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Planning For Your First Property Part 1

In one of our earlier articles, we highlighted the importance of early planning for interior designing and doing up a new home. Now, let us examine the four pillars – mortgage, renovation, furniture and appliances, and property tax and insurance - of financial costs that one will have to shoulder for his or her first property. The process of buying your first house is at once exciting and intimidating until broken down into bite-sized steps. In this article, we will examine the mortgage and renovation costs.


Mortgages for HDBs can be furnished by either a HDB loan or a bank loan, while the latter is only applicable for that of private properties.

Table 1: Compilation of HDB Loan Vs Bank Loan

It is apparent that each type of loan has its own merits – an individual’s personal preference and financial situation should ultimately be the key determinants of which to choose.

Let us consider a self-employed freelancer with a variable income.

Example 1

John is an insurance agent who earns a $60k annual income, plans to purchase a HDB 5-Room apartment. He has 2 choices - HDB/Bank loan

Financial Situation: Variable Income

However, this money is not evenly distributed across the 12 months, i.e., he received $1,500 in March and $8,000 in April in the last fiscal year.

Personal preference: Prefers to have a large, liquid allocation of reserves

John has a substantial pool of emergency funds to defend against the inevitable barren months.

Recommendation: HDB Loan

John will benefit greatly from taking a HDB loan because his variable income may be a likely cause of late payments, and he would be less penalized with the more lenient late fees. With a HDB loan, he would not have to cough out any cash downpayment – that would deplete his emergency fund – at the outset.

To summarize

It is evident that bankers evoke memories of that hard-hitting Physics teacher who had a short fuse (no pun intended) for late submissions for homework. The guys at HDB are more lenient, like that teacher who always seemed empathetic to the dog-eating-your-homework story. That being said, this article is not a 101 on how to defer your loan payments, and there will be consequences eventually with such a mindset.