What is the affordable price of a HDB flat?
In my book, Practical Guide on Financial Planning, I suggested that the flat should represent 4 to 5 years of the combined family income (after deducting the cost of employing a maid). If the combined family income is $5,000 and the cost of the maid is $800, an affordable price for a flat is $4,200 X (48 to 60) = $200,000 to $250,000.
The monthly repayment should be within 25% of the family income and the loan can be repaid within 25 years or before reaching age 55. If the monthly repayment is more than 25% of the income, you are paying too much for your flat (or private housing).
If you have used CPF or personal savings towards the down payment for your flat, your monthly repayment should be reduced proportionately below 25%, as you need the difference to be saved to restore back the savings that have been used for the down payment.
Tan Kin Lian
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