Building a home together for any young couple is a great adventure. Like any great adventure, planning well ahead before embarking can take away the stress of many unknowns. Financial planning tops the list.
Here are some tips on how to find out what your comfort level is. This means balancing your income and expenses to determine your ability to pay.
Income is what you and your spouse, or soon-to-be spouse, earn. You have to assess the stability of current and future income, so as to be confident of taking on the long-term financial commitment of paying for the flat mortgage payments.
It is better to have a more conservative estimate of your future income. This will help you cope better when unforeseen circumstances crop up.
You would need to consider your current and anticipated monthly expenses as well. These would include:
- Personal expenses (e.g. food, transport, insurance, parents’ and/ or children’s allowance)
- Financial commitments (e.g. current loans, debts or hire-purchase repayments)
- Future expenses (e.g. wedding expenses/ support aging parents/ save for children’s needs)
- Setting aside an emergency fund to tide over unforeseen expenses
On top of personal expenses, owning a home will also involve other recurring monthly expenses such as:
- Cash payments for housing loan instalments
- Service and Conservancy charges
- Property tax
- Utility bills
- Maintenance of the flat
Ability to Pay
After deducting your general expenses and any amount that you have targeted for monthly savings, the balance disposable income will be the cash you have for monthly housing loan instalments and related expenses (e.g. utility, service and conservancy charges, property tax).
Do work out your monthly cash flow. Know how much you can comfortably pay for the monthly mortgage instalments, before you begin home-hunting. With a sustainable monthly loan instalment, it will help to keep financial commitments manageable in the long term.
This article was adapted in collaboration with MyNiceHome, HDB’s official website for all things related to home buying and renovation in Singapore.