How to Finance a Second Property in Singapore
Buying a second property in Singapore works differently from buying your first.
You may already have a home loan, other debts, and a property in your name. And when you look at the new property’s price, there are also taxes and buying costs to pay.
There are three things you need to understand: ABSD, LTV and TDSR.
- ABSD (Additional Buyer’s Stamp Duty) is an extra tax you may have to pay when buying another residential property.
- LTV (Loan-to-Value) determines how much the bank can lend you.
- TDSR (Total Debt Servicing Ratio) limits how much of your monthly income can go towards paying your debts.
These three rules strictly affect how much money you need upfront and how much you can borrow.
The starting point, then, is to work out the full amount needed for the purchase, rather than looking at the mortgage on its own. This is also part of a broader approach to property asset progression, where each purchase needs to fit into your overall financial position.
Understanding the 3 Gatekeepers
These three rules affect different parts of the purchase. ABSD adds to your upfront cost, LTV affects the size of your loan, and TDSR affects how much debt your income can support.
ABSD (Additional Buyer’s Stamp Duty), The Extra Tax
ABSD is an additional tax charged when you buy a residential property, with the rate depending on your citizenship or residency status and the number of residential properties you already own.
For a Singapore Citizen, the current ABSD rate for a second residential property is 20%. ABSD is calculated based on the higher of the property’s purchase price or market value. So a property’s advertised price does not always determine the exact amount of ABSD payable.
| Buyer | First Property | Second Property |
| Singapore Citizen | 0% | 20% |
| Singapore Permanent Resident | 5% | 30% |
| Foreigner | 60% | 60% |
That makes ABSD one of the first costs to factor into your budget, especially when buying a higher-value property. These costs are best considered as part of your broader financial planning for property investment, rather than as one-off expenses attached to the purchase.
LTV (Loan-to-Value), How Much the Bank Can Lend
LTV refers to the percentage of a property’s value that can be financed through a bank loan. A lower LTV means a larger portion of the purchase has to come from your own funds.
For example, a S$1 million property with a 45% LTV would have a maximum bank loan of S$450,000. The remaining S$550,000 would need to come from your own funds, subject to the applicable lending rules and the bank’s assessment.
The LTV limit for a second housing loan depends on your existing housing loans. The applicable limit can also be affected by factors such as the loan tenure and the borrower’s age.
So having enough income to qualify for a mortgage does not necessarily mean the bank will finance most of the property’s price. The LTV limit can still leave a sizeable amount to be funded upfront.
TDSR (Total Debt Servicing Ratio), Can Your Income Support the Loan?
TDSR looks at how much of your gross monthly income goes towards paying your debts.
The current TDSR limit is 55%. This includes the new property loan alongside your existing financial commitments, such as your current home loan, car loan and other qualifying debts.
For example, suppose your gross monthly income is S$15,000. A 55% TDSR gives you a total monthly debt threshold of S$8,250.
That does not mean S$8,250 is available for the new mortgage. Existing debt payments take up part of that amount first.
So a second-property buyer with an existing S$4,000 monthly home loan would have less room for the new mortgage than a buyer with the same income but no existing housing loan.
This is why the amount a bank is willing to lend is not determined by the property’s price alone. Your existing debt and income have to fit within the same calculation.
Can You Use Your CPF for Property #2?
CPF (Central Provident Fund) is Singapore’s mandatory savings scheme for retirement, housing and healthcare. You can use savings in your Ordinary Account (OA) to help finance a second property, subject to CPF rules.
For private property purchases, your CPF Ordinary Account (OA) can generally be used towards the purchase price, down payment and certain related costs, subject to CPF’s rules.
The amount available is not simply whatever happens to be sitting in your OA. Your existing property ownership and the amount you have already used from CPF can affect how much more you are allowed to use.
The Retirement Sum Requirement
A common misconception is that buying a second property means having to leave exactly the Basic Retirement Sum (BRS) untouched in your CPF.
The actual rules are more specific.
For a second or subsequent property, CPF usage depends on factors such as the property’s remaining lease, the amount of CPF you have already used for property, and whether the required retirement sum has been set aside.
CPF generally allows savings above the applicable retirement sum requirement to be used for property, given the property has a sufficient remaining lease, subject to the relevant CPF limits.
That means the amount available for Property #2 needs to be checked against your individual CPF position, rather than estimated from your OA balance alone.
