House-buying tips for newly-weds

Source : Straits Times – 7 Jul 2009

Yearning for a love nest to call your own? To-be-weds should check out this article for some property purchasing and home financing tips.

Going on a round-island hunt for the perfect abode can be a tiring affair, especially if one doesn’t drive and has to pack it in with other people on the public transport system.

Having to jostle with other commuters when one is pregnant is worse. That’s why I try to make it a point to give up my seat for a mums-to-be.

“Would you like to sit?” I asked a few moons ago, when a lady with a slight paunch boarded the bus (but I couldn’t be sure if she was house-hunting though.)

I had expected the usual “thank you”, but that didn’t ensue.

“Er, no. I don’t need it,” came the sheepish and fractured reply, after a pregnant pause (no pun intended).

I then realised that I had bestowed the ultimate disfavour upon a woman. I had put a dirty label on her – assuming that she’s pregnant instead of just, er, well-endowed. But hey, look on the bright side! At least the enduring efforts of Singa hadn’t gone unnoticed. But that said, I certainly hope what went around won’t come back to me any time soon. (Better start jogging. Or avoid taking the bus altogether.)

But I’m jumping the gun here, what with preggies, fatties and all. I really should start touching on the main stuff – house-buying tips for newly-weds, pregnant or otherwise – before you threaten to give up your seat for me.

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A big ticket item

Property acquisition is a huge investment, and possibly the single, largest one a couple will bear. So, newly-weds who may not have accumulated enough savings and tend to borrow substantial amounts must resist rushing into a purchase – no matter how much they like it. They will have much to bear should theirs turn out to be a wrong decision.

The first step towards budgeting and measuring affordability lies in making sure they have enough cash for the 20 per cent down payment. A couple should also find out if their combined incomes can support monthly mortgage payments.

Although salaries for a young couple should rise over time, loan periods usually stretch from 20 to 30 years, during which time interest rates will fluctuate. At the end of the day, they’ll have to repay principal plus interest, which could be tantamount to twice the original amount borrowed, for every dollar they borrow.

Be a wary buyer, not a weary one

The recent economic lull goes to prove one thing: salaries can be cut and jobs can be lost. Combined with a withdrawal of promotional interest rates, possible losses on the stock market and perhaps the arrival of a baby, cash flow can suddenly become very tight. One must remember that property is the most illiquid asset of all, so a couple should try to keep monthly instalments in as manageable a manner as they can. As a general gauge, a couple could try to not spend more than a third of their gross monthly income on their mortgage.

‘House’ it going?

A couple should think about the tenure of their property. A 99-year leasehold property will cost less than a similar freehold property, which means that for the same budget, they can either get a newer or bigger leasehold property compared to a freehold one. Better still, if they decide on an HDB flat or EC, they can enjoy an ‘extra’ government grant.

A 99-year leasehold home can provide a very affordable choice for someone who, with the same budget, cannot buy freehold property and still enjoy all the facilities and resort-style living that goes with it. Of course, those who must have a freehold property will just have to be prepared to fork out a bigger budget.

Access your accessibility

If a couple cannot yet afford a car, then look for a home which is conveniently linked to the public transport system, or better still, close to their workplace. One has to be comfortable with the time taken to travel, taking into account hassles involved, in order to be convinced about living in a certain place.

Facilities & amenities

A couple should also take into consideration about the perks of living near schools, supermarkets, shops, restaurants, their parents (especially if they plan to have kids soon). If not, they may land up having to uproot themselves disruptively if a short-sighted decision has been made.

Size (and other) matters

In terms of size, a two-bedroom unit could probably be good enough for a couple starting out, as it will provide room in case a baby or live-in maid comes along. On a separate and still related note, an older or BTO property should cost less (ceteris paribus). However, house-proud newly-weds could fall into a trap of overspending on renovations in order to improve its look. Any savings made would therefore be offset as high renovation loans attract high interest rates.

With new developments, a couple should save on high-cost items which are already included, such as built-in wardrobes, air-conditioning and kitchen cabinets and equipment, so as to minimise their expenditure.

Old is gold?

With older developments, especially those above 15 years, good maintenance is critical to keep their value. For really old developments, buyers need to evaluate if it’s worthwhile to cough up thousands of dollars for upgrading work. Some people may be keen to take a bet on properties with a potential for en bloc, which could result in a ‘windfall’ should it follow through. There’s no harm in subscribing to this notion. One just has to make sure he’s taking a calculated risk.

Be patient

If a couple is planning to upgrade in a couple of years, then it may make sense to settle for less for the time being.

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Here’s hoping you’ll have a fulfilling time searching for your dream home with these pointers. Oh, if you intend to bus-hop while at it, do me a favour: let me know if you genuinely need my seat and I’ll gladly give it up; it’ll save me the hassle of guessing if it’s actually a fat baby – or baby fats – that’s residing beneath that belly.