase of any property, usually there are 3 main items that you must take note:
- Property loan
- All the stamp duties payable, other cost (legal fees etc)
Thus, just by knowing the loan amount that you are eligible for is not enough. You will need to know if you have enough money to pay toward the down-payment and other expenses too.
In fact, you should create your own property purchase financial plan that consists of all the above to determine if this purchase is sound to your pockets. It is advisable for you to also include the month loan instalment estimation in this financial plan too.
- Is the instalment affordable to you?
With the financial plan created, ask yourself if you are comfortable with the monthly instalment amount. Do you feel over stretching your finances by taking this loan amount? If you feel that, then you should consider taking a smaller loan or buy a property with a lower price.
As part of your risk management, you can consider what if any future unforeseen circumstances happening (for example, loss of job etc). How about an interest rate increase? How will these circumstances affect you and your family?
- Do you need to do contra/ bridging?
During the purchase of your next property, you may need the cash proceeds or CPF refund monies from the selling of your current house to be paid towards the buying of the next house.
So, if this is so, are you eligible for contra or bridging loan? Do find out all the terms and conditions required in obtaining such interim loan. Sometime the requirement could be stringent.
- Will you be able to renovate and move into the new home in time?
One of the biggest worries when buying a property for own stay is that are we able to move into the property in time? What if we cannot finish renovating our new property in time after selling/ handing over our current property?
You should create a timeline plan with sufficient time buffer to take care of this. So that you and your family are assured of a shelter over your head during the entire process.
*Note: This timeline planning should take into consideration if the finances can flow through also.
- If there is an existing rental, are the tenancy agreement clauses detrimental to you?
When you are buying a property with tenancy (meaning there is a tenant renting the property now), it is extremely important to look at all the clauses in the tenancy agreement. Determine if any of the clauses are unfair or detrimental to you.
Especially if you are intending to move into the property after the tenancy ends, you must pay careful attention to the option to renew clause and how it is worded.
- Before putting down the deposit, have you verified the Ownership?
Always confirm that you are paying the deposit to purchase any property to the rightful owner. Doing and verifying the ownership check is the key to ensure this.
- Have you thought of your property strategy planning?
Buy a property is the simple part. But having a long-term property portfolio plan is the difficult part.
Especially with the hefty additional buyer stamp duties, you may want to determine what is your best way to structure the property ownership now when you purchase your property so that in the future you can save on the hefty stamp duties. However, do consider the risks of doing having such a move.
- What are your exit plans in the longer term?
Finally, you may have the intention to sell or move out from this property that you purchased. So, have you considered your exit plans? How should you plan now so that it is more profitable and easier for you to exit in the future?