Why Grown‑Ups Should Keep an Eye on Their Mortgage Hangover
Across Singapore, the Monetary Authority of Singapore (MAS) has thrown out a friendly but serious reminder: before you take the next jump into a new home, make sure you actually can pay the mortgage. Huh? Apparently, the great COVID bubble has left many families with more debt than before the pandemic even started.
Get the skinny from the experts
On the recent episode of Powering Your Property on Prime Time, host Rachel Kelly and co‑host Shezad Haque sat down with Sumit Agarwal, a distinguished professor at the National University of Singapore, to unpack the wild ride of home financing.
Key Take‑aways from the Conversation
- Debt Growth is No Joke: Singapore households now carry a larger bundle of debt than when the world was still reeling from Covid‑19. That means your monthly mortgage could feel like a slow‑burning ember every single month.
- Your Ability to Pay Matters: The MAS is telling you to double‑check whether the mortgage amount aligns with your budget. Sneaky people sometimes get the numbers wrong, but they won’t be voting in the next election for you.
- Future Proofing: New borrowers should consider how rent hikes, job changes or even a sudden diagnosis of “born‑again mortgage” might affect their ability to keep up with the repayment schedule.
- Plan for the Unexpected: Have a buffer in case something unpredictable pops up. Think of it as a rain‑cloud cushion for your finances.
Bottom line
Buying a home in Singapore no longer feels like a carefree dream—it’s more like, “Can I pay this into my future?” Experts urge homeowners to approach financing with a straight‑up, no‑frills mindset. Look at your cash flow, consider your risk tolerance, and don’t let the house be a debt monster!
Rachel Kelly: For buyers looking to purchase their first home, what questions should they be asking themselves when it comes to financing?
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#1: What is the interest rate that needs to be paid for the debt?
#2: What is the right amount of housing?
Dreaming Big with Housing, but the Numbers Won’t Budge
So you’re scrolling through listings of snazzy three‑bedrooms, thinking about an extra space for future projects—maybe a studio, a home office, or a future bed for the houseguest that’s never coming.
It’s All Fun Until the Mortgage Hits You
Reality check: the monthly payment on that extra bedroom can suck the joy out of your wallet faster than a pop‑culture scandal. Debt servicing isn’t just a fancy financial term—it’s the inevitable cost that reminds you you’ve just signed a contract with your bank.
Three‑Bedroom Blues
- Nice for flexibility, but high maintenance in the long run.
- Monthly fees can feel like a personal vendetta when your income isn’t blazing.
- It’s tempting to stash it for “when the kids come home from college,” but that rent is decided now, not later.
Which Home Is Right?
If you’re rocking a tight budget, a two‑bedroom “starter” can still keep you comfy. Think of it this way: your rent is at 30% of net income—a sweet spot most financial gurus cherish. Once you’re in a position to refinance or earn extra, a future upgrade holds real potential.
Bottom Line: Be Realistic, Still Dream
It’s tempting to look ahead, but the current numbers say otherwise. Keep hubris in check, stay realistic about your finances, and keep dreaming. The right place will come along—maybe not today, but it’ll show up one day armed with a better paycheck and a revised mortgage plan.
#3: Do I have enough cash flow for the next 15 years to pay for the house and is the mortgage at a fixed or adjustable rate?
Fixed Rates in Singapore: It’s a Wild Riddle
Picture this: you’re in Singapore, eyes glued to your laptop, hunting for a mortgage that doesn’t wiggle, swim, or change its rate like a mischievous cat. The reality? It’s pretty rare to lock your interest in a permanent deal. All the good news? The first three years are usually gold‑en and fixed—like a sturdy anchor before the storm.
Why “Permanent” is a Big No‑Go
- Banks love flexibility. They’ll give you a variety of options, but the rate labors under a brief commitment.
- Market vibes change fast. If rates shift, the bank may shift too. That’s why they stick to a three‑year plan.
- Your budget needs a safe spot. A three‑year lock gives you a concrete safety net without the long‑term commitment.
A Quick Moral
In the heat of Singapore’s real‑estate hustle, think of that fixed three‑year rate as a temporary but dependable hide‑away—you get a calm breathing space, but you’re ready to adapt if the market throws a curveball.
Shezad Haque: What else should buyers factor in when it comes to cost and considerations?
How to Keep Your Wallet Happy When Buying a Home
Picture this: you’ve found the house of your dreams, and the only thing standing between you and the keys is a mountain of fees. Don’t panic—there are ways to dodge the most painful bites.
Fixed Costs: Use the CPF
- Stamp duty – That’s the tax you pay for the title.
- Legal fees – The lawyer’s bill for making sure the paperwork is legitimate.
- Use your CPF – These are straight‑line expenses, and the Central Provident Fund (CPF) is a perfect fit.
Make sure you pick the right CPF scheme that covers these costs without dipping into your monthly stash.
Variable Costs: Keep It in Your Pocket
- Monthly payments – The recurring mortgage or loan payments that can surprise you if you’re not careful.
- Avoid draining CPF? – Try not to touch your CPF for these, because it could end up leaving you short on future emergencies.
- Pay from your paycheck – Rely on your regular income until you’ve locked down the perfect spot.
Think of your CPF as a safety net, not your first line of attack for those recurring costs.
Choosing the Right Loan: HDB vs. Private Banks
- Misunderstandings are the biggest hurdle – Many buyers over‑read the fine print. Stay clear-headed.
- HDB interest rates – They can be a bit on the high side when market rates are super low.
- Future outlook – In the coming years, bank rates are likely to climb while HDB’s rates may actually stay lower.
So, if you can get a good deal from the Housing & Development Board, you might wind up paying less over time.
