Financial planning - buying a property for own occupation

Here is a financial planning tip that applies to most families. If you buy a property (for your own occupation) at age 30 and repay the  mortgage loan over 25 years with 25% of your monthly income, you can take a loan of up to 5 years of your income. If both spouses are working, you can use the combined income, but deduct $1,000 for the cost of employing a maid and other expenses.

If the family income is $5,000 a month, you can buy a property of up to $300,000. If you buy a more expensive property, the repayment will take up more than 25% of the income, leaving less to save for retirement or for current expenses, or the repayment will take more than 25 years.

Although most people expect a working career to be 35 years, it is useful to plan for 25 years of repayment, to allow for some disruptions in the income stream during your working career, caused by unexpected events, such as unemployment or disability.

If you really need to pay more for the property, you can stretch up to 6 years of family income, after you have done your budgeting carefully.

Tan Kin Lian