What is a Downpayment?
A downpayment is the initial upfront payment you make when buying a condo. It’s a percentage of the total purchase price and is typically paid when you sign the Option to Purchase (OTP).
How Much is the Downpayment?
The downpayment for a condo in Singapore can range from 5% to 25% of the purchase price. The exact amount depends on several factors, including:
- Loan-to-Value (LTV) Ratio: This is the maximum percentage of the property’s value that a bank is willing to loan you. The current LTV limit for most buyers is 75%, which means you’ll need a 25% downpayment.
- First-time vs. Subsequent Buyer: First-time buyers typically have more favorable LTV limits and can put down a smaller downpayment compared to those who already own a property.
- Outstanding Home Loans: If you have outstanding home loans, it may affect your LTV limit and require a larger downpayment.
First-Time Buyers:
- Loan-to-Value (LTV) Limit: Generally, first-time buyers enjoy a higher LTV limit of 75%. This means they can borrow up to 75% of the property’s value and only need to put down a 25% downpayment.
- Benefits: This lower downpayment requirement makes it easier for first-time buyers to enter the property market, as they need less cash upfront. Additionally, they may be eligible for government housing grants, which can further offset the downpayment.
Subsequent Buyers:
- Loan-to-Value (LTV) Limit: For those who already own one or more properties, the LTV limit is reduced to 45%. This means they can only borrow up to 45% of the property’s value and must put down a larger downpayment of 55%.
- Additional Buyer’s Stamp Duty (ABSD): Subsequent buyers also have to pay ABSD, which is a tax on top of the Buyer’s Stamp Duty (BSD). The ABSD rate increases with the number of properties owned.
- Challenges: The higher downpayment requirement and ABSD can make it more challenging for subsequent buyers to invest in additional properties.
Cash and CPF Components
Your downpayment will consist of both cash and CPF (Central Provident Fund) components:
- Cash Component: A minimum of 5% of the purchase price must be paid in cash. This cannot be from your CPF.
- CPF Component: The remaining portion of the downpayment can be paid using your CPF Ordinary Account (OA) savings.
Example:
Let’s say you’re buying a condo worth S$1,000,000. With a 75% LTV limit, you’ll need a 25% downpayment, which is S$250,000.
- Cash Component: S$50,000 (5% of the purchase price)
- CPF Component: S$200,000 (The remaining amount)
Additional Costs
In addition to the downpayment, be prepared for other costs involved in buying a condo, such as:
- Buyer’s Stamp Duty (BSD)
- Additional Buyer’s Stamp Duty (ABSD) (if applicable)
- Legal fees
- Valuation fees
Example for your 1st $1.2 million condo
Let’s break down the costs for your first S$1.2 million condo purchase, including BSD and ABSD:
Property Details:
- Price: S$1,200,000
Downpayment (First-Time Buyer):
- Loan-to-Value (LTV) Limit: 75%
- Downpayment Required: 25% of S$1,200,000 = S$300,000
- Cash Component (min. 5%): S$60,000
- CPF Component (max.): S$240,000
Buyer’s Stamp Duty (BSD):
- First S$180,000: 1% = S$1,800
- Next S$180,000: 2% = S$3,600
- Next S$640,000: 3% = S$19,200
- Remaining S$200,000: 4% = S$8,000
- Total BSD: S$32,600
Additional Buyer’s Stamp Duty (ABSD):
- For first-time Singapore Citizen buyers: Not applicable (S$0)
Total Upfront Costs:
- Downpayment: S$300,000
- BSD: S$32,600
- ABSD: S$0
- Total: S$332,600
Important Considerations:
- This calculation only includes the upfront costs directly related to the purchase. Remember to budget for other expenses like legal fees (conveyancing, etc.), valuation fees (if applicable), and fire insurance.
- Ensure you have enough funds in your CPF Ordinary Account (OA) to cover the CPF portion of the downpayment.
- Consider applying for any eligible government grants for first-time homebuyers, which could help offset some of the costs.
Example for your 2nd $1.2 million condo
Let’s break down the estimated costs for your second S$1.2 million condo purchase:
Property Details:
- Price: S$1,200,000
Downpayment (Second-Time Buyer):
- Loan-to-Value (LTV) Limit: 45% (for second or subsequent property)
- Downpayment Required: 55% of S$1,200,000 = S$660,000
- Cash Component (min. 5%): S$60,000
- CPF Component (max.): S$600,000
Buyer’s Stamp Duty (BSD):
- First S$180,000: 1% = S$1,800
- Next S$180,000: 2% = S$3,600
- Next S$640,000: 3% = S$19,200
- Remaining S$200,000: 4% = S$8,000
- Total BSD: S$32,600
Additional Buyer’s Stamp Duty (ABSD):
- For Singapore Citizens buying their second residential property: 20%
- ABSD: 20% of S$1,200,000 = S$240,000
Total Upfront Costs:
- Downpayment: S$660,000
- BSD: S$32,600
- ABSD: S$240,000
- Total: S$932,600
Important Considerations:
- This total does not include other potential costs like legal fees, valuation fees (if required by the bank), and fire insurance (usually mandatory for home loans). These could easily add tens of thousands of dollars to your upfront costs.
