This is the third part of our first home series; click to read parts one and two.
We have finally gotten to the last part of our three-part article. In our first article, we went through the different ways to pay for the house, and in our second part of the article series, we mentioned the different types of insurance that you can (and have to get) for your home.
Look where we are; you’ve come so far, but there’s not a long, long way to go! Here is the final article regarding renovation, furniture and stamp duties!
Renovation Loan
Renovation costs are usually the second-highest cost of your first home, after mortgages. There are many types of interior design: electrical to carpentry to fixtures, and even altering the house’s layout by hacking or installing walls. On average, Singaporeans spend up to 20% of their home value or roughly around $50,000 – $60,000 on their house renovation.
Renovation style can also differ depending on the current trend and how much work and materials are needed to create the apartment’s look.
Most experts recommend setting a budget first and removing 15% from this total. If your renovation budget is $50,000, you should aim for $42,500 or less, with the remaining 15% (or $7,500 in this example), expect some things not to go as planned. By creating a 15% buffer, you will be confident that the project can be done at your price point and not put a financial strain on you or your family.
Renovation loans are available in the form of personal loans; on average, home renovation loans in Singapore charge about 5.33% in interest and a one-time upfront processing fee of 0.75%-2%, for a total cost of about 6-7%. Unlike other standard instalment loans that banks provide, a home renovation loan’s interest rate is called a “rest rate.” This means that you pay an interest payment on the outstanding balance of your loan.
Read Also: Average Cost of Home Renovation in SG 2022 & The Average Cost of Home Renovation Loans 2022.
Lendela allows users to have a simple way to find the cheapest personal loan by offering custom offers. These offers are tailored to a prospective borrower’s profile to be the best rates available from both moneylenders and banks.
Personal Loads for Furniture
Furniture and Appliances are the final expenses for your first home, just like the last piece of the puzzle. One must find the balance between prices, aesthetics, and quality of their home items.
Firstly, finding the proper budget for furniture is crucial. Even though IKEA provides the best quality furniture with a simplistic and minimalistic aesthetic, there are cheaper alternatives that you can choose, such as local custom-made or vintage furniture. You can even sign up for credit cards that reward high spending, wait for the good sales with the best deals, and keep your horizons open for alternatives.
Read Also: IKEA: The Cheapest Way To Buy Furniture?
When choosing household appliances, on the other hand, you should consider the long-term costs associated with the appliances’ electrical usage (and water usage for washing machines and dishwashers). Try to balance the upfront cost of the electrical appliances and their potential savings from being energy efficient.
The Citi Cash Back+ Card is a good card choice for high spenders who want to avoid reward caps. Cardholders earn 1.6% unlimited cashback on every purchase with no minimum spend requirement. Though there are cards with a higher cashback rate, they are limited by reward caps. The downside of this reward structure is that to make the most of it, cardholders have to spend S$7k monthly. However, should you be able to hit that threshold of spending, this card offers an easy way to maximise rewards without having to worry about artificial restrictions or limits.
Stamp Duty
Stamp duties are cooling measures placed by the government to regulate the price growth of properties in Singapore. There are a few types of Stamp Duties: Buyers’ Stamp Duty (BSD), Seller’s Stamp Duty (SSD), and, lastly, for private property, additional buyer stamp duty (ABSD).
Buyer’s Stamp Duty (BSD) is a levied tax on every home buyer. Whenever you purchase a property, BSD is always payable. It is computed based on the property price, so the higher the price of your new home, the higher BSD you would have to pay.
On the other hand, seller Stamp Duty (SSD) is a levied tax on most home sellers. SSD is calculated depending On The Year Of Sale. If we wish to sell our property within three years from the date of purchase or acquisition, we need to pay 4% to 12% of the actual price or market value of the property, whichever is higher.
There are exceptions to Seller Stamp Duties, which are mainly legislative in nature:
- Property owners whose property is being acquired by the government (Land Acquisitions Act)
- Property owners who are declared bankrupt and are required to liquidate their property
- Foreigners (Residential Property Act)
- SERS identified flat owners that sold off their flat before HDB claims the flat
- Repossession of flat by HDB due to SERS or other refund reasons
- If we inherit an HDB flat/marry another person that owns an HDB flat while owning one and is required by HDB to dispose of the inherited flat
Additional Buyer’s Stamp Duty (ABSD) is levied tax, which applies to the higher of a property’s purchase price or market value for private properties. It was introduced in 2011 as a property cooling measure by pushing prices upwards to moderate property demand. It is levied on top of BSD and only applies to buyers who fit specific criteria, including residential status and the number of properties owned.
As of May 2022, ABSD has increased to 35% for any transfer of residential property into all living trusts.
Conclusion
Now that you have come to the end of the final article of our three-part series (If you have not read the previous two articles about mortgages and insurance, don’t miss them!), you are finally ready to plan for your first home. It may be intimidating at first, but you will find the journey rewarding step by step.
Additional Resources:
The article Furniture, Renovation and Stamp Duties: What are Other Costs for Your First Home in Singapore originally appeared on ValueChampion.