Before you sign on the dotted line...

This week's guide is for first-time property buyers. While developers dangle discounts, there are other costs. The Sunday Times looks at what first-time home buyers should do before writing that cheque for their new home.

The Government's latest property market cooling measures, unveiled in January, were the toughest yet, hitting both the residential and industrial sectors.

But one group emerged unscathed: local first-timers in the market.

The Government said the measures were necessary to prevent prices from "running further ahead of economic fundamentals", hurting housing affordability for Singaporean first-time home buyers.

The measures included raising the additional buyer's stamp duty by between 5 and 7 percentage points across the board, and this was extended to apply to permanent residents buying their first home and Singaporeans investing in their second residential property.

Now that first-time home buyers have a healthy edge, many are perhaps contemplating taking the big step.

But buying a private property can be a lengthy and complicated process, especially for first-timers.

Buyers have to juggle a mortgage, legal processes and stamp duty - and deal with various parties.

The Sunday Times looks at what first-time home buyers should expect before writing that cheque for their new home.

Work out your sums

The price tag of a property might make it seem affordable at first glance. But there are additional costs that buyers should factor in.

It is crucial to work out your budget before walking into a showflat, as marketing efforts and buying pressure can often cloud one's judgment.

Additional costs include the buyer's stamp duty. This is tiered at 1 per cent for any amount up to the first $180,000 of the property's price, 2 per cent for any amount up to the subsequent $180,000, and 3 per cent for the remaining amount.

Legal fees may range from $3,000 to $5,000, depending on the circumstances of each case, said Rodyk and Davidson partner Lee Liat Yeang.

"Buyers should ask the lawyer to give a written quotation of the proposed professional fee and estimated disbursements for the services," he said.

A commission, which could range from 0.5 to 1 per cent, is usually given to agents at showflats too, said PropNex chief executive Mohamed Ismail. This means buyers may typically fork out $5,000 to $10,000 in commission fees for a $1 million purchase.

At this point of the process, DBS Bank managing director and head of deposits and secured lending Lui Su Kian advises potential buyers to approach a bank for advice on the maximum financial commitment one can make.

Banks offer floating and fixed interest rates, and buyers should decide which is suitable for their budget.

For floating rates, the one-month Singapore Interbank Offered Rate (Sibor) and three-month Sibor are the common benchmarks.

These are rates widely used in the banking industry. Loans are pegged to these variable rates.

They now stand at 0.31 per cent for the one-month Sibor and 0.38 per cent for the three-month Sibor, according to the Monetary Authority of Singapore (MAS).

Some floating rate packages now offer an average of 1.28 per cent per annum for the first three years of the mortgage.

Although buyers have benefited from low interest rates in recent times, experts warn that these rates should not be taken for granted.

Mortgage terms usually extend over a decade or more, and interest rates are likely to fluctuate during this period.

Bank officers are required by the MAS to present a fact sheet to buyers with projections of monthly instalments based on different interest rate scenarios. This is a useful guide to decide if an interest rate package is within one's means.

"Play out the best- and worst-case scenarios and see how your repayment may be affected by changing interest rates," Ms Lui advised.

It is also important to note that banks take an applicant's existing credit card, vehicle and study loans, as well as personal lines of credit, into consideration before granting the maximum loan amount.

That means a bank may give you a smaller loan than you had hoped for.


It is common for developers to start marketing their new developments before the actual launch of the project.

At this stage, buyers keen on a development may be invited to a preview of the showflat.

This is a method that most developers opt for to identify buyers genuinely interested in the project, Mr Ismail said.

Developers will then decide on a launch date when they have gathered enough interest from prospective buyers.

Selecting a unit at the showflat

Developers may choose a ballot, allocation or queue system to determine who may purchase a unit.

With the ballot system, buyers are invited to identify a few preferred units, and wait for their names to be drawn for a unit they want.

This is definitely a fairer way as the process is transparent, said Mr Ismail.

Buyers at a showflat with an allocation system can indicate the house category, stack number and level that they prefer.

When making a selection, agents at showflats are required to display and convey accurate information about the property and pricing to the buyers at the property launches, said the Council for Estate Agencies (CEA) director of licensing and investigation Purnima Shantilal.

This includes information on the requirement to pay deposit monies, progress payments and other fees such as stamp duties.

"Salespersons are required to advise buyers to consult their bankers or check on their financial status before committing payment," CEA advised.

Mr Don Poh, 25, self-employed, who recently bought a four-bedroom unit at CityLife@Tampines in January, believes that information on the approximate price of the units should be disclosed.

Developers are not obliged to disclose the price list at private condominium showflats under current regulations. Buyers have to specifically ask the agent for the price of the unit they are eyeing.

Option stage

After making a choice, home buyers have to make a cash payment of 5 per cent of the purchase price stated on the option to purchase (OTP).

Mr Lee pointed out that "this document is an irrevocable offer by the developer to sell the unit to the buyer on the terms stated within".

It should contain information of the unit to be sold, specifically the address and tenure of the land.

A set of documents commonly known as "Form 3" will be issued to buyers, said Mr Lee.

It should include specifications of the property, site and location plans, restrictions and requirements imposed on the property and the track record of the developer.

Mr Lee warned that buyers who change their minds after signing the OTP will forfeit 25 per cent of the deposit placed with the developer.

Marketing agents should also remind buyers that the next 15 per cent of the property's purchase price is payable within eight weeks of the date indicated on the OTP.

Review stage

It is advisable for buyers to appoint a lawyer to act on their behalf soon after obtaining the OTP.

Within 14 days of obtaining the OTP, the buyer's lawyer will receive a sales and purchase (S&P) agreement.

Exercise of option

Buyers have three weeks to sign the S&P agreement after receiving it - otherwise known as exercising the option.

Make sure you have secured a bank loan by now as once the option is exercised, the buyers are bound to the agreement to complete the purchase.

Also, you need to have funds ready to pay the stamp duty. The appointed lawyer will pay the duty to the Commissioner of Stamp Duties on behalf of the buyer, within 14 days after the exercise of option.

Progressive payments

As the construction of the development is completed in stages, buyers will be notified by their appointed lawyers that the loan is being drawn down.

This will take place until 60 per cent of the purchase price has been paid.

As this relationship between buyers and law firms can take place over years, it is imperative that buyers select one that is of good repute.

Temporary occupation permit

Once the developer has collected 85 per cent of the progressive payments, the condominium will be issued a temporary occupation permit.

Buyers will also be given the keys to their new home at this stage.

Certificate of statutory completion

As soon as the developer has received the final 15 per cent of the property's purchase price from all owners, the certificate of statutory completion and subsidiary strata certificate of title will be issued to the development.

This usually takes place over one year, and new owners have this period to draw construction defects to the attention of the developer.

Due diligence

While marketing agents, lawyers and banks have the duty of guiding their clients through the purchase, the responsibility of addressing all doubts before committing to the purchase falls on buyers.

IPP Financial Advisers managing director of investment and research Albert Lam notes that interest rates are the main determinant of affordability, and that first-time buyers should be mindful of the details of the deal they are signing up for.

Join ST's Telegram channel and get the latest breaking news delivered to you.