Buying a flat or apartment, whether it is from the Housing and Development Board (HDB) or a private developer, is expensive.

Some people start saving as soon as they get a job, while others wait until they are engaged or married.

It is important to start early on deciding when and why to start saving.

Buying a flat is often the biggest purchase anyone ever makes. While prices vary tremendously and have often been on a slow upwards trend recently, you can still use today’s prices for a flat in a place you like, to estimate what you will pay.

Factors that affect the cost of buying your first home, as property portal 99.co explains, include whether the flat is in a mature estate or a non-mature estate.

The wide range of amenities in mature estates means these flats will usually cost more.

Whether you buy a Build-To-Order (BTO) flat or resale flat also makes a big difference in price and affects the waiting time until the purchase is completed.

Understanding prices will help you choose a flat that you can afford and also have enough income to continue to pay for it.

AN EMERGENCY FUND

The easy answer to when you should start saving for your flat is “as soon as possible”. While that’s true, the full answer is more complex.

Before you start saving for your flat, it is important to accumulate an emergency fund equal to at least six months of your salary so that you have enough money to pay your bills even if you lose your job or fall ill.

Buying a home is a long-term commitment, and you need to make sure you’re ready no matter what happens.

Once you have that amount, start saving for a flat.

The sooner you save enough, the faster you can buy and start building up equity in your home.

If you buy when you’re younger and your salary is lower, you may also qualify for more government grants. First-time HDB homebuyers, in particular, may be able to access an array of housing grants, which can make the purchase price lower and may enable you to pay off your housing loan earlier.

Starting to save for a flat as soon as possible allows you to maximise these advantages.

HOW MUCH TO SAVE

While it is important to save, it helps to have a specific target rather than just saving in general.

To calculate the amount to save, you can look at prices of flats in areas that you like and begin to estimate how much you will need.

As you consider what to buy, it is also important to consider that property experts advise homeowners not to spend more than about 30 per cent of their monthly income on housing costs.

If your annual income is S$50,000, for instance, you should not spend more than S$1,250 a month for housing costs.

You can use a mortgage calculator to figure out how much you can afford with your income and use that amount to cap the price as you look at where to buy a flat. 

To buy a four-room BTO flat in a non-mature area with a purchase price of S$315,000 using a loan from HDB, for example, financial product comparison website Get.com said that you will need a 10 per cent down payment that totals S$31,500. You can use money from your Central Provident Fund (CPF) Ordinary Account or your savings.

If you start saving at age 25 and earn 2 per cent on your savings, you will need to save about S$237 a month to accumulate a S$31,500 down payment in 10 years. If you want it in five years, you will need to save about S$499 a month.

Beyond the down payment amount, however, national financial education programme MoneySense explains that you will need to have enough to pay for upfront costs, ongoing homeownership expenses and monthly loan instalments.

Initial costs include the stamp duty, legal cost, agent's commission and fees, and renovation. These fees can easily add up to more than S$5,000.

Monthly expenses include your loan payment, property taxes, fire and mortgage insurance, and conservancy and management service fees.  

Along with having enough savings for the down payment, then, you will also need to make sure your salary is sufficient to make the monthly payment for your loan and prove to the lender that you are capable of repaying your mortgage.

A good credit score is also essential for showing that you will pay the mortgage. Borrowing S$284,500 for 25 years at a rate of 2.6 per cent, for instance, would result in an estimated monthly payment of about S$1,205. If you save more and borrow less, the monthly repayment can be lower.

The CPF Board also suggests not using all your CPF savings for the payments. The more you use your CPF savings for housing, the less you will have for retirement.

Signs you are ready to buy a flat, CPF suggests, are that you have an emergency fund, you have approval-in-principle (AIP) for a loan, you don’t need credit for the down payment and your monthly housing payment is less than your CPF Ordinary Account contribution.

By doing your calculations and starting to save early, you can make sure you’re ready to buy your flat when you want to rather than being forced to wait.