If you’re in your early to mid-30s, upgrading to a private property (or executive condominium) will most likely will be a major financial decision you’ll grapple with at some point soon, especially for those who’d just completed their 5 years MOP (minimum occupation period) on a HDB BTO property.

It can be a daunting experience crossing over from HDB to private housing for the first time and find yourself suddenly owing a million dollar of debt for the first time in your life. Will you be able to afford and service the monthly repayment which doubles from $2,000 to $4,000 or more. Should you make that move?

It’s no wonder most will quickly then make plans to pay down the mortgage using any bonus, windfall or spare cash one could raise and hope to pare down that debt by half in the next 10 years, only to see themselves leveraging up even bigger debt when they reach their 40s to acquire the next bigger or better property in landed, or a second investment property.

The most important tip when it comes to mortgage planning for those in their 30s is your perspective of debt – you need the power of leverage to get ahead in life, at least financially.

Some may think this is a contrarian and provocative view, or that we have self-serving interest to propagate this view. But the truth remains that most people underestimate both the earning power in their lifetime as well as the amount of financial resources to retire well in Singapore.

Being in the mortgage business for close to a decade, we have 7 tips to share when it comes to mortgage planning in your 30s:

1. See mortgage as good debt

You can look at mortgage as one of those necessary “evils” in life.  You’ll need one to get a roof over your head, or pay rents. Leverage is also one of the main motivation for property investment, as opposed to other asset classes like stocks, bonds, gold, crypto, etc.  In fact, mortgage is deemed good debt (lowest interest, highest stability) which ought to be deployed to pay off all other debts in life where possible, be it car loans, renovation loans, personal loans, etc.

Understand this in the context of life stages: you maximise leverage from age 35-45, some may start to deleverage from 45-55 and become totally debt free by 55 earliest or 65 before official retirement.  Doing regular prepayment does help to reduce debt and lower interest costs, but at what opportunity cost? We are know by now that in order to benefit from compounding interests, you’ll need to start investing early in your 30s.  All the more so, any cash surplus and excess savings should be diverted to help build your nest egg for retirement, rather than paying down good debt.

30s is a good time to start acquiring assets using good debt, as your income is expected to grow.  Take for example a private property loan of $1m at a long run average interest of 2.50% over 30 years tenure (interest will not remain high forever), the monthly repayment works out to be $3,951.  For a dual-income household earning at least $10,000 per month, that’s only a mortgage servicing ratio of 40%.  In the scenario where interest rate rises to 4.50% or higher, which is what TDSR stress test is all about, it’s still below the regulatory limits (60%) with mortgage payment going up to $4,774 per month or 48%.  You do have some margin of safety even if your income stays stagnant at the same level, which is unlikely at this age.

But what if one spouse stops working?

2. Deploy maximum leverage

Because of this risk (unexpected reduction in income), it’s imperative to understand the difference between the twin objectives of capital gain versus income in any investment. Too many people prioritise the former to the neglect of the latter, especially when one is younger.

But having the cash flow to sustain debt is so paramount before you can have the confidence to fully deploy leverage when you are younger. And doing that allows you to maximise asset acquisition when you are still in your prime and most productive years with enough runway in life and a rising income. Often, that could mean a difference between achieving financial independence early or just getting by in life financially. The rich certainly knows how to make use of leverage. You practise that too when you take out a mortgage for a million-dollar real estate asset.

When you work with MortgageWise and partner with us on your mortgage, we’ll show you exactly how to build this autopilot cash flow system to become mortgage-free in 6 years!

Even if you are risk-averse and deem no investment safe enough to part with your hard-earned money, there’s at least one “investment” you’ll probably agree with us – put back the CPF withdrawn for housing plus accrued interest.  You can do this with any amount via CPF login.  The earlier you put it back, the less you’ll need to pay back from your sales proceed (when you sell) and the earlier you start compounding the 2.50% interest paid by CPF Board.  The only drawback is – you can’t touch those funds in CPF Ordinary Account until you hit 55.  But you can always utilize it when you next sell and buy property again.

3. Focus on mortgage management

Instead of worrying about debt obligations which may unnecessarily crimp your asset acquisition potential in your 30s, focus on managing the mortgage interests.  To do that, you need to make the right choice between fixed or floating home loan rates at different phases of the interest rate cycle.

