So…You’ve decided to apply for the latest 4 room hdb resale flat Launch and now have to decide what HDB flat type to choose. Should you just buy the largest flat that you can afford?
What if you only wish to live in the flat until you meet the Minimum Occupation Period (MOP) and want to sell it?
Are there any considerations that you should think about when deciding a 4 room hdb resale flat. Before we get ahead of ourselves, let’s do a little math to find out: what type of HDB flat can you REALLY afford?
Only Buy a House That You Can Comfortably Afford
For this exercise, determined what is the minimum average monthly household income needed when considering what type of HDB flat to get.
- used the Tampines August 2021 4 room resale flat Singapore Launch prices as a reference (since it’s one of the most recent launches which has almost all of the existing 4 room hdb resale flat types)
- assumed that you would be taking an HDB housing loan and would put down a 10% downpayment
- calculated how much Enhanced CPF Housing Grant I would get with respect to my household’s monthly income bracket
- applied the Mortgage Servicing Ratio of 30%
HDB BTO Flat TypeAverage Price
(Excluding Grants)Minimum Monthly Household Income Needed2-Room Flexi$169,000$1,0933-Room$267,500$2,6604-Room$398,500$4,7435-Room$541,000$6,987
Note: this price and income range is ONLY a guide, a flat in a high-demand estate is definitely going to cost more
Feel free to apply my calculations to your respective BTO or Resale flat purchase to see which type of 4 room hdb resale flat you can comfortably afford.
How Much Do You Need to Pay for My Monthly Mortgage?
Without getting into the debate of whether a bank loan or HDB housing loan is better.
Let’s look at how much you’d need to pay if you took an HDB housing loan.
After making the 10% down payment, you would be borrowing the rest at an interest rate of 2.6% per annum for 25 years.
Buying a big-ticket item like a house is where we need to be brutally honest with ourselves in order to stay within our financial lane.
To get a good measure of that, I’ll be using the Mortgage Servicing Ratio (MSR) which caps the amount that you can spend on mortgage repayments to 30% of your gross monthly income.
This way, we have a more realistic way of evaluating what kind of flat you can actually afford.
In cases where the MSR is more than 30%, I’ll indicate it with a “Not Applicable”.
For a 4 room hdb resale flat, your minimum monthly household income should ideally be $4,743 or more.
What Else Should I Consider When Deciding If I Can Afford an HDB Flat?
Considering that we’re using an HDB Housing Loan to service the mortgage.
It means that we’ll be using our monthly CPF contributions to pay the monthly mortgage.
Some of you might find yourself in a situation where your monthly CPF contribution is insufficient to cover the cost of your monthly mortgage (eg. using one person’s CPF to make payments for the HDB housing loan).
Should you perform cash top-ups on top of your CPF payments in order to ‘afford’ that house?
If your cash top-ups come from a steady stream of passive income that is unaffected by unfortunate events like you losing your job (touchwood). Then sure… why not?
But if you’re using money from your monthly household income (aka cash top-ups) to supplement your CPF contributions. Then you’ll want to be very careful. In the unfortunate event where either you or your partner are unable to continuously bring in that extra amount of money to meet your monthly mortgage. You’ll eventually find that your finances will be severely stretched.
However, if your BTO flat doesn’t command that location premium, it may be worth considering just biting the bullet and getting the 4 room resale flat singapore now. The additional Family Grant does soften the financial blow of buying a resale flat significantly especially in non-mature estates. It may be well worth buying the 4 room resale flat singapore today to save yourself and your family the intangible costs of not having a permanent solution to meet your housing needs.
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