Property Ownership
Making sure you have the right property ownership would help you save in property tax when you have the intention of decoupling. Property taxes can come up to tens of thousands of dollars and having the right property ownership structure can be one of the tweaks that can save you a significant chunk of the expense.
50:50
By far the most common type of property ownership structure, but when you have the intention of decoupling, you'd be required to pay property tax for 50% of the property when you eventually decouple.
99:1 (Pre-meditated decoupling)
When you're sure you'd be buying multiple properties in Singapore, you may want to save in property tax, by owning a smaller portion of the property.
Do note however, is when you intend to buy out the 1%. you would need to pay back the CPF contributed mostly in cash.
By owning 1%, rather than 50%, you'd save the transaction fees for the 49% of the property. And even tho you own 1% of the property price, you'd be able to contribute as much CPF as you want to the property's down payment and monthly instalments. Which party holds the 1% or 99% matters, so speak to us as each situation will differ.
90:10
If your intention is to pay lesser tax, and have the intention of using the CPF to return to your partner when you eventually decouple, you may want to use the 90:10 method because of the lump sum payment your partner would be paying for the property on purchase.
Loan Tenure
For mortgages, you're exposed to one of the cheapest interest rates in the market.
Mortgage rates are relatively cheap when compared against inflation rates.
When you own money, the value of your money gets eroded over time.
When you borrow money, you pay for interest to the bank.
Also, cashflow equals sanity.
Shorter Loan Tenure
By not extending your loan tenure, a bigger part of the monthly instalment goes to servicing the principle borrowed, thus lowering outstanding loan amount. This will translate into lower total interest payable. Would be good if you consider mortgage rates to be expensive, and that your returns won't be higher than your mortgage rates.
Longer Loan Tenure
For property loans, leverage is key and optimising cashflow is equally important. With one of the lowest interest rate bearing loan possible, extend your loan tenure where possible. This helps to lower your monthly repayment amount, providing you with better cashflow and disposable cash for your other needs. Don’t be afraid to extend your loan tenure because you can always have the option to shorten it. it’s not cast in stone!
Loan Ownership
You're able to take responsibility for 100% of the loan, even when you own 1% of the property.
This method is ideal when 1 of the 2 owners are able to take on the TDSR responsibility of the entire loan.
2 Borrowers
if the loan is borrowed by 2 people, the liability of the loan is shared. which means both parties would be liable for payment on the credit bureau report, split according to income earned.
This hinders both parties to take up another loan.
1 Borrower
Having 1 borrower instead of 2 borrowers tied to a loan essentially frees up the other person for additional property loans. This person will not be restricted with lower loan to valuve (LTV) ratios due to multiple property ownership. Additionally, if they don’t have any mortgage loan on paper, this will increase their borrowing capacity where they can consider buying into non-residential properties such as commercial, industrial or even overseas properties.
Summary
- The right property ownership can lower your taxes and allow a more optimized decoupling process
- The right loan tenure can optimize your cashflow and help offload inflation.
- The right borrower structure can optimize your borrowing capacity, enabling you to buy more properties
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We'll structure your mortgage well