How to check your available CPF
Before including CPF in your financing plan, check:
- Your CPF Ordinary Account balance
- How much CPF has already been used for your existing property
- The retirement sum you are required to set aside
- The CPF usage limit that applies to the new property
This is because CPF can reduce the amount of cash needed for the purchase, but it does not remove the need to plan for cash expenses such as the minimum cash portion of the down payment and any costs that cannot be paid with CPF.
The exact amount you can use should be confirmed through CPF’s current property withdrawal rules before committing to the purchase.
Example – How Much Do You Need for a S$1.5 Million Second Property?
A S$1.5 million property can require a substantial amount of your own money, especially when it is your second residential property and an existing home loan is still running.
Let’s say the applicable LTV is 45%.
The breakdown
| Cost | Amount |
| Property price | S$1,500,000 |
| Maximum bank loan at 45% LTV | S$675,000 |
| Amount not covered by the loan | S$825,000 |
| ABSD at 20% | S$300,000 |
| Buyer’s Stamp Duty (BSD) | S$44,600 |
| Other buying costs | Additional |
The S$825,000 is the portion of the property price that would need to come from your own funds, subject to the applicable financing rules. The S$300,000 ABSD is then added on top of that.
That already brings the amount to S$1.125 million, before accounting for legal fees, valuation fees and other transaction costs.
How much needs to be cash?
The rules also determine which parts can be paid with cash and which can potentially be covered using CPF.
For a bank-financed private property, at least part of the down payment has to be paid in cash. The exact cash requirement depends on the applicable LTV and loan structure.
CPF OA savings may cover certain eligible portions of the purchase, subject to CPF withdrawal limits and your individual CPF position.
So the S$1.125 million figure above should not be taken as S$1.125 million sitting entirely in cash. It represents the broad amount that needs to be funded outside the bank loan, with the mix of cash and CPF depending on your circumstances.
It is more than important to check your available CPF balance, existing property loan and borrowing capacity should happen before committing to the purchase.
A second property can still be affordable, but the upfront funding requirement needs to be worked out well before the Option to Purchase is signed.
The upfront cost is only one side of the calculation. The property’s ongoing income and expenses also matter, particularly when you’re assessing whether the property can remain cash flow positive.
3 Ways to Reduce Upfront Cost of a Second Property
There are several ways you can structure your purchases to reduce the amount of money tied up in a second property. The right approach depends on the type of property, ownership structure and your longer-term plans.
Decoupling
Decoupling is a term used when one owner transfers their share of a jointly owned private property to the other owner, leaving one spouse with the existing property and the other without a residential property in their name.
The concept is to allow the spouse without a property to buy another residential property without being treated as an owner of the first property.
This can potentially reduce the ABSD payable on the next purchase, but the savings are not automatic. The transfer itself can involve stamp duty, legal fees, financing changes and other costs.
Decoupling also has to be structured within Singapore’s property and tax rules. It is therefore worth calculating the cost of the ownership transfer alongside the potential ABSD savings before deciding whether it makes financial sense.
Buying a Dual-Key Property
A dual-key unit is a single property with two separate living spaces within the same property title.
The attraction is that you are buying one property rather than two separate residential properties. That means the purchase is treated as one residential property for property ownership and ABSD purposes, rather than two.
The arrangement can also give you more flexibility with how the property is used. For example, one part could be your home while the other is rented out, subject to the property’s rules and any applicable regulations.
It is important to look at the layout and title rather than assuming every dual-key unit works the same way. A dual-key property is still one property purchase, and its rental potential depends on the specific development, location and layout.
Considering Commercial Property
Commercial property is another route if you want exposure to property without buying another residential unit.
Commercial properties such as offices, retail units and industrials are generally not subject to ABSD because it applies to residential property. The financing rules are also different from those for residential properties.
That does not make commercial property an easier version of investing. Banks assess commercial loans differently, and factors such as the property’s use, lease, rental income, remaining tenure and the borrower’s financial position can affect the amount available.
Commercial properties can also have different tax, financing and vacancy considerations. So this option makes more sense as a separate investment decision than simply a way around ABSD. It’s always helpful to understand more the difference between commercial and residential property in terms of risks and returns.
If you’re considering this route, you can explore Proptiply’s Commercial and Industrial Program for a deeper look at commercial and industrial property investing.
Financing a Second Property, Step-by-Step Plan
It’s heavily advised that you know your borrowing limit and the amount you need to fund upfront. A sensible order is to check your eligibility first, then work out your available funds before committing to a property.
