Uncover Hidden Costs Before Buying Your Home

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Buying a home is exciting and marks a huge step in life. However, it’s not just about finding your dream house; you also need to be aware of hidden costs that come with owning a home. Let’s dive into some of these costs to help you prepare better for this big purchase.

Option Money

When you decide on a property in Singapore, your first cost is the “option money.” This fee, typically 1% of the property’s price, gives you the right to buy the property within a certain period, usually 14 days. If you move forward, you’ll pay an additional 4%, making it a total of 5% of the property price. This payment ensures both you and the seller are serious about the deal. But remember, if you change your mind, you lose this money.

Stamp Duties: BSD and ABSD

In Singapore, you’ll face two main stamp duties: Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD). BSD applies to all property purchases and is calculated based on the purchase price or market value, whichever is higher. ABSD is an extra charge for those buying multiple properties or for foreigners, aimed at cooling the market. These duties can add up, so make sure to include them in your budget.

Cash Above Valuation and CPF Shortfall

Sometimes, the bank values the property lower than the price you agreed to pay. The difference, known as “Cash Above Valuation” (CAV), needs to be paid in cash. Also, if your Central Provident Fund (CPF) savings don’t cover the entire property cost, you’ll face a CPF shortfall, meaning more out-of-pocket expenses. Planning for these scenarios will save you from unexpected financial stress.

Lodgement of Caveat

Your lawyer will lodge a caveat with the Singapore Land Authority (SLA) to secure your interest in the property. This legal notice costs S$64.45 and shows that you have a priority claim on the property. It’s like a safety net against fraud. While this might seem like a small fee, legal services can add to your costs, so keep that in mind.

Valuation Report Fee

To get a mortgage, you’ll need a property valuation report. Licensed valuers charge between S$200 and S$500 for this service. This report helps ensure you’re paying a fair price and can negotiate better loan terms. Especially for high-value properties, hiring a reputable valuer from organizations like the Singapore Institute of Surveyors and Valuers (SISV) is a smart move.

Property Taxes

Property taxes in Singapore depend on the Annual Value (AV) of your home, which is the estimated yearly rent if you rented it out. The Inland Revenue Authority of Singapore (IRAS) reviews AVs yearly. The tax rate varies based on whether you live in the property or rent it out. Knowing these rates helps you plan your budget better.

Insurance

Owning a home means dealing with various risks, from natural disasters to accidental damage. Different types of insurance, like fire insurance, home content insurance, and mortgage insurance, can help protect you. Each type of insurance has its own premiums, so include these in your monthly budget. Insurance might seem like an extra cost, but it offers vital protection against unexpected events.

Maintenance and Utilities

Once you own a home, maintenance and utility costs become part of your routine. Regular upkeep, like repairs and general maintenance, keeps your property in good shape. Utility bills for water, electricity, and gas are ongoing expenses that you’ll need to manage. Including these in your budget prevents financial surprises down the line.

Conclusion

Understanding these hidden costs is a crucial first step in your home-buying journey. By being prepared for option money, stamp duties, valuation fees, property taxes, insurance, and maintenance, you can avoid financial surprises and make smarter decisions. Thorough planning and budgeting help ensure a smooth transition into home ownership. Always consult with financial advisors and property experts to guide you through these costs confidently.

Your home-buying journey should be exciting and rewarding, and with the right preparation, it can be just that. Happy house hunting!


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