Unless you have the time to track the cycle and watch U.S. Fed’s every move, it’s probably easier to work with a trusted mortgage broker who can also send you timely reminders and updates on promotional rates from banks from time to time.

Understand this in the context of life stages: you maximise leverage from age 35-45, some may start to deleverage from 45-55 and become totally debt free by 55 earliest or 65 before official retirement.

4. Build a property portfolio

Many people make their wealth through rock-solid real estate investments. This is especially true for Singapore properties where prices have remained most resilient through the decades even during the pandemic years. Property is, after all, the one asset class that comes with both capital gain and good income stream when you buy right.

However, with TDSR & ABSD (additional buyer’s stamp duties) entrenched as part of property purchase costs in Singapore, gone were the days where you can just put down 20-25% of your own money, get financing for the rest, thereby amassing 4 to 5 properties in a short span of time.

There’s still one segment in the market though that’s accessible without must restrictions – commercial properties like shophouses, offices, retail shops or industrial B1 units. It’s debatable whether commercial properties are right for the average investor. In recent years, there’s been a plethora of property investment seminars touting easy money through buying, selling and flipping of commercial and industrial properties. SSD (seller’s stamp duty, within 3 years of sale) were introduced back in 2013 to rein in such speculative activities (on industrial, excluding commercial).

It’s not the intention here to advocate commercial property investments for the average Joe. However, if you do have interests to build a property portfolio, industrial & commercial properties onshore are certainly much lower risks when compared to overseas properties investment. In the worst case scenario, you could still take care of the property when it’s located here where you live. Financing, or remortgaging, will also be readily available. There’s no ABSD for commercial properties and you can still get up to 80% financing, sometimes 90% if you have an operating company. You can buy the commercial property under individual name or company name. In general the latter gets slightly more favourable financing rates. TDSR will still apply if you set up an investment-holding company (IHC) for the sole purchase of buying and holding such properties. However, it will be exempted if the company has some form of operating income for assessment.

As long as you’re always able to secure a good tenant through business cycles, a good commercial or industrial property can still provide good upside in capital value which beats inflation many times over. In fact, some will return much higher asset appreciation as well as rental yields than residential units. As with all things in life, you’ll need to do your homework. And the best time to start working on that knowledge is in your 30s. You might even have the need to use one by the time you get to your 40s, instead of paying rent to the landlord.

Speak to our team here for the best commercial property loan rates be it under individual or company names.

As long as you’re always able to secure a good tenant through business cycles, a good commercial or industrial property can still provide good upside in capital value which beats inflation many times over.

5. Refinance with the longest tenure

Once again, the general misconception in the 30s is that it’s better to go for a shorter tenure to pay less interests so as to reduce costs and cut down that debt fast, but at what opportunity costs?

Even though it is correct that you do pay less interests with a shorter tenure, no one really finishes servicing a mortgage till the end on the same property for the next 30 years. More likely than not, you’ll redeem the loan early and upgrade your property to be saddled with an even bigger loan to start all over again. How then do you determine how much interest is too much to pay over a lifetime?

Rather, consider the wisdom of lowering your monthly repayment to free up more cash for investing in your 30s. Generating more wealth by acquiring more productive assets is more impactful than merely focusing on cost cuts.

For those who’d just purchase your property, refinance as soon as you can as that allows you to stretch the loan tenure by up to 10 more years (The last age for refinancing loan is set at 75 years old, versus 65 for purchase loan)

6. Stay wary of lock-in periods

This is a tip that cuts across all age groups (not just those in their 30s) for all homeowners with a mortgage to service. And it’s one of the most important tip when it comes to mortgage planning.

We have been through a period of great certainties from 2022 to 2024 thus far interest rate is concerned. Though Fed has started the easing cycle with a first interest rate cut in September 2024 followed by one more this month, they have re-iterated that they are not on a preset path when it comes to further rate cuts.

As such, we have repeated the same advice over the last few years: Do not overcommit on mortgage lock-in period beyond the usual two years. Better yet, if you can commit to only one year. In a highly uncertain world with mountains of government debt, geo-political risks and slowing growth globally, retaining that flexibility to get out of contracts early almost certainly gives you an advantage.

