5 Things To Know Before Buying a Second Property In Singapore

By EdgeProp Singapore / EdgeProp | April 5, 2018 11:23 AM SGT
Buying investment property that you can rent out to earn rental income is a common Singaporean dream. Many see this as a gateway to achieving early financial freedom or creating a sustainable income stream in retirement.
But there is another side to buying investment property and it can be a risky move that can wreck your finances if you’re not prepared. Which is why, you need to first understand the dynamics of the residential market, its various rules and regulations, and your responsibility as a property owner before embarking to snap up property number two.
For a start, here are 5 things you need to cover before you buy your second property in Singapore:
1) Your eligibility to buy private property
Singaporeans who already own a HDB flat, DBSS flat or Executive Condominium must first fulfil the Minimum Occupation Period (MOP) to be eligible to buy private property. The MOP is five years and you will be required to stay in the flat throughout the duration before you are allowed to purchase a private property.
Meanwhile, permanent residents (PRs) will be required to sell their flat within six months of acquiring private property.
However, those who currently own private property or a Housing and Urban Development Company (HUDC) flat are not subject to such restrictions.
2) How much you can borrow for your second property
Banks assess your loan eligibility based mainly on the following criteria. They are:
i) Total debt servicing ratio (TDSR)
The TDSR dictates that the total loans you need to service in a month should not exceed 60% of your total gross monthly salary. This includes all types of loans, including property, car loans, personal loans and even student loans.
Specifically for loans taken from HDB or banks to purchase HDB flats, the monthly mortgage repayment instalment cannot exceed 30% of a borrower’s gross monthly income.
ii) Loan-to-value (LTV) ratio
When you’re buying your first home, you are eligible to borrow up to 75% of the property value if you’re taking up a bank loan This was reduced from the previous 80% in the latest....