THE COSTS OF FINANCING A HOME (BUILD) IN SINGAPORE

Financing, Refinancing & Doing the Tango

In truth, this has nothing to do with the Tango - although conversations with banks (or rather bankers) sometimes feels like it.

Wait - let me qualify. I don't dance the Tango (or any formal dance really) because I don't like to. same way I don't like speaking to bankers, or anyone really. That's why I blog. it's sad, I know, but i digress.

To set the context,  this is what the existing (inter-bank) interest rates look like

Updates can be obtained from http://www.moneysmart.sg/home-loan/sibor-trend

It does not look good if you want a loan as we have interest rates creeping upwards.

Ok here's the deal. I have a mortgage for the existing property. The good news is, I have a property; the better news, is that the property has actually appreciated in the last 10 years. so I have a few options to extract the value from my property.

In order to get a construction loan, banks typically have given me the following terms & conditions:

Construction Loan Financing:

Up to 70%  of the construction cost and subject to approval. Construction cost must not exceed land cost

Interest charge

~6.00% Upon issuance of the Temporary Occupation Permit (TOP), the construction loan will be converted to a housing loan at the prevailing interest rate and remaining loan tenure.

Loan size

Minimum loan amount is S$200k and maximum S$2m

Loan tenure

Up to your age 65 years olf or 30 years loan tenure whichever is earlier For construction loan, project mus be completed within 24 months from 1st drawdown

Valuation

Will be conducted in 2 stages: - prior to disbursement - at TOP stage

There are a bunch of other clauses, but it's pretty boring. Bottom line is that for a $1 mil build, the cash outlay will be a whopping $300,000. I DON'T HAVE $300,000 lying around!!!! And If I did, I wouldn't te telling everyone on a blog!!! (trust me I don't)

Anyway, the alternative, is an equity based term load. ie, using the value of my property as collateral to take a loan.

Home Equity/Term Loan Financing:

There is certainly more flexibility in this, but EVENTUALLY, the interest rate would be higher than if you took a construction loan which you could convert into a home loan upon completion of the build.

One bank gave me a detailed breakdown on repayment based on a $1 mil loan. the various permutations, taking into account rising interest rates are as follows.

The repayment schedule based on a ~1% Sibor

Year	Year 1	Year 2	Year 3	Year 4...
Gross Interest Rates (p.a.)	2.43075%	2.43075%	2.43075%	2.48075%
Monthly Instalment	$3,915.30	$3,915.30	$3,915.30	$3,938.94
	Over 3 Years	Over 5 Years	Over 10 Years	Over Loan Term
Total Interest Payable	$70,454.71	$115,403.34	$216,469.92	$417,165.71
Total MI Payable	$140,950.76	$235,485.20	$471,821.30	$1,417,165.71

The repayment schedule based on a ~2% Sibor

Year	Year 1	Year 2	Year 3	Year 4...
Gross Interest Rates (p.a.)	3.43075%	3.43075%	3.43075%	3.48075%
Monthly Instalment	$4,451.88	$4,451.88	$4,451.88	$4,477.42
	Over 3 Years	Over 5 Years	Over 10 Years	Over Loan Term
Total Interest Payable	$99,958.22	$163,942.10	$309,712.58	$610,952.62
Total MI Payable	$160,267.69	$267,725.83	$536,371.19	$1,610,952.62

BEST OF BOTH WORLDS

So, I'm not totally convinced that we can afford this rebuild. BUT, if we did want to game it, we could take a $400k Home Equity Loan (on the pretext of "personal investments") and thereafter, take a 70% construction loan for the explicit purpose of the rebuild.

The alternative, and I am waiting for other banks to get back to me, is to refinance my mortgage completely.

THE COST OF BUILDING A HOME IN SINGAPORE

It's all about the money

Building Costs (Buildings Cost!)

According to all the architects that we have spoken to, including our top 3, mentioned here, here and here, the costs for building a bespoke home average $320-400 per square foot. So a property that has 3,500 sq feet built in (325 sq m) would cost S$1.1 mil to $1.4 mil. Someone we know, is paying upwards of $500 per sq m for an extremely luxe build.

If you want gross construction figures and statistics, you may refer to Langdon & Seah's Construction Cost Handbook. For other countries in Asia, you may download other handbooks from here. The costs here, based on Construction Floor Area (CFA) put a 325 sq m semi-detached house at $877k to $1.02 mil.

CFA of course excludes all the bits and bobs outside of the actual house (eg. garden, car porch etc.)

Of particular interest, is the breakdown of costs. turns out the bulk of the costs are in architectural finishes. So ultimately, the cost of the home is tied to the quality of the finishes and fittings.

What I'm hearing more and more is that glass is expensive. the more light you want to let in, the more it's gonna cost.

Architectural & Other Professional Fees

According to the Singapore Institute of Architects, all members (read architects) are free to set their own fees.

So we've had quite a few interesting quotes ranging from fixed fees, to percentage of total estimated build.

A ballpark for a build of our scale, is $70k-$100k in architectural fees alone.

Then there is more.

A structural engineer will likely come in at $20k

A quantity surveyor will come in at $15k (but Architects may be willing to do this for a project of this scale)

Others, including your land surveyors, clerk-of-works & soil testing could likely set you back a further $15k

Of course, you need to set aside a budget of submissions to all the authorities, and that will likely cost you $15-20k

The BIG Total

Building costs: $1mil to $1.4 mil

Professional fees: $120k - $160k

Furniture: (oh gosh! we're going to be sleeping on straw mats at this rate!!!)

S$1.2mil - S$2 mil 

ok let's see what the banks come back with!!!