Today, we’ll take about building resilience to disease. Of course it’s relevant. You’ll need it when you’re living in the street, eating out of the trash bin at the local Wendy’s. Wait, you weren’t planning to do this? Because you imagine you’ll be living in an actual HOUSE? Yeah, and I imagined I’d sing back-up for Eddie Van Halen. I suppose anything’s possible; but here’s three reasons why you should restrain your optimism:

View photos Singapore flats More

Flats: Clearly different, and worth more than the neighbour’s.

1. You Can’t Take Advantage of Low Interest Rates

Property experts keep saying home loans are cheap right now. And they’re right, but here’s the problem: It may not apply to you.

See, in theory, houses should be more affordable than ever. Mostly because America mistook the words “make more money” to mean “bomb a desert”. After which, America’s federal reserve policies pushed SIBOR and SOR to an all time low.

SIBOR and SOR both determine home loan rates in Singapore; and housing loans now hover around 1% interest. That’s cheap, and a deal you want to jump on…if you have the cash or income to qualify. Otherwise, it doesn’t do squat for you.

Here’s why:

To get this low interest rate, you need a bank loan. But a bank can only loan you 80% of your home’s market value, max. So to buy a $400,000 flat, you need to make a down-payment of at least $80,000 in cash. Yeah, why don’t you just reach in your back pocket and get that?

View photos Empty wallet More

Sorry, European wallet. No one knows where the money goes.

Oh wait, if you’re not a high income earner, then you’re more likely to find a horse’s ass in there than 80 grand. And because you’re too poor, you can’t get a bank loan. You need a HDB loan.

A HDB loan will cover 90% of your flat price, and the 10% down-payment can come from your CPF. Unfortunately, HDB loans charge an interest of (0.1% + the current CPF).

That means you get to pay an interest rate of 2.6%. Only richer people have access to that low 1% average. That’s some government help right there.

What You Can Do About It:

If you have a HDB loan, you can choose to refinance into a bank loan. But not everyone can qualify: To refinance into a bank loan, you need to meet minimum income standards.

In particular, you can’t be over-leveraged (owe too much on credit cards, car loans, etc.), and your overheads can’t exceed 50% of your income.

Also, once you switch to a bank loan, you can’t switch back to a HDB loan. That means you need to have emergency savings, in case the interest rates spike (it might after 2014 – 2015). You need to set aside at least three to six months of your income as savings.

View photos Signing a home loan More

…and if you use our loan, you’ll only *probably* be poor!

Don’t have that? You’re stuck. You don’t dare refinance, and you have to swallow the 2.6% interest.

If you do want to refinance, compare the loans from all the banks first. There are free loan comparison sites out there, like SmartLoans.sg. But if you don’t have the savings, think twice. The low interest rates are for the wealthier crowd, who can handle volatility. Sucks, I know.

2. Insane Sellers’ Expectations

Resale flats get pricier by the week. You’ve seen the stories about the million dollar flat; and some property agencies keep stoking that fire.

Sure, they’ll claim it’s an irregularity. But some will add a “maybe” to it:”This is a freak show, but just maybe, in X years, we’ll see more million dollar flats. Who knows, who knows“.

Hey, their comissions aren’t going to pay themselves.

Property news like this does something to home owners. They get all funny in the head, and develop expectations less realistic than your insurance agent’s projections. The end result is rising median COV (Cash over Valuation); this is a sum paid above the bank’s official valuation, which can’t be covered by the loan.