PN
02-02-09, 18:52
There seems to be quite a lot of young couple looking for condo to own stay. As some has already mentioned, this is a big ticket item which requires careful planning and financial considerations.
Depending on how much you earn as a couple and how much you spend, below is a table which I’ve compile based on some assumptions made as below:-
· you own a car, have one child, a maid and need to give mthly allowance to parents.
· Insurance payment is 10% of monthly household income
· the higher the mthly income, the higher the spendings
· not much cpf left after paying for the 20% downpayment for the condo. So need to top up bank installment in cash
If you buy a condo, this is what you’ll be expecting in terms of monthly expenses & savings.
Couple A
Couple B
Couple C
monthly household income
8000
12000
15000
CPF (20% cap at 4500 pax)
1600
1800
1800
Transport (Car loan, road tax, patrol)
1500
1500
1500
own expenses for 2
1500
2000
2500
Personal Insurance
800
1200
1500
Parents
500
700
1000
1 children
600
700
800
maid inc tax
700
700
700
mobile, cabletv, internet, utility bill
250
300
400
condo maintenance fee
270
270
270
Mthly income balance
550
3100
4800
Couple A has only $550 left mthly after deducting cpf and expenses above and we’ve not even consider the need to pay income tax yet.
Couple B & C has balance of $3k & $4.8k respectively. So, is this good enough?
Let’s look at couple A first, assuming they buy a condo at $700k and took a bank loan of 80% which is $560k with 2% interest. Below is a how the monthly installments will look like. Clearly, couple A is not in a very good position regardless of loan period of 15, 20 or 30yrs. They may need to let go of the car and cut down expenses. Life will be very tough for them.
Couple A
Installment
CPF
cash
% goes to Interest
15 yrs
3600
1656
1944
26%
20 yrs
2800
1656
1144
33%
30 yrs
2000
1656
344
45%
Couple B has monthly balance of $3100. Part of this can be used to service the loan. Minus the loan, there is a balance of bet 1k to 2k. However, part of this still need to service personal income tax.
Couple B & C
Installment
CPF
cash
% goes to Interest
15 yrs
3600
1890
1710
26%
20 yrs
2800
1890
910
33%
30 yrs
2000
1890
110
45%
Couple C has mthly balance of $4.8k. This is a healthy figure. After paying tax and installment, there’s still some savings.
Summary
If you are like couple A or worst, I’ll not recommend you to go for condo unless you have a huge savings or strike Toto. If you die die must stay in condo, use part of your CPF balance to reduce the loan (keep some balance for monthly installment). Cut down on personal and car expenses, look for alternative like part time cleaner instead of maid. Having said that, still very tough.
If you are couple B, you are running thin on your mthly savings. May need to cut down on other expenses. You need to save more especially in this climate.
If you are couple C. You can mange this by yourself but be prudent. You still need to save for the unpredictable future.
From the installment table, you will notice that the longer the loan term, the higher you pay for mthly installment interest. Which is the best for you? The answer is do your maths.
Hope this will generate more contributions from others and benefits everybody.
Depending on how much you earn as a couple and how much you spend, below is a table which I’ve compile based on some assumptions made as below:-
· you own a car, have one child, a maid and need to give mthly allowance to parents.
· Insurance payment is 10% of monthly household income
· the higher the mthly income, the higher the spendings
· not much cpf left after paying for the 20% downpayment for the condo. So need to top up bank installment in cash
If you buy a condo, this is what you’ll be expecting in terms of monthly expenses & savings.
Couple A
Couple B
Couple C
monthly household income
8000
12000
15000
CPF (20% cap at 4500 pax)
1600
1800
1800
Transport (Car loan, road tax, patrol)
1500
1500
1500
own expenses for 2
1500
2000
2500
Personal Insurance
800
1200
1500
Parents
500
700
1000
1 children
600
700
800
maid inc tax
700
700
700
mobile, cabletv, internet, utility bill
250
300
400
condo maintenance fee
270
270
270
Mthly income balance
550
3100
4800
Couple A has only $550 left mthly after deducting cpf and expenses above and we’ve not even consider the need to pay income tax yet.
Couple B & C has balance of $3k & $4.8k respectively. So, is this good enough?
Let’s look at couple A first, assuming they buy a condo at $700k and took a bank loan of 80% which is $560k with 2% interest. Below is a how the monthly installments will look like. Clearly, couple A is not in a very good position regardless of loan period of 15, 20 or 30yrs. They may need to let go of the car and cut down expenses. Life will be very tough for them.
Couple A
Installment
CPF
cash
% goes to Interest
15 yrs
3600
1656
1944
26%
20 yrs
2800
1656
1144
33%
30 yrs
2000
1656
344
45%
Couple B has monthly balance of $3100. Part of this can be used to service the loan. Minus the loan, there is a balance of bet 1k to 2k. However, part of this still need to service personal income tax.
Couple B & C
Installment
CPF
cash
% goes to Interest
15 yrs
3600
1890
1710
26%
20 yrs
2800
1890
910
33%
30 yrs
2000
1890
110
45%
Couple C has mthly balance of $4.8k. This is a healthy figure. After paying tax and installment, there’s still some savings.
Summary
If you are like couple A or worst, I’ll not recommend you to go for condo unless you have a huge savings or strike Toto. If you die die must stay in condo, use part of your CPF balance to reduce the loan (keep some balance for monthly installment). Cut down on personal and car expenses, look for alternative like part time cleaner instead of maid. Having said that, still very tough.
If you are couple B, you are running thin on your mthly savings. May need to cut down on other expenses. You need to save more especially in this climate.
If you are couple C. You can mange this by yourself but be prudent. You still need to save for the unpredictable future.
From the installment table, you will notice that the longer the loan term, the higher you pay for mthly installment interest. Which is the best for you? The answer is do your maths.
Hope this will generate more contributions from others and benefits everybody.