Path to dream house starts with a spreadsheet

Assess financial projections like salaries, loans and cash flow before deciding the way forward

NOV 3, 2019

Poon Chian Hui

The dust had barely settled after my wedding when my husband presented me with a "romantic" gift - a giant Excel spreadsheet.

The document summed up our key financial projections - salaries, loan repayments, monthly cash flow and Central Provident Fund (CPF) interest earned.

And that was as romantic as it got because the purpose of this document, he said, was to see if we could afford our dream home.

We had recently set our sights on freehold cluster house developments with units priced from about $2.5 million to $3 million each, at a per-square-foot price of about $500 and up.

This type of hybrid housing appeals to us - it has the spacious feel of a landed estate but at a friendlier price tag. Then there's the convenience of condominium-style facilities such as a swimming pool.

It would be a major step up from our 721 sq ft two-room condominium unit, which the property agent had touted as "cosy" six years ago but which most visitors politely describe as "kind of small".

Poring over the spreadsheet, it was clear that we would have to do something about our mortgage.


This discussion, which took place less than two weeks after the June wedding, was a reality check.

In the six years of servicing the 22-year loan, the monthly interest rate has steadily climbed from about 2 per cent to 3 per cent.

How about refinancing the loan, I suggested. Switching to a bank offering lower interest rates was a logical step.

At the same time, refinancing would give us a chance to make other adjustments, such as to the loan tenure and CPF contributions.

For instance, we could inject a lump sum from CPF to reduce the outstanding loan amount, or add my husband's CPF to offset monthly instalments (the loan was serviced by cash and partially by my CPF money). Problem solved!

Not so, we found. One stumbling block were the legal fees of $4,000.

Changing banks incurs costs such as having the property valued.

Thankfully, our trusty spreadsheet was there to save the day. Within minutes of keying in the $4,000 and applying the various scenarios, the verdict was out: Not worth it.

One key reason was that using my husband's CPF for the refinancing meant he would have less or minimal savings in his account to accrue interest. The potential loss of that CPF interest - we calculated for three, five and 10 years - was stark.

Add this to the legal fees and refinancing looked less appealing.

So it was decided that we should stick to the current bank but just have the loan repriced.

A phone call to the bank provided three options for a new home loan.

There were two choices of fixed-rate packages, which meant you pay the same interest rate throughout. These packages came with a lock-in period, so you would pay a penalty if you chose to make changes.

The third option was a floating-rate package. The interest rate varied or "floated" based on a reference rate called FHR8, which is the bank's average interest rate on fixed deposits for the prevailing eight months.

A spread or margin, determined by the bank, was added to this base rate. If the spread is 1.1 per cent and the FHR8 is 1 per cent, the interest rate payable would be 2.1 per cent.

At the point of my inquiry, the interest rate for the floating-rate package was lower than that for the fixed-rate ones.


I told the customer service officer that I would like to think about it. She replied that she could send the detailed fact sheets via e-mail.

Can I apply online or must I go to a bank branch, I asked.

She said she would send an e-mail link. All I would have to do was to click on the link and follow the steps to apply online for the package I preferred.

A fee of $300 would be automatically deducted from my bank account if the application was approved, she added.

The good thing about banking services increasingly going digital is that I can go through the details at my own time and pace.

However, it also means that I cannot easily ask someone if questions crop up, for example, about the fact sheets the bank provided.

That said, these fact sheets worked out the estimated monthly instalments and outlined the terms of the different loan packages in a fairly succinct manner.

The online application was easy.

Select the preferred package, answer a few questions about the property and attach images of my identity card as well as a soft copy of my property portfolio downloaded from the Inland Revenue Authority of Singapore website.

The troublesome part was that I had to print out the bank's fact sheet and sign it by hand, scan the signed papers and e-mail them back to the bank. If only digital signatures could be accepted!

Typically, fixed rates are higher than floating rates as people literally pay for the stability.

But we opted for the floating-rate package as we figured that the current economic slowdown will keep interest rates in check for a while. Many central banks around the world have cut rates.

The day after I submitted my online application, a bank officer phoned to confirm that the repricing had been approved.

The new instalment sum kicked in the following month. It was oddly satisfying to have done all this without stepping inside a bank branch.

Another thing to be satisfied about - having to cough up less each month for the mortgage has freed up a significant sum of cash savings.

As our cash expenditure is stable for now, most of the extra money is funnelled into a multiplier account to generate more savings.

The figures on our spreadsheet now look a little healthier.

And that dream house got a little closer to reality.