Own a Home without being House Poor

Getting a place of your own in Singapore is a costly dream. To make that dream come true takes sound financial planning. Winston Koo, Group Director from Trinity Advisory Organization (TAO) highlights some strategies to help prospective first-time homeowners avoid becoming house poor.

The average cost of a house on the market in Singapore is roughly SGD2 million1. If you get a government subsidised (HDB) flat, you are looking at an average of a little over SGD530,0002. Either way, it is a costly endeavour, especially if you are still establishing your career and planning to raise a family at the same time.

Typically, people aim to become financially responsible by their 40s. This includes ‘living within their means’, in other words, budgeting for expenses and financial outflow in accordance to one’s income, while accounting for the ownership of assets, such as a home.
As life evolves, so do one’s financial priorities. With time, expenses tend to increase, and one needs to begin budgeting for a family, retirement, exigencies, health, and a host of other needs. How then is it possible to allocate funds towards a huge financial commitment such as home ownership, while earmarking for monthly expenditures on a fixed or variable income?

Real(i)ty Check – Home Affordability in Singapore

In spite of the Singapore government’s efforts to prioritise and encourage affordable housing, property prices are skyrocketing, making it tough for those relatively new to the workforce to fulfil their home ownership dreams. On the flipside, when compared with global standards, Singapore’s home ownership rate has been consistently high; approximately 90%3 of Singaporeans own their own homes.

In my opinion, individuals should ideally invest in not just a home, but also pay heed to a good financial plan that allows them to become debt-free by their 50s, with respect to repayment of home loans, mortgages etc.

Here are step-by-step recommendations and issues worth considering when it comes to affording a home while sustaining a lifestyle within your means:

Get a Financial Health Check-up

Instead of getting enamoured by homes that are outside your financial reach, begin your house hunt once by getting a financial health check-up. The best person to do this with you is not your real estate agent, but someone who specialises in looking at your financial position from a holistic perspective – an experienced financial consultant. This essential exercise will go a long way in helping you understand and make an informed budget for homes that you can afford, based on your current income, expenses and future financial projections.

Calculate all the Costs

The next step is to create an estimate for the purchase of your home. This includes the following costs:
o Cash savings required to finance upfront payments such as the property’s down payment, option fee, stamp duty, legal and agent-related costs.
o CPF savings and housing grants available.
o Loan amount, interest rate & repayment tenure.

Budget To Avoid Becoming House Poor

Being house poor isn’t directly related to your income; one can earn a high income, but forget to budget for monthly expenses, leading to over-spending on the home in the long run. While it’s commendable to own a home, it’s also imperative to consider other expenses and investments on the same budget.

One of the most common causes of becoming house poor is the inability to realise the overall cost of homeownership. Buying a home includes many costs such as the upfront property cost, hidden maintenance costs, utilities, insurance, mortgage payments, taxes etc. Over and above home-related costs, one should avoid compromising on meeting other long-term financial objectives such as allocating money for contingencies and retirement.

Complete Your Checklist

Singapore’s CPF Board has laid down a brief checklist4 to increase self-awareness among Singaporeans, with respect to their ability to finance a home. If you’re just about to put a down payment for your future home, make sure you go through this checklist. It will enable you to understand how much you can take from your savings for your home down payment, whether your home loan repayment tenure suits your monthly income and expenses, and if there are any specific limits on your CPF.

Take Control of Your Home & Your Finances

Enjoying a ‘rich’ life doesn’t necessarily mean having a lot of money – it means being able to allocate the money you have comfortably, towards owning assets like a home, and budgeting for other important expenses.

At SG Alliance, we help you understand your finances so you can get an idea of what kind of a home you can afford, and begin your journey towards owning it, and not the other way around.

Get in touch with me, and let me help you step closer to your dream home and dream life today.


SG Alliance © Pte Ltd All Rights Reserved  |  Co. Reg. No.: 202036335W