Especially for first time buyers - How much to pay and when?

You have been eyeing a particular new project for ages, gone down to the showflat a dozen times just to be sure it is “The One”, and now finally ready to put money on an apartment unit. So what do you do to complete the purchase and what can you expect in terms of a payment schedule?

Some of you property veterans may find this all too elementary, but here is a rundown on what to expect for the benefit of first time private home buyers:

The following is written based on a Progressive Payment option. The wife and I are no big fans of the Deferred Payment/Interest Adsorption Scheme – there is normally a 2 – 3% premium charged on the purchase price, and you find yourselves facing a hugely inflated monthly housing loan repayment when this finally kicks in.

1. Booking Fee
This is the money you need pay the Developer once you have decided to buy. You can call this the “Option to purchase/Exercising of Option” combined payment. This is typically 5% of the purchase price, and you have to pay this in cash, i.e. cannot utilize your CPF.

In the event that you change your mind about buying the property after you have put in the option, most Developers will allow you to “back out” by imposing a partial forfeiture of this 5% booking fee that you have paid.

2. Completion of Sale
This normally happens between 8 to 10 weeks from the day you put in the 5% option. By now, you would have engaged a conveyance lawyer and a bank to take the housing loan from.

To exercise the option, you need to pay another 15% of the purchase price. This can be paid either in Cash, money from your CPF (subject to fulfilment of all conditions on use of CPF for property purchase) or a mix of Cash/CPF. This 15% payment is paid to your lawyer, who will also collect Stamp Duty and some other fees from you – we will detail these in the next section. The legal fees will usually be fully subsidized by the bank that you are taking the loan from.

And should you decide to change your mind about the purchase after completion of sale, be prepared to forfeit the full 20% and possibly getting sued by the Developer for breach of contract. So if you really need to back out of the purchase at this juncture, a better option is to try and “flip” the unit even if it means suffering a small loss.

3. Stamp Duty and Other Fees
This is the biggest component of legal costs in the purchase of your property. A simple way to calculate this is to multiply the purchase price by 3% and deduct $5,400 from the result.
In addition to the Stamp Duty, there are several other fees that you need to pay:

• Mortgage Stamp Fees – maximum of $500

• Registration fees – This is payment to the Singapore Land Authorities (SLA) in order to register the transaction. Registration is a must to formalize the change in interest in the property. Unfortunately, we cannot remember how much this is, and our web search did us no favor. But it should not come up to be more than a few hundred dollars.

• Disbursements – These are expenses incurred by your lawyer on your behalf. Again, this is not big money, i.e. less than a hundred dollars normally.

4. Progress Payment Schedule
After the completion of sale, the balance payment will be based on a progress payment schedule. The schedule is based on the different stages of completion of work done at the project, as detailed in the Sales & Purchase Agreement.

A sample of such progress payment schedule is shown below. However, this will differ somewhat between Developers/Projects:

Purchase Price: $1,255,180

Progress Payment Scheme(%)             Amount
Booking fees - Paid (5%)                  $  62,759.00
Completion of Sale - Paid (15%)       $188,277.00
Foundation Work (10%)                   $125,518.00
Concrete Framework (10%)             $125,518.00
Brick Walls (5%)                              $  62,759.00
Ceiling Works (5%)                          $  62,759.00
Doors and Windows (5%)                $  62,759.00
Carpark, Roads & Drains (5%)        $  62,759.00
TOP (25%)                                      $313,795.00
Certification of Completion (15%)     $188,277.00

It usually takes up to a year after TOP for the Certification of Completion (CSC) to be obtained. So you usually do not have to pay the last 15% till then.

The bank will take care of the various stages of payment, in accordance to the amount of loan you have taken, and pay the Developer accordingly. The quantum of your loan will increase correspondingly and so will your monthly loan repayment amount.

So there you have it. Happy hunting!


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