7. Buy with the end in mind

In Singapore, that end in mind for many young working middle-class couples means ultimately buying a second private residential property later for both rental income and capital gain, as well as legacy planning. If that’s you, you might want to opt for tenancy-in-common for your first matrimonial property with 1% vs. 99% manner-of-holding, instead of the usual joint-tenancy where each spouse will have equal shares to the property.

Some may be concerned with cases in the limelight this year (2024) where IRAS went after those who blatantly flouted the rules to get around ABSD. However, there were notable differences in those cases where the intent of the purchaser (usually an adult child) can be clearly seen in selling 1% of the ownership, after exercising the option, to one parent even before the completion of the original purchase. This is so that the parent, who is financially stronger, could then take up a mortgage for the property as a 1% joint-owner, who then pay ABSD only on 1% of the property value.

In the case of a couple buying jointly at the same time, with the legit intent for one party to sell his or her 1% share years later, when income would have risen substantially as to justify the couple investing in a second property for rental income, it should be construed as part of proper tax planning ahead of times. Having said that, if one is unclear, it’s best to consult a lawyer or even a tax expert.

In fact, in recent years, we read more and more lobbying voices calling for the government to allow for every Singaporean to buy up to two properties without ABSD. I think this idea is merited and worth further deliberation when TDSR alone provides sufficient check to rein in excessive borrowing and speculative demand for properties. In my view, the current ABSD regime artificially restraint citizens’ demand leading to too much waste, inefficiencies and even distortions in the market place. Of course, it has brought in huge tax income for the government over the years, but there’s always a tradeoff somewhere.

The worst thing to happen is when such unintended distortions lead to potential social ramifications when divorcing couples dispute such 99:1 arrangements in courts leading to unnecessary legal contests and unproductive lives, which could have all been avoided if couples, as two legal citizens, are allowed to jointly-own two properties without incurring additional taxes.

Still, until the law changes, it does make financial sense to ask for such 99:1 manner of holding so long as couples are cognisant of all the ramifications.

We have seen it repeatedly over the years: Those who over-commit for more than the usual 2 years of lock-in period tend to overpay and regret.  Retaining that flexibility to get out of contracts early almost certainly gives you an advantage.

Beyond these 7 tips for those in your 30s, perhaps the epitome in mortgage planing culminates in our exclusive gift for you when you work with us on your mortgage: We’ll show you to become Mortgage-Free in 6 Years!

Better yet, get it free with a Starter Pack bundle worth over $1,500 when you work with us on your mortgage. Get the entire course on Mortgage-Free in 6 Years, which guides you step-by-step how to put in place a whole new autopilot cash flow system, along with exclusive tools, resources, templates, and a powerful leverage solution with the lowest interest in Singapore, so you can retire with a S$4 million* asset and S$16,000 of passive income*.

At MortgageWise, we don’t just help clients navigate the myriad of Singapore mortgage rates and get you the best home loan Singapore, we give you the ultimate gift that no brokers or repricing bank can offer – learn an autopilot cash flow system to become Mortgage-Free in 6 Years!  It works only in Singapore and few other places in the world.  Notwithstanding sceptics, it’ll be hard-pressed to find such a consistent system (not by luck) which could deliver potentially up to S$4 million* retirement assets and up to S$16,000 of passive income*!

So, be it for residential or commercial property loan. Work with us today and you’ll also be helping to support our social cause!

Stay tuned for rate alerts on our Telegram channel SG Mortgage Rates.

* Subject to ownership of a Singapore private property, meeting of certain loan & seed capital requirements, interest rate not going into anomalies like the Great Inflation of 1965-1982 and other typical investment risks

Disclaimer: MortgageWise Pte Ltd is not in the business of providing financial advice nor are we licensed or regulated by MAS under the Financial Advisory Act (FAA) in Singapore. All information presented are opinions and any representations given, whether by way of example, illustration or otherwise, are purely portfolio allocation advice and not recommendations or inducements to buy, sell or hold any particular investment product or class of investment product.  All opinions are generic in nature and are not tailored to the particular circumstances of any reader.  Seek advice from a qualified financial advisor before making any investment decision.

Though every effort has been made to ensure the accuracy of the information and figures presented, we make no representations or warranties with respect to the accuracy or completeness of the contents in this blog and specifically disclaim any implied warranties or fitness for a particular purpose.  We shall not be held responsible for any financial loss or any other damages suffered whatsoever, directly or indirectly, if you choose to follow any of the advice or recommendations given in this blog.