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A Beginner's Guide to Saving for Your First Home

profileXue Miao

One of the big-ticket items that we might purchase would be a house.

It is easily one of the most expensive financial milestones in our lives.

Being someone who has trouble deciding what to have for lunch, big life decisions just intimidate me.

Adulting and its huge responsibilities. 

Source: Giphy

In addition, a house not only comes as one price, but has many little price tags dangling along with it.

While I wish I could win TOTO and clear such an amount in one shot, the reality isn’t that sweet.

But knowing that I still have a couple of years ahead before purchasing a flat, I have time on my side.

Having the luxury of time means I could start setting goals and budgets early for my #fundmyhouse project.

Here are the things I’m doing to break this BIG intimidating financial goal into smaller, achievable ones.

TL;DR: A Beginner’s Guide to Saving for Your First Home

Calculate How Much You Need to Save

In order to start with your planning, you need to have an end-goal in mind.

What is the amount of money that you need to save?

This can be done by having a rough gauge of the house you’re looking to purchase.

Are you an HDB dude? 

Or are you a private property gal?

Or looking to decide between an EC or private condo?

Knowing your own property expectations could help in calculating your budget.

Source: Giphy

Understandably, not everyone has an exact idea of what flat type you’re looking to purchase.

For me, I know I am #TeamHDB, but am unsure of the flat size I would like.

With that in mind, I calculate based on the most expensive apartment type, out of all my options.

This gives me the leeway to still opt for that apartment type, if I were to ultimately choose it.

Here’s a rough guide of how much BTO flats might cost, with reference to Feb 2020’s HDB BTO prices.

Do note that the figures could be vastly different based on several factors – location, resale or BTO, etc.


Seeing that $300,000 price tag doesn’t mean you need to pay all $300,000 in cash.

If not we all pengsan (read: faint).

If you can spend within your means, your CPF Ordinary Account can be used entirely for the downpayment for your home (if you’re taking a HDB loan, otherwise it’s 5% cash for bank loan), as well as monthly mortgages.

There are a few components that require cash (such as option fee), as mentioned in our handy HDB cost guide.

Besides that, one huge price tag which requires cash would be the renovation for the house.

Source: Free Cartoon Pictures

According to Value Champion, the renovation of a 4-room flat typically costs $56,000.

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How Do I Set Aside This Sum of Money?

Source: Tenor

Similar to what we usually propose, you can follow the 50-30-20 salary allocation rule to set aside this sum of money.

Of course, this value can tweak accordingly to your preference.

If you’re someone who wishes to amp up on your investments, you can do a 50-40-10 allocation.

If you want to challenge yourself and lower your expenses, you can do a 40-30-30 allocation.

Think you’ll be too lazy to separate your money monthly?

You can choose to automate your transfers by setting up instructions with your bank accounts.

Ensuring That an Emergency Fund Is in Place

Source: Tenor

Apart from that sum you’re working towards, don’t forget to first set aside your emergency fund.

For the uninitiated, an emergency fund is a sum of money you need for urgent and unplanned life events. 

Typically, individuals only use their emergency funds when they lose their jobs, have an unexpected medical emergency or unplanned home repairs.

While everyone’s situation is different, a good gauge will be to set aside an equivalent of 3 – 6 months worth of your living expenses in your high-interest savings account.

That is assuming that you do not have any debts, and have your insurance coverage in place.

If you don’t, do look into them first!

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Finding a Place to Grow Your Savings

Source: Dribbble

Now that you have a budget to work with, it is time to look into where you can place these savings at.

If you’re someone with a long time horizon, congratulations!

You hold the power of the 8th wonder of the world – compound interest.

Having the advantage of time is like finding magic beans at your financial backyard.

Because this means that you have the ability to hold investments of a slightly higher risk.

Why so?

Because having a longer time horizon means having the time to ride out the dips in these investments.

Source: Giphy

(Surfing through those dips~)

Based on whichever time frame you have, look for investment products that would suit you.

Need help in having a crash course on the types of investment products?

We have an ultimate guide for investing for ya.

Some common products used would be regular savings plans, short-term endowment plans, or bonds.

If you’re someone who still prefers liquidity, cash management accounts have been on the rise recently.

Besides that, you can also rely on the good ol’ high-interest savings accounts.

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Maximise your CPF

Source: Moneysense

Since we are paying the bulk of our housing loan via CPF, another method that could be used is the maximising of CPF.

This refers to topping up of your CPF account, and using it for the loan repayment afterwards.

Some people might want to do so as CPF rates are rather attractive.

CPF Account Interest Rates*
(1 Jul 2020 to 30 Sep 2020)
Ordinary Account Up to 3.5%
Special Account Up to 5%
MediSave Account Up to 5%
Retirement Account Up to 5%

However, there is currently no method to solely top up the Ordinary Account.

Any cash top-ups would be allocated to the Ordinary, Special, and MediSave Accounts according to the CPF allocation rates.

As such, do consider carefully since any top-ups are irreversible.

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Maintain a Healthy Credit Rating

Source: Loanstreet

Singapore is a costly country to live in.

With that, there are times where we might have to borrow money to fund certain things in life (such as education).

These will be part of your credit history.

This in turn might affect your credit score, which is an important factor when it comes to taking up new loans.

For most of us, the chances of us having to take up a loan for housing would be high.

(Unless we’ve got $300,000 laying around just like that.)

With a bad credit score, the chances of you getting a successful HDB/bank loan might be affected.

In order to maintain a healthy credit rating, keep your debts low.

Also, choose a credit card that suits your spending habits, in order not to owe any credit card bills. (this affects your rating too!)

There are a few ways you can maintain a healthy credit rating:

  • Paying your credit card bills on time
  • Repay your loans promptly
  • Avoid taking multiple loans within a short span of time

A Beginner’s Guide to Saving for Your First Home

Source: Tenor

Saving for your first home could be intimidating.

While it sounds like a mammoth task, having a solid plan would help to make it become much more digestible and less scary.

Besides that, there are so many resources out there that we have (as compared to our parents) that teaches us how to stretch our money.

If you’re still curious how you can maximise your savings, the SeedlyCommunity has been providing loads of insightful tips on that!

About Xue Miao
A millennial who is learning to adult. She doesn't believe in the rat race and hopes to live on a farm someday.
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