Bottom Line
Keep a sharp eye on what’s fixed, what’s variable, and where you find the best interest rates. With the right strategy, you’ll have the keys to your new home without emptying your wallet.
Shezad: What are the pros and cons of leaving your CPF untouched for the mortgage?
Your CPF: A Double‑Edged Sword
Locking it Down for a Rock‑Solid Retire‑Me‑Later
Leaving your CPF untouched is basically you saying, “I’ve got this thing that will pay me back when I’m old enough to enjoy it.” That larger, sun‑shined nest egg can be the privacy‑pampering escape you never had the chance to plan.
- Automatic Saving – Every paycheck you see a small chunk slide into your pension basket.
- Peace of Mind – No surprises in the future, just a quietly growing stash.
When the House, House, House Is Calling
But life can throw a plot twist: a house that has to be bought, a flat that must be rented, or an emergency that forces your hands. In those moments, you might think, “Should I just pull from the CPF?”
- Alternatives? Few. Other savings are usually too low to cover a down‑payment.
- The Decision Point – You’re staring at a tough choice: borrow from your future self or keep the nest egg safe.
Why Dipping Out Can Be a Hard‑Guilt Kill‑Artist
When you do decide to pull from your CPF, it’s not just a one‑time “bounce.” You’re in a contract with your own future. Here’s what you’re actually doing:
- Return the Money – After all the concrete and paint, you’re required to put it back.
- Interest Charge – The current rate sits around 2.6 % – yes, that’s in your favour if you consider the market, but you’ll feel it the next time your bank statement pops up.
Bottom line: Pulling out may feel like a quick fix, but the interest tag, plus the obligation to repay, can make it a pricey affair. Treat it like a “borrow from a friend” scenario – it’s convenient, but you’ll have to apologize later.
Rachel: Are we then paying double interest – interest on our CPF and also on the mortgage?
How Your CPF Money Turns Into a Home and Back Again
Picture this: you put your CPF savings into the cash box. The CPF board thinks of the money as a silent buddy, earning you a tidy interest for every dollar you stash away. But, in a twist of fate, you pulled the whole shebang out and spent it on the big-ticket item of a home.
Fast forward to selling your house.
The Big Return Ticket
- When you hand over the keys, you might get a nice profit from the sale—think of it as the house’s “capital gains.”
- Instead of pocketing all that green, you’re required to pay the CPF board back. The practical outcome? The house’s profit goes straight into covering the interest you owe for the original withdrawal.
Bottom line: Your house’s profit pays for the CPF interest you skipped.
In plain English, you generate wealth with your home, but the CPF still plays the role of the bank‑in‑the‑back, demanding its share of the interest back whenever you sell.
Rachel: With interest rates expected to rise, how would this impact the property buying plans for next year? What should homeowners do to plan?
The Great Office Home Makeover Craze
COVID‑19 has turned our living rooms into the new office. Forget about those sleek cubicles and endless commutes – it turns out that the most coveted real estate feature right now is a quiet extra room with a desk, a chair, and a coffee mug that doesn’t spill on the carpet.
Work‑Life Balance Gets… a Make‑over
When the pandemic made the world go quiet, most of us discovered that the “work‑life balance” isn’t a static concept anymore – it’s on a constant journey. People are suddenly realizing that the idea of “working from somewhere” needs a solid real‑space to back it up.
Three Reasons Why Everyone Wants a Third Room
- Zoom, Zoom, Zoom. Frequent video calls mean you need a dedicate spot that’s free from background drama.
- Home‑Cafe vibes. That extra room becomes a personal paradise – the fridge stays in the kitchen, the couch stays on the couch.
- Avoiding the “co‑working from a kitchen” drama. Suddenly, the kitchen is no longer a legitimate office.
Price Surge – The Home‑Office Edition
Happy as it is to see people buying bigger places, the trend has also sent house prices upward. When buying a new room becomes as common as buying a new phone, the market reacts – and the numbers do too.
The Bottom Line
In short, the pandemic has reshuffled > work‑life balance, and the new reality is that a home office isn’t a luxury – it’s a necessity. Homes are stretching to accommodate this change, and as a result, real‑estate prices are taking a modest tilt toward the higher side. Stay tuned – and remember to keep your desk clear of coffee stains!
Shezad: What is the ideal percentage of a monthly salary that should be allocated for paying the mortgage?
How Much Your Savings Should Actually Be
Sumit’s rule of thumb is pretty sweet: 30‑40 % of what you earn goes straight into that envelope, leaving enough to pay rent, keep a few spare dollars for giggles, and cover the next month’s surprises.
Why 30‑40 % is the Golden Mean
- Enough for the essentials: rent, groceries, phone bills—all taken care of.
- Safety cushion: a rainy‑day fund for those “what‑if” moments.
- Flexibility: a few dollars left over to treat yourself to a movie night or a brunch.
Putting It Into Practice
Grab your monthly paycheck, highlight the portion you’ll save, and watch it grow. Remember: the goal isn’t to penny‑count every purchase, but to keep that saving habit alive like a muscle you flex daily.
Enjoy More with Awedio
Don’t just sit on your armchair. Listen anywhere. Awedio, SPH’s free digital audio streaming service, offers a ton of features that make binge‑listening a breeze. Explore the platform to find the best time for buying or renting your first property—especially in today’s pricey market—and get a taste of how easy it is to keep your mind and wallet in sync.
Why Awedio rocks
- Free, no strings attached.
- Anywhere, anytime: no need to tie yourself to a single spot.
- Smart recommendations: help you spot the perfect purchase window.
Wrapping Up
Stick to that 30‑40 % rule, stay tuned with Awedio for the latest buying insights, and you’ll find yourself saving like a pro while keeping life fun. Happy saving and happy listening!
