Buying your first home and moving out is an exciting and fulfilling milestone. However, it is also a huge financial commitment, and likely the most expensive purchase you will make in your lifetime. As prices of public and private housing may continue to climb, it is important you start planning and saving for your home early.

 

Use this guide to help you.

 

 

A larger family might value the space that landed property brings, while someone who values having a gym and swimming pool at their doorstep might find a condominium more suitable for their lifestyle.

Given the higher price tag of both, you might consider public housing options such as a built-to-order (BTO) flat or a resale flat instead. BTOs are often the cheapest option, but flats are allocated based on a balloting system, not a first-come, first-served basis. In addition, between applying and collecting your keys, you may need to wait around two to six years. With this in mind, it is advisable to start planning early, especially if you and your spouse would like to move into the home soon after marriage.

 

 

Part of what makes public housing an attractive option is that it is more affordable, and there are additional Central Provident Fund (CPF) Board grants, such as the Enhanced CPF Housing Grant and Family Grant to further alleviate the financial burden. In fact, as a first-time buyer, you can receive up to $80,000 in grants for a BTO flat, and $160,000 for a resale flat. That said, to qualify, you must meet the eligibility criteria, such as falling below the income ceiling.

 

If you are single, you can purchase public housing after the age of 35. It is also possible to apply for a BTO if it is a two-room flexi flat in a non-mature estate. This brings us to the next question.

 

 

You should personally check out the neighbourhood you wish to live in, to ensure you like the area. In addition, look out for factors such as the distance to a MRT station, your workplace, schools, supermarkets and other amenities, all of which can affect your home resale value as well as your lifestyle.

 

You may also consider surveying the urban master plans of the city as further development in an area can increase the property's market value, making it a clever investment choice for the future.

 

It is worth noting that your home location can come with financial benefits as the Proximity Housing Grant (PHG) is available for those purchasing HDB flats within four kilometres of their parents' home.

Once you have an idea of what type of home you want and where you want it, you'll be able to start looking into the costs of home ownership and loan options you have. The CPF First Home Calculator provides a good estimation of the purchase price and housing loan amount you can afford. Here are also some of the costs you need to consider:

 

 

The amount of down payment you make depends on the type of loan you take. If you take a housing loan from a bank, you may need to make a down payment of at least 25 per cent of the purchase price, of which 5 per cent must be paid in cash. A HDB loan on the other hand, requires a down payment of 15 per cent of the purchase price, all of which can be funded from your CPF savings. However, do note that to be eligible for the HDB loan, there are various criteria, such as an income ceiling and the remaining lease of the flat, that must be fulfilled.

 

Check your savings to see how much you can commit as a down payment for a home. You may also want to look into other financial products you have previously purchased. For example, you may have savings insurance with accumulated cash value that you can liquidate to help fund your dream home.

 

 

Experts suggest no more than 30 per cent of a home buyer's monthly income be spent on mortgage repayments, and the CPF Board advises a more conservative 25 per cent. Ultimately, the board says that one's Total Debt Servicing Ratio (TDSR), which refers to the proportion of gross monthly income that can go towards repaying monthly debt obligations, should be capped at 55 per cent. Use the CPF Mortgage Calculator to help you determine what you can afford.

 

 

These include transaction costs such as stamp duties and legal fees. Besides that, there are also renovation costs, property tax, monthly property maintenance fees, real estate agent's commission fees and fire insurance fees.

 

You might also wish to take on additional insurance plans to protect your home and family. Mortgage insurance such as the AIA Mortgage Reducing Term Assurance offers support in the unfortunate event that you are unable to meet your home loan repayments and the AIA Elite HomeCare, goes a step above HDB Fire Insurance and Management Corporation Strata Title (MCST) Fire Insurance to protect your valuables if a fire breaks out.

Buying your first home can seem daunting, but you do not have to do it alone. If you are uncertain how to budget or what type of loan to take, a property agent will be able to help.

 

As tempting as it may be to save on real estate agent commission fees, there are benefits of having a seasoned professional walk you through the home-hunting process. A good agent will be able to do a proper financial evaluation, advise you on the prices of properties you are interested in and help you negotiate so you do not have to pay more than you should. They will also be able to help you navigate your new neighbourhood better and provide useful suggestions on what features to look out for in your purchasing decision.

Shopping for a home have its ups and downs. You may find yourself loving a property online, only to discover it does not match your expectations in person. You might also find you are forced to accept trade-offs in the home-buying process, or that renting a place is ultimately more suitable for your lifestyle and financial needs.

To help you decide, it is important to review your financial status, needs, wants and non-negotiables. As buying a home can mean decades of financial commitment, always give yourself time to weigh your options.

At the end of the day, your first home will be an achievement. But, like most goals, it takes work and preparation. Plan early and start building your savings with AIA Smart Flexi Growth or AIA Smart Wealth Builder Series to maximise your savings potential and secure your dream home. Reach out to an AIA Financial Services Consultant today to find out more about what type of plans are suitable for your needs and lifestyle.