TODAY, 14 Oct 2016, First-time buyer: HDB resale or BTO?
A young couple with a combined household income of S$5,000 is considering a three-room HDB flat in Toa Payoh. One option is to apply for a unit in the Bidadari BTO estate, Woodleigh district, which is scheduled to be launched next month. While the HDB has not announced its prices, if the Bidadari project launched last February is any indication, the median price should be around S$350,000. Based on this, it is possible to calculate the cash out-of-pocket required to service the couple’s mortgage.
As Table 1 illustrates, the cash payment required to service the mortgage is S$256 per month. This cash outlay translates to a mortgage servicing ratio of 28 per cent.
In contrast, if the young couple buys a resale HDB three-room flat in the same location as a BTO Bidadari unit, the cash outlay is zero with a mortgage servicing ratio of 20 per cent. Given this information, the decision matrix can be seen in Table 2.
Let us look at a second example. Another young couple has a combined income of S$7,000 and would like to buy a four-room HDB flat. The numbers are reflected in Table 3.