What’s an EC?
ECs are condos built and sold by private developers, but which are considered HDB properties for 10 years. They are fully privatised from the 11th year afterward. ECs are full-suite condos, which means they have the pool, gym, tennis courts, and other such amenities. However, they can also be bought with subsidies, such as the CPF Housing Grant.
Yes, it’s private property that you can buy with government subsidies – now you know why ECs sell out so fast.
ECs can be purchased by Singaporeans with a household income of no more than $14,000 per month.
The cost breakdown for upgrading to a condo or EC
The first thing you need to consider, when upgrading, is whether you’ll buy your condo before you sell your HDB flat, or after.
As a Singapore citizen, you’re subject to seven per cent Additional Buyers Stamp Duty (ABSD) on your second property. And yes, buying a condo before you sell your flat counts as buying your second property; so on a condo that costs, say, $800,000, this comes to an ABSD of $56,000.
Ouch.
However, you can get the ABSD money back later, if you sell your flat within six months of purchasing your new home (which you’ll have to do anyway, because you have to sell your flat within six months upon purchasing a private property).
You do need to pay the ABSD money within two weeks of exercising the sale and purchase agreement though, so you’ll need to have it in cash or in your CPF to begin with. If you can wait, you might want to seriously consider selling off your flat before you rush to buy a condo.
The second consideration is the prepayment penalty. After you sell your house, your first priority will probably be to pay off your outstanding home loan, and take another one for your condo.
(Note: if you try to take a home loan when you already have an outstanding one, the down payment will be a whopping 40 per cent on the second home loan).
Here’s the bad news: many banks impose a fee, if you try to pay back your home loan early. That’s to make up for the interest they would lose. Typically, the prepayment penalty is one to 1.5 per cent of the repaid amount, but it can vary with each bank.
In the above example, say you still owe $70,000 on your home loan, at the time you decide to sell and upgrade. You repay the rest of this loan with the sale proceeds. The bank might charge you a prepayment penalty of 1.5 per cent of the $70,000 you pay back, or $1,050.
Next, we look at the costs of your fancy new condo.
The main costs will be:
- - The initial down-payment
- - The stamp duties and legal fees
- - The monthly loan repayment
- - Maintenance fees
- - Property taxes
- - Renovations
1. The initial down-payment
We’ll assume you need a home loan to buy a condo or an EC*. The maximum Loan-To-Value (LTV) ratio from the bank will be 80 per cent. The down payment is 20 per cent, of which the first five per cent must be paid in cash. The remainder can be paid in a combination of cash or CPF Ordinary Account (OA) monies.
Do note that for ECs, you can qualify for CPF housing grants to lower the cost. These can be found here.
- 80% from bank loan
- 15% from cash or CPF
- 5% in casH
- For example, say you purchase an EC with a value of $800,000. You would have to pay:
- $40,000 in cash
- $120,000 through a combination of cash and/or CPF OA funds
The remaining $640,000 can be financed by the bank loan, assuming you get the full LTV of 80 per cent.**
2. The stamp duties and legal fees
Legal fees – also called conveyancing fees – range between $2,500 to $3,000. You can use a cheaper law firm if you can find it, so long as the bank accepts the firm (hint: get a mortgage broker to do this for you for free, because checking out law firm prices can be a mind-numbing process.)
You may be able to pay the legal fees with your CPF monies; again, this depends on the law firm you use.
Next, you need to pay the Buyers Stamp Duty (BSD). This is how BSD is charged:
Payment schedule
BSD Rate
- First $180,000 of property price or value (whichever is higher)
- 1% of this amount
- Next $180,000
- 2% of this amount
- Next $640,000
- 3% of this amount
- Any amount exceeding $1 million
- 4% of this amount
For our $800,000 property, the BSD is:
- 1% of the first $180,000 = $1,800
- 2% of the next $180,000 = $3,600
- 3% of the remaining $440,000 = $13,200
- Total = $18,600
The BSD is payable within two weeks of signing the Option to Purchase (OTP), and can be paid with your CPF.
3. The monthly loan repayment
The interest rates on home loans vary, as there’s no perpetual fixed rate. Typically, interest rates are lower during the first three years, but are much higher on the fourth year and thereafter. You may want to re-finance (switch from one loan package to another) on the fourth year or beyond, if your loan gets too expensive.
Nonetheless, we will go with an interest rate of 1.8 per cent per annum, which is the median rate at this time of writing. The borrowed amount is $640,000 (see point 1), and the loan tenure is assumed to be 25 years.
Overall, this comes to a monthly repayment of around $2,651, which can be paid via cash or CPF. You can calculate mortgage repayment sums here.
4. Maintenance fees
Most condos have maintenance fees of around $250 to $350 per month*. The fee will vary based on the share value of your unit; the bigger the floor space of your property, the more of the maintenance costs you’ll bear.
(This also means that, the more units there are in a development, the lower the maintenance costs tend to be. It gets divided among more people. But who wants to use a pool so crowded, it’s almost got more people than water?!)
If you previously lived in HDB estates, you may be surprised to learn that many condos don’t collect maintenance fees on a monthly basis; many of them collect on a quarterly basis instead. So brace yourself for bills of $1,000 to $1,400, which have to be paid in full every quarter (there’s an interest rate charge for late payment).
*For higher-end condos, this can come to over a thousand dollars a month. Ask before you buy!
5. Property taxes
Your property tax is based on the Annual Value (AV) of your condo unit, as assessed by the Inland Revenue Authority of Singapore (IRAS). The AV is the estimated amount of rental income your condo could generate, in a year (whether or not you actually rent it out).
You’ll have to visit the IRAS site to determine your specific condo’s AV.
There are two property tax rates for condos: the first is for owner-occupiers (lower rate), and the second is for condos that are rented out (higher rate).
To keep things simple, just use the IRAS calculator to determine your property tax.
- For the $800,000 property in our example, we will use an AV of $36,000. This comes to an annual tax rate of $1,120, or $93 per month.
- (An AV of $32,000 - $40,000 is typical of most suburban condos, at this time of writing).
6. Renovations
Most condos have a renovation cost of between $30,000 to $50,000. This is because renovation loans are capped at $30,000 or six months of your income (whichever is higher), so interior designers / contractors use this as a guideline.
For the condo in our example, we’ll assume you keep it to $30,000, and pay this in cash. For a family this would probably be more, but many singles find this is sufficient even for large (1,400 square feet) condos.
If you do want to take a loan for renovations, however, you’ll be paying an interest rate of between 4.8 to 5.3 per cent per annum (around $560+ per month in repayments, over a five-year loan).
Total cost breakdown:
- Initial cash payments = (5% down payment) + ($2,500 legal fees) + ($30,000 renovations) = $72,500
- Initial amount paid from CPF = (15% down payment) + (BSD) = $138,600
- Monthly payments = (Property tax broken down to monthly amounts) + (Maintenance) + (Home loan repayment) = $2,994
Note that this is a ballpark figure, excluding smaller costs such as insurance, furnishings, commissions for a property agent, etc.
Lastly, remember to protect your shiny new condo with home contents insurance.
