For Richer For Poorer I Wed Thee: Preparing Financially For Getting Married
Marriage seems an expensive affair. Even if you’ve yet to get hitched, you would have attended one wedding or two and would have seen the works – fancy big book of wedding photography, gowns and suits, 7-course dinner, even a singing band. Not forgetting the engagement and wedding rings. But that is only the beginning. For many Singaporean couples, the outlay might start even earlier, when you apply successfully for a HDB flat to call your matrimonial home.
So it does look like getting married in Singapore could come with a rather hefty price tag. But “Till money do us part” is the last thing we want to happen when we enter into this lifelong commitment. Being aware and prepared for the various financial responsibilities that comes with getting married will help you to not only plan for them but be on the same page as a couple.
Know and Plan for These Major Expenses
Let us cover the first two big-ticket items on your plate when you decide to tie the knot. Being aware of the costs involved will help you to budget for it with your partner and come to a consensus on what you are willing and able to spend.
The Wedding
The cost of a wedding can actually vary quite a bit, depending on where you are holding it, how many people you invite and generally, how much you are willing to spend. There are couples who hold a buffet at home with a DIY theme and there are those who can’t imagine doing it without a designer wedding gown and a 5-star hotel celebration complete with free-flow champagne. I know it is hardly helpful to tell you “it depends” but it really does. Knowing, and agreeing with your better half, how severely you are willing to dent your bank account will be the starting point for deciding what goes into that wedding expense list.
Unless you are going the unconventional route, a typical Chinese wedding would set you back by $50,000 according to this infographic. The range given is anything between $30,000 - $80,000.
It is hardly sensible to go into debt for one single day over the longer term journey of marriage so the key is to budget wisely and spend within your means. For example, there are some things that you can do without if you are looking to cut costs. These include pre-wedding photography (please tell me if anyone ever took them out to admire over a cup of tea every Sunday), lavish decorations (paying thousands of dollars for flowers that will wilt the next day) and honeymoon (who says it is a honeymoon only if you go right after the wedding – save up for it first if you must!).
To help ease your pre-wedding nerves, I've come up with this spreadsheet that you can use to plan and budget for your wedding expenses.
Your Matrimonial Home
For most, this is likely to be the first property purchase of your life. Unless you strike the lottery and can pay off your mortgage in one sitting, it will be a long-term financial commitment that requires prudent and practical planning to ensure you can afford the instalments throughout the loan period.
Some questions you and your partner will need to discuss and ask yourselves:
Are we eligible / do we want to apply for a new HDB flat?
This would depend on your eligibility, your future plans, affordability and lifestyle choice. This First Home Calculator is a useful tool to estimate what you can afford. It also depends on whether you can wait 3-4 years for new flats to be ready.
For HDB flats, how much housing grants are we eligible for?
If you are eligible, a new HDB flat is a wise choice for a young couple as on top of the subsidised purchase prices, you can receive CPF Housing Grants of up to $80,000 (as first-timer applicants) to:
Offset the purchase price of the flat
Reduce the mortgage loan for the flat purchase
The cash grant received depends on the average gross monthly household income for the 12 months prior to you submitting your flat application.
How much can we borrow for our housing loan?
You can choose to take up a HDB housing loan (check your eligibility here), or if you are not eligible, a housing loan from banks. How much home or mortgage loan you can take out is determined by:
Total Debt Servicing Ratio (TDSR): a computation of your total monthly debt obligations (e.g. existing home loan, car loan, other credit facilities etc.) to your total monthly income. For prudence, the TDSR is not to exceed 60% and your monthly housing loan payment should ideally not exceed 30% of your gross monthly income as well.
Loan to Value Ratio (LTV): the amount of loan taken out on a property in relation to its value expressed as a percentage. Factors that banks in Singapore use to determine the LTV to be granted:
Existing loan(s)
Tenure
Monthly repayment instalment as a proportion of gross monthly income
For new HDB flats, the loan ceiling amount you can obtain depends on your loan tenure and is based on the purchase price of the flat.
| Loan tenure | Loan ceiling |
|---|---|
| ≤ 25 years | 80% |
| > 25 years, or loan period extends beyond borrower’s age of 65 | 60% |
This Home Loan Calculator is useful for calculating the home loan you can afford and the breakdown of loan plus interest payments to be made.
Can we use our CPF to pay for our mortgage?
You can use your CPF savings to service your housing loan so that your cash outlay is minimised. But note that there is a limit to the amount of CPF savings you can use if you are using bank financing. This cap is known as the CPF Withdrawal Limit and is currently 120% of the Valuation Limit of each property.
| Type of property | Type of loan | CPF-OA eligible for loan repayment, for up to |
|---|---|---|
| New flat from HDB | HDB concessionary loan | Full OA |
| Bank loan | 100% valuation limit or up to withdrawal limit if half of the prevailing Minimum Sum met | |
| Resale flat from HDB | HDB concessionary loan | 100% valuation limit or up to full OA if half of the prevailing Minimum Sum met |
| Bank loan | 100% valuation limit or up to withdrawal limit if half of the prevailing Minimum Sum met | |
| Private property | Bank loan | 100% valuation limit or up to withdrawal limit if half of the prevailing Minimum Sum met |
Table source: MoneySENSE
The CPF websites has calculators to help you check your CPF housing withdrawal limits and repayment schedule, and work out the period of time you would need to use cash and how much cash to pay.
Note that when you buy a HDB flat and take up a housing loan using your CPF savings, you are required to be covered under the Home Protection Scheme (HPS).
While the above considerations are for your long-term planning, there are some upfront costs for your new home that you will need to prepare for in the immediate term.
Down-payment/initial deposit: For HDB, this is 10% and can be paid with your CPF if there are sufficient funds. It can go up to 80% of the property price in extreme cases, depending on type of property, the loan tenure and whether you have any outstanding housing loans.
Miscellaneous costs involved in purchasing a property: stamp duty, property agent's commission and fees etc.
Renovation and furnishing costs: Again, this depends on property type, extent of works, individual preference, lifestyle and budget but can range anything from $20,000 to $60,000 for a HDB flat.
And We Lived Happily Ever After...
Well, not to pour cold water but this is just the tip of the ice-berg.
Marriage marks a brand new chapter in the story of life of two persons who has vowed to go through “thick and thin together, for better or worse” and it will no doubt have its ups and downs. It requires mutual understanding and trust. Preparing yourselves for the different aspects and milestones of marriage, including money management, is important to maintaining a blissful union.
Growing your savings together to prepare for the next milestones such as parenthood and retirement will be something you will need to look at as a couple, as well as protecting your family against the unexpected.
USEFUL LINKS
CPF Board website calculators - https://www.cpf.gov.sg/members/tools/calculators
Buying a HDB flat - http://www.hdb.gov.sg/cs/infoweb/residential/buying-a-flat
Note: The property segment of this article focuses more on HDB than private property, which itself can command another standalone article to go through. Reason being, other than the fact that more than 80% of Singapore population live in HDB flats, for typical newly-weds, getting a government subsidised property is a practical option.
Sources: www.cpf.gov.sg | www.hdb.gov.sg | www.iras.gov.sg | www.moneysense.gov.sg | www.areyouready.sg |
