Cashflow and Cost for a resale $400,000 flat

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A friend recently asked me about buying a resale flat around his fiance's place. Thought it would be a good time to do some maths and see whether the workings for our own flat is correct as well.

For young starters of a family, the most important factor is cashflow. This is largely because we don't have much to start of with in the first place as we only would have started working for a couple of years only. Buying a flat should be a prudent move that should not weigh us down in the long run. That's my opinion - start small then move up.

Without further ado, let's make some assumptions of this resale flat we are buying:

Market Value of a 4rm flat (east example): $400,000
COV: $40,000
Housing grant for couple staying near parents: $40,000
HDB loan taken at constant rate of fixed rate of 2.6% per annum.

HDB says that the loan taken can only be up to 90% of the selling price or market value of the flat (whichever lower). In this case, it is a $360,000 loan. The 10% or $40,000 left, half can be paid by the grant and the other half to be paid in cash or by CPF.

The COV must be fully paid in cash or financed by a bank loan. No CPF allowed.

Do note that there are various costs like stamp duties, conveyance fees, administrative fees etc to take care of. Most of these can be settled through CPF. The largest amount will come from the stamp duties which is estimated to be 2% ($7000) of the selling price/market value of a large flat. 

So basically to play safe, the couple must have these upfront:

1. $40,000 in cash savings
2. $30,000 in CPF
   

In terms of financing a $360,000 HDB loan in a 30 year time period, it will cost the couple $1,441.22 for monthly installments. This translates to a combined monthly income of $6,266.17 if the couple wishes to finance the installments via their CPF ordinary accounts only. (note that these are estimates and applicable for Singaporeans only).

Do note that in the above example, $20,000 is left over after paying 5% out of the 10%, hence this goes to offset the HDB loan as well. This effectively reduces the monthly installments by about $80 for 30 years.