Buying a HDB resale flat

Hi Mr Tan,

I need your advice on acquiring a HDB resale flat. I am considering the following options:

1) A 5-rm HDB flat in Bishan, cosing $400k. I qualify for a HDB concessionary rate of 2.6%.

2) A 4-rm flat in Bishan, costing $300K. The catch: I need to get a bank loan with floating interest rate of 4-6%.

In your opinion, which is a better decision?

REPLY:

I hope that the following figures will be useful for you to make a decision.

 
Loan            Repayable    Interest    Annual  
                 over          rate     repayment
$400,000         30 years      2.6%       $19,367
$300,000         30 years        4%       $17,349
$300,000         30 years        5%       $19,515
$300,000         30 years        6%       $21,794

If you have to pay a floating interest rate at 5%, the annual repayment for a $300,000 loan is $19,515. This is almost the same as the repayment for a larger loan of $400,000 at a subsidised interest rate of 2.6%.

It may be better for you to take the 5 room flat for $400,000 at the subsidised rate. Bear in mind that the interest rate of 2.6% is subject to revision.