Step 1: Check the rules around your first property
Start with the type of property you already own.
HDB owners need to meet the applicable Minimum Occupation Period (MOP) before buying a private residential property. For most HDB flats, this means completing the required five-year MOP, although specific schemes and property types can have different rules.
The ownership of your first property can also affect your ABSD, LTV and CPF position, so this is worth settling before looking at Property #2.
Step 2: Check how much CPF you can use
Look at your CPF Ordinary Account balance, but remember not to treat the full balance as money available for the purchase.
Your previous CPF usage, the retirement sum requirement and the property itself can affect the amount you are allowed to withdraw.
This gives you a better idea of how much CPF can form part of your upfront funding.
Step 3: Find out your borrowing limit
An In-Principle Approval (IPA) from a bank gives you an indication of how much you may be able to borrow.
The bank will assess factors such as your income, existing debts, age, loan tenure and the property’s value. TDSR also comes into the calculation.
Getting this figure before house-hunting gives you a more realistic price range. A property’s asking price may fit your savings, but the numbers can change once your actual borrowing capacity is taken into account.
From there, the next step is deciding what type of property fits that budget and investment objective. A broader property investing in Singapore framework can help put the financing decision into context.
Once you know your borrowing range, professional property consulting service can help you assess the options that fit your financial position and investment plans.
Step 4: Work out your cash requirement
Next, separate the purchase into the amounts that need to be funded through cash, CPF or the bank loan.
Include:
- The cash portion of the down payment
- The remaining down payment that may be paid with eligible CPF funds
- ABSD
- Buyer’s Stamp Duty (BSD)
- Legal and valuation fees
- Other transaction costs
This is where the true cost of Property #2 starts to become visible.
Step 5: Make the purchase
Once the numbers make sense, you can move ahead with the property search and purchase process.
After finding a suitable unit, the usual steps include securing the Option to Purchase (OTP), arranging the mortgage, appointing a conveyancing lawyer and completing the purchase.
The exact process varies depending on the property type and financing arrangement, so the loan and cash requirements should be settled before paying the Option Fee.
A second property can be a useful part of a long-term property plan, but the financing needs to work on paper before the purchase makes sense in practice.
If you want to build their residential property strategy further, the Residential Acceleration Bootcamp covers the broader decisions around buying and progressing a residential property portfolio.
Frequently Asked Questions
Can I use CPF to pay ABSD on a second property?
CPF OA savings can be used to pay certain property-related costs, including ABSD, subject to CPF withdrawal rules and your available CPF savings.
The payment process can also differ from the timing of the CPF withdrawal. In some cases, the ABSD needs to be paid first before the eligible amount can be reimbursed from CPF. Your conveyancing lawyer can advise on the payment and reimbursement process for your purchase.
What happens if I sell my first property after buying the second?
A Singapore Citizen married couple may be able to claim an ABSD refund when buying a second residential property, provided the purchase and ownership meet the conditions for the ABSD refund scheme.
One key condition is that the first residential property must generally be sold within six months of purchasing the second property. Other conditions also apply, including the ownership structure of both properties.
The refund is not automatic, so the couple needs to meet the relevant IRAS requirements and submit the claim within the required timeframe.
Does owning a property overseas affect my second property loan in Singapore?
An overseas property does not count towards the number of Singapore residential properties used to determine ABSD on a Singapore residential purchase.
However, an overseas mortgage can still affect your ability to borrow in Singapore. Banks take existing debt obligations into account when assessing your TDSR, so monthly repayments on a foreign property loan may reduce the amount available for a new Singapore property loan.
Can I buy a second property with my CPF and cash?
Yes, CPF OA savings and cash can be combined for an eligible property purchase, subject to the CPF withdrawal rules and the applicable cash down payment requirements.
The amount available from each source depends on your existing property, previous CPF usage, the new property’s characteristics and the applicable financing limits.
Is it easier to finance a second property after paying off my first mortgage?
Paying off your first mortgage can improve your borrowing position because you no longer have that monthly housing loan repayment affecting your TDSR.
Keep in mind that reducing one mortgage does not make another long-term mortgage a good retirement strategy. The risks of relying heavily on a long-term mortgage are worth considering separately.
And it does not mean that the next property will receive the same financing treatment as your first property. The applicable LTV limit depends on the number of outstanding housing loans and other lending conditions at the time of the new purchase.
It is therefore worth checking both your TDSR position and the applicable LTV.
