The Shrewd Way To Finance Your First Home That Most Singaporeans Never Think About
Home ownership is one of the defining marks of a Singaporean. With 91% of Singaporeans owning your own homes, Singapore has the second highest home ownership rate in the world, just behind Romania. But home ownership does come with its own set of challenges, especially on the financing side. After all, you are committing to a few hundred thousand dollar space that will take up 20-30 years of your life to finance it.
That’s why we think that it is important that Singaporeans learn some shrewd moves to help you finance your first home. Here are three shrewd moves to think about for you to finance your first home in Singapore.
Picking Bank Loan Over HDB Loan To Leverage On The Low Interest Rate
Conventional wisdom tells us that HDB loan is the way to go when you want to finance your first property. Well, there’s a reason why it’s called conventional wisdom. The fact is that the ‘Go for HDB loan’ argument does not always apply.
This is especially when you are in a low interest rate environment when you have bank loan packages that are offering almost half the interest rate that HDB loan is offering. There’s really little reason why you will want to choose HDB loan over bank loan when you can save as much as a few hundred of dollars each month, isn’t it?
Opting for bank loan instead of HDB loan? Let Moneyline help you get the best bank loan deal so that you can maximize your savings to spend on other parts of your home.
Don’t Wipe Out Your CPF And Keep Up To $20k For Retirement Savings
Another common thing to do when financing your first home is to wipe out your CPF for the first downpayment. Most of us won’t think twice about wiping out our CPF because the money can’t be touched by us until our retirement age (62 for now). But is that really the smartest way to spend your CPF money?
Indeed, the shrewd way to use your CPF money is not to wipe it out. Under the new CPF rule, you can choose to keep up to $20,000 in your CPF OA as part of CPF’s move to encourage retirement savings. By keeping your first $20,000 in your CPF OA, it will grow to $32,772 in 20 years’ time at the annual interest rate of 2.5% per annum. By simply leaving money in your CPF OA, your money has the potential to grow to 1.64 times without you lifting your finger.
Time Your Downpayment And Earn Additional Interest Rate
Paying for the downpayment of your first home is one of the largest cash outlay that you will face in your lifetime. Most of us tend to save for this cash outlay by keeping our money in the bank and continue saving up till the moment we need to pay for the downpayment. After all, that’s the only way to do it so that you don’t end up having your money locked up somewhere else, right? Well, that’s mostly true until you learn about the endowment.
Instead of slowly saving up in your bank account, why not use an endowment to help you save instead? It works in a similar fashion to saving in your bank account with monthly deposits to accumulate enough savings to use in 2-5 years’ time. The only (good) exception is that you get to earn additional interest while you save up. So, why let that interest go to waste in a low-interest savings account in the bank?
Reach out and let Moneyline.sg help you find out how you can use endowments to your advantage when saving for the downpayment of your first home.