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Thread: Do you earn enough to live in condo?

  1. #1
    Join Date
    Dec 2008
    Posts
    1,378

    Default Do you earn enough to live in condo?

    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 Iíve 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 youíll 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 weíve 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?

    Letís 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, thereís still some savings.

    Summary
    If you are like couple A or worst, Iíll 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.
    Attached Images Attached Images
    Last edited by PN; 02-02-09 at 19:00.

  2. #2
    Join Date
    Dec 2008
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    1,378

    Default

    The table formatting doesn't appears nicely. Pls refer to the thumbnail instead.

  3. #3
    Join Date
    Mar 2008
    Posts
    97

    Default

    and 700k can only get you the most basic of condos in this day and age.. woohoo

  4. #4
    Join Date
    Dec 2008
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    3,721

    Default

    Quote Originally Posted by toaler
    and 700k can only get you the most basic of condos in this day and age.. woohoo
    some 5 room hdb in "good" areas can cost this much also

  5. #5
    Join Date
    Nov 2008
    Posts
    175

    Default

    It's financial suicide. Enjoy now, suffer later.

    Young couples should always buy direct from HDB first, enjoy the subsidy and capital appreciation. If hit income ceiling, just go "jobless" during application. How? Many ways..hehehehe...

    Why?
    1. enjoy the subsidy and capital appreciation.
    2. HDB don't usually re-possess flat in hard times, unlike banks.
    3. HDB flat shielded from creditors.
    4. When saved enough for condo, make sure HDB kept for rental. Again as a safety net, see 2-3 above, and good rental yield. Personally, I could have sold my flat for $150k gain, but past 2 years, I already got back >$50k in rental. Sell or rent out? No brainer to me ...
    5. Come what may, one can sell condo, can sell backside, family still got flat to fall back on.
    6. Be prudent....

    Quote Originally Posted by august
    some 5 room hdb in "good" areas can cost this much also

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