- Since the LTV limit is lower for second-time buyers, your maximum loan amount would be S$540,000, and you’d need to be prepared to finance the remaining amount through cash or CPF.
- It’s crucial to assess your financial situation carefully before proceeding with a second property purchase, considering the significant upfront costs and the increased monthly mortgage repayments you’ll be responsible for.
Tips for Managing Your Downpayment
- Save Early: Start saving for your downpayment as early as possible.
- Check Your CPF OA Balance: Ensure you have enough funds in your CPF OA to cover the CPF component of the downpayment.
- Consider Government Grants: First-time buyers may be eligible for housing grants that can help offset the downpayment.
Buyer’s Stamp Duty (BSD)
The Buyer’s Stamp Duty (BSD) is a tax levied on buyers when they purchase any property in Singapore, including condos. It’s calculated based on the purchase price or the market value of the property, whichever is higher.
BSD Rates (Effective from 15 February 2023):
| Purchase Price or Market Value | BSD Rate |
|---|---|
| First S$180,000 | 1% |
| Next S$180,000 | 2% |
| Next S$640,000 | 3% |
| Next S$400,000 | 4% |
| Remaining Amount | 5% |
How BSD is Calculated:
Let’s use the example of a S$1.2 million condo to illustrate the calculation:
- First S$180,000: 1% x S$180,000 = S$1,800
- Next S$180,000: 2% x S$180,000 = S$3,600
- Next S$640,000: 3% x S$640,000 = S$19,200
- Next S$400,000: 4% x S$400,000 = S$16,000
- Remaining S$200,000: 5% x S$200,000 = S$10,000
- Total BSD: S$1,800 + S$3,600 + S$19,200 + S$16,000 + S$10,000 = S$50,600
Who Pays BSD?
The buyer is responsible for paying the BSD. It’s typically paid within 14 days of signing the Option to Purchase (OTP).
Purpose of BSD:
BSD serves as a revenue source for the government. It also plays a role in managing property demand and ensuring that property prices remain stable and sustainable.
Key Points to Remember:
- BSD is a one-time tax paid at the time of purchase.
- The BSD rate is progressive, meaning that higher-value properties are taxed at a higher rate.
- You can use a BSD calculator (available online) to easily calculate the amount payable.
Additional Buyer’s Stamp Duty (ABSD)
The Additional Buyer’s Stamp Duty (ABSD) is a property cooling measure implemented in Singapore to moderate demand and ensure sustainable property prices. Here’s how it works:
Who Pays ABSD?
ABSD is payable by:
- Singapore Citizens (SC) buying their second or subsequent residential property.
- Singapore Permanent Residents (SPR) buying any residential property.
- Foreigners buying any residential property.
ABSD Rates:
The ABSD rate varies depending on the buyer’s profile and the number of residential properties they own:
| Buyer Profile | 1st Residential Property | 2nd Residential Property | 3rd & Subsequent Residential Properties |
|---|---|---|---|
| Singapore Citizen (SC) | Not Applicable | 20% | 30% |
| Singapore PR (SPR) | 5% | 30% | 35% |
| Foreigner | 35% | 35% | 60% |
How ABSD is Calculated:
ABSD is calculated based on the higher of the property’s purchase price or market value. For example, if a property is purchased for S$1.2 million but has a market value of S$1.5 million, the ABSD would be calculated based on the S$1.5 million value.
Example (ABSD Calculation):
A Singapore Citizen buying their second residential property worth S$1.2 million would pay ABSD of:
S$1,200,000 * 20% = S$240,000
ABSD Remission and Refunds:
In some cases, buyers may be eligible for ABSD remission or refund. For example, married couples with one SC spouse and one SPR spouse can get a remission if they meet certain criteria. Additionally, if a buyer sells their existing property within a specified timeframe after buying a new one, they may be able to claim an ABSD refund.
Purpose of ABSD:
ABSD serves several purposes:
- Cooling the Property Market: It discourages excessive speculation and investment in residential properties.
- Ensuring Affordability: It helps to keep property prices more affordable for genuine homebuyers.
- Protecting the Interests of Singaporeans: It prioritizes homeownership for Singaporeans by making it more expensive for foreigners and PRs to buy property.
Important Note:
The ABSD rates and regulations are subject to change. Always refer to the latest information on the Inland Revenue Authority of Singapore (IRAS) website for the most up-to-date information.