Why housing affordability is more than your salary
July 26, 2017
Dollars and Sense recently published a blog post titled “Here’s the salary you need to earn to afford these homes in Singapore”.
The writer of the article has the good intention to show readers what type of housing they can afford based on their monthly salary. However, income is only part of the whole picture when it comes to deciding whether you can pay up for a property.
Housing affordability is not all about income
When you apply for a housing loan, banks usually ask for your latest payslips, account statement, tax assessment, CPF contribution history, etc.
The banks need to make sure that borrowers are capable of repaying their housing loan. This also provides proof of income when calculating the Total Debt Servicing Ratio (TDSR).
However, whether you can afford a particular housing type cannot be entirely based on your monthly salary. There are other important factors to consider too.
1. How much cash and CPF you can use to settle the deposit, legal fee, stamp duties, renovation, etc.
2. How much you can set aside for mortgage repayment after deduction of your monthly expenses.
3. How much contingency fund you have to cope with interest rate hike, negative equity, etc.
4. How stable is your household income (job stability of both husband and/or wife).
5. When you purchase your property makes a big difference in the loan-to-value, buyer and seller stamp duties, etc.
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