You probably already know this, but property is expensive in Singapore. Homes can cost anywhere from hundreds of thousands for HDB flats to millions of dollars for private condos and landed homes. So for many of us, buying a home is our biggest single expense and our home loan (or mortgage) repayments the biggest liability in our lives.
Let’s not talk about the Crazy Rich Asians. Say you’re an Average Joe: Even if you buy a modest under-500k HDB flat - assuming you take 75% to 90% in home loans to finance it - you’re looking at mortgage repayments of at least $1,200 each month (depending on the interest rate and tenure). Considering the median salary of Singaporeans is $4,563 (Ministry of Manpower, 2019), that’s about a quarter of our monthly income!
Most of us take decades to pay off this debt, but not Clara Lim, 34, and her husband, Jon Phay, 37. Yes, it’s not uncommon to hear of couples who pay off their homes by their mid-thirties, but what’s interesting is that unlike couples who marry early in their twenties and live frugally for the next 10 years, Clara and Jon actually only tied the knot and bought their Bishan HDB flat two years ago.
So how did the couple manage this feat at such a young age? After all, Clara and Jon both hold pretty average-earning jobs as a writer and engineer respectively.
Well, first of all, Clara and Jon most definitely didn’t save hundreds of thousands in two years. The saving up took place before they bought the property.
In fact, with their savings combined, they actually had just about enough to pay for their $468,000 resale flat in full at the point of purchase. They only took up a home loan because Jon wanted to utilise his CPF funds while he continued working.
Clara’s savings: $120,000
Jon’s savings: $80,000
Combined CPF OA: $191,000
CPF housing grants: $70,000
Given this, you’d expect that the couple must have spent their entire twenties staying home and eating cup noodles, but that was not the case.
“Frankly, I don’t think Jon put that much effort into saving up that $80,000. He just doesn’t have expensive hobbies,” says Clara. For her, however, it was a different story: “For most of my twenties, I spent all my money on going out with friends, drinking, shopping, etc. But when I was 29 years old, a bad breakup caused me to go on a big lifestyle detox.”
Saving $120k after a bad breakup
Clara changed her job, changed her mobile number, and as far as her friends were concerned, fell off the face of the earth.
For a year or so, she went home straight after work every day. She turned to solitary (and free) hobbies like exercising at the company gym, reading library books, hiking and cycling.
Even after she had healed and was able to socialise and date again, those frugal habits still persisted.
“Without really planning to, I had saved a ton of money. I earned about $60,000 a year, and saved about 80% to 90% of my take-home pay. After about three years, I had saved up about $120,000 in cash,” she shares.
Debt-free in 24 months
As mentioned earlier, Clara and Jon took a small home loan to keep aside some cash savings and utilise the CPF they were earning.
“Although we could have paid off the entire flat in cash and CPF, Jon suggested we take a housing loan because he wanted to utilise his CPF contributions while he continues working.
I, on the other hand, did not want too much financial commitment,” says Clara.
In the end, they compromised on a $53,000 loan for two years, which seemed like an acceptable commitment period to Clara. The amount is too small for a bank loan, so they went for an HDB loan. Here’s the breakdown:
Flat price: $468,000
Down payment: $261,000 in CPF (including grant) + $149,000 in cash
Deposit: $5,000 in cash
HDB home loan: $53,000 at 2.6% p.a. for two years
Monthly repayments: $2,276 using CPF