Buying your first home? 4 budget tips to note

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In my role as a financial planner, I have observed a worrying trend amongst the many young professionals whom I advise and speak with.

Whenever I ask them about their three year-term goals, many will list purchasing their first home as one of their top priorities. However, they often admit that they don’t really know where to start nor understand the necessary considerations when it comes to buying their first homes.

See also: 3 things to note before moving in with your husband.

We all know that buying a property is a huge financial commitment. This is especially true in Singapore, where a large amount of our money is tied up in real estate (and usually over a long period of time).

An unwise investment could lead to dire consequences which could take years to reverse.

This challenge is further compounded because when young professionals commit to a property, they are rarely in their peak earning years. They also do not have many people they can turn to for sound advice.

A common complaint is that few financial consultants understand the implications of property purchases, and seem more interested in marketing financial products, while some property agents are more concerned about selling units than in properly advising these young professionals in the purchase of their first homes.

See also: why you shouldn't buy a flat right after your wedding.

Fundamentally, as a first timer, the approach to buying a first property has not changed. Most  look at location to suit their needs and affordability. However, external factors do vary from time to time depending largely on macro-economic factors. The present climate offers a good opportunity for first timers to purchase their home. While multiple-properties owners are taxed heavily on their purchase, first timers are only required to pay the nominal stamp duty. First timers are also able to benefit from moderating property prices which  cooling measures introduced.

Together with Mr. Zavier Zhang (Associate Senior Marketing Director at Huttons Asia), who specializes in helping first time home buyers own their dream homes, we offer the following 4 tips for first time home buyers.

These 4 Tips (or 4Ps) are Priorities, Products, Planning and Prudence.

Tip 1: Determine your priorities

There are many considerations to mull over with your spouse with regards to your first place. Examples include: Location, proximity to parents, workplace, child’s future school, affordability, growth opportunity, waiting time, unit size, extent of renovation, etc.

See also: 3 things married couples should do when planning their finances.

Especially for resale units, there are many other factors such as level, facing, condition, neighbours, etc.

Take time to go through these issues together. There are some issues which are a definite priority over others. For instance, if your parents assist you with childcare, a priority would be to live near to them. This will allow a shorter time to collect your children after work, as well as possibly enjoying the Proximity Housing Grant. Have a common understanding before embarking on your search. It is normal to fine tune your requirements along the way.

Tip 2: Find out about the available products

There are many different options. But do understand the pros and cons of each:

See also: things to know before buying your first home.

Tip 3: Ensure that you are planning ahead

The Minimum Occupation Period (MOP) of 5 years begins when you receive the keys. For BTOs, this can mean a wait of at least 8 years after the construction phase is added. This information must therefore be considered alongside your marriage plans. One prime consideration you may have to plan for are living arrangements with your parents or your in-laws. I.e, will you be staying with your in-laws or your parents?

MOP not only prevents the couple from selling or subletting, but you are also unable to make forays in other property investments (either local or overseas).

Because a large amount of your money is tied up, when poorly timed, this restriction will definitely have a bearing on your longer term financial planning decisions such as family and retirement planning, which would then have a knock-on effect on your immediate lifestyle choices.

See also: 3 money topics to discuss before marriage.

Tip 4: (Financial) prudence

Now that you have decided what your first property will look like, here is how you can go about financing it.

All in all, our first property is usually the major determinant of our wealth in the first 10 years- the first pot of gold that everyone covets. So do take time to evaluate your options and always consult a professional when in doubt.

This article first appeared on Consultwho.sg.

Seng Bingyang is a financial planner who helps young professionals achieve financial goals by growing and protecting their wealth. He is listed on Consultwho.sg - visit us to ask a question anonymously, connect with a financial consultant, or read helpful guides and advice. Like us on Facebook to receive updates on interesting content!