The Essential Home Upgrading Checklist for 2021

If you’re looking for a new home this year, you’re in luck – there were many launches in good locations in 2020, that are still available (Clavon, Woodleigh Residences, and Ki Residences all come to mind). In 2021, there are also a good number of new launches, and developments like Normanton Park are coming to the fore. With so many exciting opportunities, here’s how to prepare for an upgrade so the process will be smooth sailing:

What to prepare if you’re thinking of upgrading in 2021

  • Shortlist of available lenders
  • Documents to secure pre-approval
  • Stamp duty calculations
  • List of new home requirements
  • Sale strategy for your current home
  • Accommodation and storage solutions
  • Renovation requirements

1. Shortlist of available lenders

A common tendency is to look for the home first, and then start looking for a bank or other lender. However, I would suggest doing it the other way around if you can – this is because finding the cheapest bank, and securing pre-approval from them, helps to determine your overall budget.

There are over 12 banks in Singapore that give out home loans – not to mention non-banking financial institutions. However, at any one point in time, it is usually just one or two banks that are offering the lowest interest rate.

(At the time of writing, the lowest rate is usually around 1.2 to 1.3 per cent).

To give you a sense of the difference, consider a loan of $1 million for 25 years, at an interest rate of 1.3 per cent, versus 2 per cent.

At 2 per cent, your monthly loan repayment would be around $4,238.60. You would pay about $271,563 for the interest alone, by the time the loan tenure is up.

At 1.3 per cent, your monthly repayment falls to just around $3,906 per month; and you would have paid just around $171,823 by the end of the loan.

So the first step should be to identify which lender is currently the cheapest, and get a pre-approved home loan from them (but note that home loan rates fluctuate, so a few years down the road, you may need to refinance again to always pay the lowest rates).

The cheapest lender changes quite regularly, so there’s no way to provide a fixed list. Do drop me a message and I’ll help you find the cheapest loan. You can also contact me if you’re paying a much higher interest rate right now, and we may be able to find you a better deal.

2. Documents to secure pre-approval

You should seek Approval In Principle (AIP) from the cheapest bank, before beginning your search.

The AIP is a statement from the bank, declaring how much they’re willing to lend you if you buy a house; it’s usually valid for around two weeks. It is highly advisable to get AIP before putting down any deposit for a home – this is to avoid situations where you have put down a non-refundable deposit or booking fee, and then later realize that you can’t secure the loan.

You will usually need the following:

  • Your NRIC
  • 12 months CPF contribution history
  • Last three months’ payslip
  • For self-employed persons, or those working on commissions, you should prepare your last Notice of Assessment (NOA) from IRAS
  • A compilation of credit card statements, personal loan details, or any other financial obligations you’re currently under.

If your current home is an HDB flat, you may be asked to present some additional documents; such as documentary proof that you are in the process of selling your flat, or HDB’s valuation of your flat. This will vary between banks.

3. Stamp duty calculations

Stamp duties, such as the Buyers Stamp Duty (BSD) and Additional Buyers Stamp Duty (ABSD), are payable within 14 days of completing the transaction. Note that stamp duty payments can come from your CPF Ordinary Account (CPF OA).

If you choose to buy your new home before selling your existing home, you will have to pay the ABSD first. You can then apply for ABSD remission, if you’re a married couple and at least one of you is a Singaporean, and you sell your previous home within six months.

(An exception is if you’re upgrading to an Executive Condominium; then you do not need to pay the ABSD, even if you buy the EC before selling your flat).

It’s important to know how much you’re likely to pay for stamp duties, at your home’s price range. For example, for a home valued* at $1.5 million, the BSD would be $44,600. If ABSD applies, you would need to pay a further ABSD of $180,000.

The BSD and ABSD rates can be found on the IRAS website, but if they confuse you, do ask and I’ll help you to work it out.

There are sometimes legal ways to minimise the stamp duty you pay, such as via a transfer of ownership of your property to your spouse. Drop me a message so I can better understand your situation, and we’ll see if we can minimise the cost to you.

*For resale homes, the stamp duty always applies to the higher of the price or actual valuation.

4. List of new home requirements

Do not get sidetracked or end up making impulse buys! Some upgraders get so entranced by what they see, they end up buying something that’s outside of their original purpose (e.g. buying a home that’s even further from their workplace, because they love the view).

