Buying Flats Series: Buying a flat in Keat Hong (part II)

This is part two of the series about buying flats. There is no right or wrong...if you have the money. But otherwise, please always evaluate your financial situation before jumping in and regretting it later or worse, put a strain in your relationship due to financial woes.

Part (I) Buying Flats Series: Buying Clementi Crest right off the bat

Now we are gonna look at buying a very affordable flat. 

What constitutes as affordable? 

Firstly, instead of looking at the flat price and calculating whether you can afford it, why not do the reverse? When you are about to take up a HDB loan, you apply for HLE (please go read it up what this important document is). HLE will tell you how much HDB is willing to lend you. So if your flat costs much much more than the maximum amount HDB is willing to loan you, you cannot afford it. So simple!

Like previously mentioned, you cannot say that you will strive harder and earn big bucks in future to pay for your high end HDB because HDB will not loan you that much and you have to pay for the difference now in up-front downpayment. Try telling HDB that you will earn big bucks in future, see what they say. So don't tell me you have 25 years to work and pay off when HDB won't even lend you the money because why should HDB believe you?

Now that we have move all those aside. Lets see what constitutes as affordable. Skipping the maths, My HLE shows that I can loan about $496,000 max. Now, this doesn't mean I go out looking for a flat that costs $550k ($496K is  90% of $550K). What we are striving for in life is to reduce debt. It is much more easier to reduce debt than to increase your money. Instead, we look for a reasonably priced BTO at about $300,000?

For me, I chose a 4-room flat as I think it is much more sellable than a 3 room or 5 room and also it is neither too big to clean nor too small for a 4 person family.

There are always these kind of "affordable" price range for houses everywhere in Singapore, lets just go ahead and analyse this one.

Pricing:

This is the pricing taken off the BTO Launch of Keat Hong Axis which is in July 2012 BTO exercise. So probably in today's money, it will be more expensive.

Now for the 4 room being at about $280K on the higher side, a couple can easily afford the place and not put a strain on their wallet. For a couple earning $4,000 each a month, they have about $920 going into their CPF every month. This is $1840 every month into ordinary account only.

The thing about debt you have to understand is compound interest (Also, please read this up to understand the effects of compound interest). And if you understand it fully, you will see why some people who can pay full for their condo say that they no money to pay interest.

The more you can afford a place (meaning you have no problems paying for your flat), the quicker you can pay it off and reduce the interest, which is key if you want to move out eventually.

Quick math:
Flat price: $280,000.00
Dwnpymt: $28,000.00 (see if you remove the vowels, you still do not lose the meaning or identity of the word)
Balance: $252,000.00

Loan period/Monthly installments/Total (mthly installment X 12 months X no. of years):
10 Y / $2388 / $286,560.00
15 Y / $1693 / $304,740.00
25 Y / $1144 / $343,200.00

When I saw these figures, I immediately feel that this is literally "长痛不如短痛" a chinese saying that means long term pain is worse than short term pain. I would rather bite the bullet and push for 15 yrs or less. All in all, I pay lesser interest (that you cannot pass on to your future flat buyers). And I also have lesser accrual in my CPF OA and have time to grow the pool of money properly.

This first 10-15 years, your children also do not incur a lot material wants, they can really survive on bare necessities: no need to give expensive gifts, pay for expensive tertiary education, and their holidays, you get the drift. Not to say that young children are cheap, but they do not complain when you give them hand-me-down clothing.

Also, I keep telling people this, it is very easy to find out where couples mis-plan their money. All you have to do is see what banks are providing loans for. Banks do not provide wedding/honeymoon loans but they provide plenty of home and renovation loans.

Always plan your money till at least 2 months of living in your house. This includes money from wedding to your honeymoon to your house renovation and lastly at least two months worth of installments.


There are quite many disadvantages in living in Clementi versus living in Keat Hong that is intangible that you are paying for, I am fully aware of that. In the next post, we will explore how to still afford any place you want (inlcuding Kallang/Whampoa)