A comprehensive guide on condo downpayments and commonly asked questions.
When buying private property in Singapore, the downpayment amount can be critical. Regardless of the loan that you take out, the downpayment will have to be paid upfront, and is a key determinant of whether a property is within your price range.
Exactly how much will you need to fork out as downpayment, and how much in cash, when purchasing a condominium unit? We pick apart the costs.
Why buyers in Singapore are opting for condos
Housing and Development Board (HDB)’s Build-To-Order (BTO) flats are usually the first choice of many first-time buyers thanks to their affordability. After meeting the Minimum Occupation Period requirements, some owners then sell their flats to upgrade to condominiums.
However, this has changed dramatically as HDB’s BTO projects have been delayed due to the COVID-19 pandemic.
On top of that, the requirements for owning a HDB flat are more stringent than for owning a private condominium. For example, you need to be a Singapore Citizen or Permanent Resident (PR), earn below a certain income ceiling, and have your family composition meet certain criteria. To get around all these restrictions, first-time homeowners may opt to buy a condominium unit.
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Factors that affect prices of condos
When considering the downpayment amounts for condos, there are a few things to keep in mind.
Loan-to-Value (LTV) limit
When you take out a loan from a financial institution, you need to consider the LTV ratio, which determines the amount a bank can lend you.
Your Central Provident Fund (CPF) account can be used to pay for your home purchase, within certain limits.
Stamp duty is payable in cash before you pay the condo deposit. However, you can get a refund using your CPF account.
The stamp duty depends on the following:
- The purchase price of the property
- Number of other properties owned, if any
- Whether you are a Singaporean, PR or foreigner
For simplicity’s sake, here is a breakdown of how much you would have to pay for a condo in Singapore if it cost S$1,000,000.
|Outstanding condo downpayment (25%)||S$250,000||S$250,000||S$250,000|
|Minimum cash downpayment (5% of 1,000,000)||
Not applicable (downpayment to be paid in cash fully as no CPF)
|Stamp Duty (Buyer’s Stamp Duty and Additional Buyer’s Stamp Duty where applicable)||S$24,600||S$74,600(Includes Additional Buyer’s Stamp Duty of 50,000 which is 5% of purchase price.)||S$324,600(Includes Additional Buyer’s Stamp Duty of S$300,000, which is 30% of purchase price.)|
|Total condo downpayment (CPF and cash)||S$274,600||S$324,600||S$574,600|
|Cash money on hand (minimum cash downpayment and Stamp Duty)||S$74,600||S$124,600||S$574,600|
The example applies to a Singaporean/ Permanent Resident (PR)/foreigner who owns no other property and wants to buy a condo.
As can be seen in the above illustration, the downpayment amount for a citizen is less than for a PR or foreigner, as only foreigners and PRs need to pay Additional Buyer’s Stamp Duty (ABSD) for their first property purchase.
How much CPF can you use for a condo?
In our example, the total downpayment is equal to CPF plus cash. In this case, the minimum cash downpayment is 5% of the purchase price (S$1,000,000), which is S$50,000.
In the case of a Singaporean, the total downpayment for the condo is:
S$1,000,000 x 25% = S$250,000
5% of S$1,000,000 is payable in cash and the balance of S$200,000, or 20% of the purchase price, can be paid from the CPF Ordinary Account.
However, the big question is how much money do you have in your CPF account?
If you are an employee earning S$3,000 every month, it may take up to 10 years to accumulate S$200,000 in your Ordinary Account – so do check your CPF account balance before deciding on a purchase. You can also opt to top up any shortfalls with cash.
How is the stamp duty calculated?
If you are buying a condominium, Buyer's Stamp Duty (BSD) is a requirement and an additional cost to consider. It also applies to other properties, whether commercial or residential.
The amount of the charge depends on the property’s purchase price. For example, if you are buying a residential property, the following charges will apply:
|Cost of the property||BSD rates for residential properties|
There is a stamp duty calculator on the IRAS website which you can use to estimate the amount of stamp duty you will have to pay.
To return to our example: If you are planning to buy a condo worth S$1,000,000, the amount of BSD is $24,600. If you are Singaporean, this is the only amount you will have to pay.
However, PRs and foreigners also have to pay ABSD of 5% and 30% respectively.
You are to pay the stamp duty in cash. However, this amount can be refunded from your CPF if there is sufficient balance to enable a refund.
How does the LTV limit factor in?
In addition to knowing the purchase price of your preferred condo, the LTV limit is another important factor that can affect private condo downpayment. If you own other properties, the LTV is based on the balances of your home loans.
The LTV ratio depends on the number of other outstanding loans you have. If you have no outstanding loans, the LTV is 75%, which means you need to put down a S$250,000 deposit or 25% of the purchase price.
On the other hand, if you have one outstanding loan, your LTV is about 45% and that means you need to raise more cash to meet the minimum downpayment for the condo. In other words, a lower LTV ratio means a higher cash commitment.
Will you be able to pay the monthly instalments?
Making the downpayment is only the first step on the way to owning a condo, because you still have to pay up to 75% of the purchase price. The question is how you will pay your monthly instalments. Or simply put, will you be able to pay? If you are getting a financing option from your lender, these are also important questions that you’ll need to answer.
Truth be told, it's no walk in the park and the monthly payments can be hefty. Currently, bank interest rates on home loans range from 1.25% to 1.6% per year. Of course, there are other factors to note, such as lock-in periods of up to two years.
For instance if you decide to buy a property at S$1,000,000 as in our example, monthly payments can be at least S$3,000 over a 20-year period with most banks.
So your income has to be sufficient to cover your instalments over the years. For a fixed rate of just below 1% (0.93%–0.97% depending on bank) in the first year, the table below reflects the lock-in periods for some loans:
|Maybank 3M SORA||One year|
|OCBC 1M SORA||Two years|
|HSBC 1M SORA SmartMortgage||Two years|
|DBS 3M SORA||Three years|
|Standard Chartered 3M SORA||Two years|
On the other hand, other types of home loans may have floating interest rates, which could provide scope for refinancing your loan should the rates drop.
How much cash do you need to buy a condo?
As reflected in our example, the out-of-pocket amount for a Singaporean is made significantly more manageable by the option to foot part of the downpayment using CPF. Given a sufficient CPF balance, only S$74,600 will have to be paid in cash, significantly less than the amount for PRs and foreigners.
However, if your CPF balance is not at a level where it will be able to help offset costs, you may have to top up more cash to make up the 25% downpayment and stamp duty.
The affordability of the downpayment for a condo depends not just on regulations that determine its amount, but also on your CPF balance and the amount of cash you have on-hand. While owning a condo may not come cheap, keep these factors in mind so you can start saving and investing towards making this goal a reality.
Buying a condo? Check out the different home loan rates and apply via SingSaver to enjoy low rates of less than 2.0% per annum plus a two-year lock-in period.
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