Others suffer from “analysis paralysis”, and can’t make a decision because they’re overwhelmed by options.

To keep it simple, make a list of “must have” home requirements, and keep it to no more than three to five essential points. For example:

  • Must be within 300 metres of your child’s school
  • Sheltered walk to MRT station is a must
  • Should not be near noisy or crowded areas, like next to a shopping mall (or conversely, you may love the convenience and want an integrated development like Woodleigh Residences or DUO Residences, which are on top of malls).

While facilities and views are nice, your family’s lifestyle, schooling, and work should always take precedence. A nice pool won’t compensate for a two-hour trip to work (except maybe for the first few weeks when it’s exciting).

5. Sale strategy for your current home

How will you sell your current home? Will you use the HDB resale portal and try to Do It Yourself, if it’s a resale flat? Or will you engage a property agent to help you?

Some of the things to consider are:

  • How will your property be marketed? If you don’t do this yourself, do you agree with how your agent will proceed (e.g. sending flyers, using property portals, etc.)?
  • How will you stage your home for viewings? It is much easier and quicker to secure a buyer when your home looks good. You may want to pick out some of the most glaring problem areas for fixed, before the sale process begins.
  • What is the right price point for your home? You can check the latest transactions in your block or development, to see what’s reasonable. A common way to check is to refer to caveats lodged with URA. You may want to price slightly above the average if your home is better renovated, or sometimes even a bit less if the situation is urgent.
  • Do you want to engage multiple agents for a mass-marketing effort, or give an exclusive deal to one agent, so they will focus all their efforts on it?*

It’s a good idea to speak to landlords in your same block or development by the way; this way you can tell prospective buyers about the current rental yields and situation. It can help if your prospective buyer is an investor, rather than a home buyer.

*In the Singapore private property market today, it’s usually better to have an exclusive agent. If you have multiple agents, there may be multiple listings of your home under the same property portal or website – this can make buyers wary, as they’ll have the impression your home has not sold for a while.

Also, agents tend to prioritise the clients who engage them exclusively, as this is the purpose of an exclusive arrangement. Sometimes, having no exclusive agent can mean no one is prioritising the sale of your home.

7. Accommodation and storage solutions

These will vary greatly, depending on whether you are going to buy a your new home first, or sell your existing home first. It also depends on whether you are buying a new or resale unit.

For example: if you buy a unit that’s still under development, you’ll need somewhere to live while your new home is being built. This can lead to a decision to purchase the new unit, but continue to stay in your home until the new one is ready (buy first, sell later). However, this could incur costs such as the upfront ABSD (see above).

You need to plan how you’ll find temporary accommodation while in between homes; be it staying with in-laws, or renting a unit. Do bear in mind that the minimum leasing period in Singapore is six months, there’s no weekly leasing.

You’ll also need a plan for your bulky belongings. If you have a piano, for instance, you may need to rent a proper storage facility. I suggest looking these up and planning for the costs early on.

Do avoid the common mistake of assuming that renovations are always on time, or that your condo will be finished exactly on the Temporary Occupancy Permit (TOP) date. There is always some possible chance of delay, especially given the Covid-19 situation. I’d suggest budgeting for an extra one to two months of accommodation and storage, just in case.

7. Renovation requirements

This is related to point 6. I advise consulting a contractor or interior designer early on, to get a sense of how long your desired renovations will take. This is because the interior works could delay the length of time needed, before you’re ready to move in.

One thing to note is that – while you don’t have to wait for resale units to be built – they might take longer and cost more to renovate. This is because new units are a blank canvas “ready to move in”, and you don’t need to hack away the previous owners’ renovations.

I have a background in construction and interior works, so I can also help you work out the likely time and cost of your intended renovations.

A day or two of preparation can make your home upgrading experience a pleasant one

While it may take up a weekend to get everything together, it’s well worth the effort. This will avoid potential frustrations later, such as rushing to find a home loan before the OTP expires; or being caught without accommodation for a few months.

If you have any questions, feel free to reach out to me on Facebook, or at RonChongProperty.sg. I look forward to helping you plan your property wealth and asset progression for this new year.

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