Financing An Executive Condominium

Buying an Executive Condominium (EC) is a long term financial commitment.  Moving past the issue of 'Should I Buy an EC Now?', the logical step for potential homebuyer is to check whether it is within their means to buy an EC unit.  

1. Consider What is Needed

Besides the need to know the pricing and associated cost (such as resale levy, stamp fee, legal fees), homebuyers also need to be familiar with the payment timeline.and applicable regulatory measures. 

Unlike buying a BTO unit from HDB, there is no HDB housing loan for the purchase of EC unit.  Applicants are advised to check on their loan eligibility from banks or financial institutions licensed by the Monetary Authority of Singapore before committing to a purchase of an EC unit.    

Below is a general payment schedule for the purchase of an EC unit under construction. For specific details, please check with the bank or solicitor regarding financing matter.

2.  Next, Consider Your Available Resources 

a. Monies in CPF Ordinary Account -  Only the applicant and co-applicants can use their CPF monies in the Ordinary Account for the purchase of the EC unit.  Occupiers listed in the aplication are not allowed to use their monies for this purpose.

CPF monies can be used to pay for the balance 15% downpayment, stamp fee, legal fee and construction stage payment and servicing the mortgage loan payment.

For applicant(s) who plan to use their CPF, it is important to note that the priorisation is "Cash first, CPF later" and not "CPF first, cash later".   So, do the sum correctly, the minimum cash amount could be substantially higher if your CPF cannot be used upfront for the downpayment balance and stamp duty

Login here with your Singpass to check the CPF Ordinary Account balance (CPF website –> My Statement -> Section A)

 b.  Cash -  Under the current regulatory guidelines, the minimum cash amount needed is 5% of purchase price.  The other mandatory cash component is the resale levy (for 2nd timer who had not paid the resale levy upon compeltion of their 1st  subsided flat sale)

Cash and/or CPF monies can be used to pay for the balance 15% downpayment, stamp fee, legal fee and construction stage payment and servicing the mortgage loan payment.

c. Bank Loan.   It is advisable to get an In Principle Approval (IPA) done with at least one bank before you place a booking.  IPA is an amount that bank is potentially prepared to lend based on the borrower's income, credit history and prevailing regulatory control measures.  IPA is not a guarantee, but it does give the applicants an indication how much they can stretch to find a unit that best meet their needs.

Different banks may offer different interest rates packages and IPA limit.  The current Regulatory measures applicable to compute EC housing mortgage loan is 55% Total Debt Servicing Ratio (TDSR) and the 30% Mortgage Servicing Ratio (MSR).    

d. Existing Flat. This is an useful asset that can be used to finance the purchase of an EC unit. For 2nd timer applicant, there is a resale levy to be paid for the purchase on an EC whose land was bought after 9 Dec 2013.

As EC unit are meant for owners' occupation, all applicant(s) and essential occupier(s) listed in the application must sell their exisiting flat within 6 months from the date of Temporary Occupation Permit (TOP).

e. Monthly CPF contribution. Buyer can use their monthly Ordinary Account CPF contribution to service their mortgage loan. Under the CPF Board's requirements , there is a CPF withdrawing limit for a housing loan obtained from a bank or financial institution.  The limit (w.e.f 1 Jan 2018) is set at the lower of 120% of the Valuation Limit or the Available Housing Withdrawal Limit (AHWL). Once the CPF withdrawal limit is reached, mortgagors will have to pay their monthly instalments in cash

The current CPF contribution rate is based on salary (cap at $6000/mth) and age group.  Do note that the CPF contribution rate decreases with the age, with marked reduction in contribution rate at 50 years of age. 

CPF Contribution and Allocation Rates 

3. Finally, put the financial numbers together. 

The desired outcome here is to assess whether you have sufficient financial resources to cover all the required payments before bank disbursement of loan and am comfortable with the mortgage servicing payment.  

It can be a daunting task to work out the calculation and numbers.  Imagine the effort if numerous tweaks and/or 'what if' scenarios need to be explored.   This is where the service and value of a competent agent differentiate from the rest.

Do refer to the FAQs on Finances section where there are some exxample of financial calculation shown.

(I have spend a great number of hours programming an Excel spreadsheet to compute these numbers effortlessly. Read my Estimation Report if you need assistance in this area.) 

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