How Much HDB Loan Can I Get: Navigating Singapore’s Property Finance
Buying a home in Singapore can be bliss. However, this is only if you’re truthful with yourself about your financial situation. You won’t have to stress about making your monthly payments when you buy a home within your financial means.
If you don’t have sufficient funds to make a cash purchase, you can choose between a bank loan and an HDB loan. If you’re a citizen of Singapore, you can use HDB, a public service provided by the Housing and Development Board (HDB). Low-income Singaporeans can purchase decent homes from the board at reasonable prices.
You can opt for traditional bank loans if you don’t want to benefit from an HDB loan. If you desire a more fixed interest rate, bank loans might not be an option.
Key Points to Note:
- Opt for a home based on what you can afford in the Singaporean property market.
- Potential eligibility for a Singapore HDB loan.
- Determinants of borrowing capacity in Singapore: total debt servicing ratio (TDSR) and loan-to-value (LTV) limit.
How Much Can You Afford?
Purchasing a property is challenging, especially when using credit. It demands a lot of time. Additionally, you must have sufficient resources to cover the upfront costs, ongoing expenses, and monthly loan payments.
Sit down and determine if you have enough money to cover all of the expenses. Where will you obtain the money if there is a shortfall? The most frequent sources are income, savings, or asset sale earnings.
An HDB loan’s initial costs include appraisal fees, legal fees, closing charges, agent’s commission, stamp duty, and insurance.
You’ll have to buy fire insurance and a home protection insurance policy. Thanks to home protection coverage, your dependents won’t lose their home when you pass away. Additionally, it protects your house if you become permanently disabled or terminally ill.
Another initial cost you’ll have to pay is the option fee, which is the agreement between the buyer and the seller of a home.
Be ready to pay some ongoing expenses once you’ve bought your home. Your monthly charges include gas, plumbing, and electricity. It’s possible that your house needs renovation, which you’ll have to undertake before moving in.
You must pay monthly or yearly property taxes, loan interest, service charges, and conservancy fees. The service and conservancy fees assist with neighbourhood maintenance.
You should also improve your home to give it a more individual vibe.
Monthly Loan Instalments
The interest rate for HDB loans is typically 0.1% higher than the current market rates for CPF (central provident fund). The current CPF rate, which has remained steady for a while, is 2.5%. Therefore, your monthly repayments will not vary.
The loan duration will determine your monthly loan payments. The repayment amounts decrease as the period lengthens. But keep in mind that the total interest overall will be high.
Let’s say you are going for a flat costing $300,000 for 25 years, and the monthly interest rate will be.
- Deduct a 15% down payment. 15/100*300,000 = 45,000.
- 300,000-45,000 = 255,000.
- 2.6/100*255,000 = 7,800.
- 7800*25 = 195,000.
- 300,000+195,000 = 495,000/300 (months).
- Monthly repayment = $1,650.
However, there is no need to calculate manually. Use a mortgage calculator.
Note: A social security savings scheme called CPF (Central Provident Fund) accepts contributions from you and your employer. You can use it to pay for your retirement, housing, and medical needs.
What Is Your Current Financial Position?
After being aware of the initial costs, evaluating your present financial situation is crucial. Will your income sufficiently cover the monthly loan payment and other financial commitments?
Do you have enough money to pay for all of the upfront expenses? How are you going to cover your down payment? These are the kinds of questions that will help you determine whether you’re in a financial position to take a home loan.
If you have enough, you can use your CPF Ordinary Account (CPF OA) savings for your down payment. You have the option of using the entire sum or keeping $20,000. You cannot use your CPF savings to make a downpayment for a bank loan.
Determine Your Borrowing Capacity
Do you wish to repay your HDB loan without stress? Evaluate the home’s affordability before making a purchase. Only by taking into account your borrowing capacity can you do that.
That will depend on the following factors:
- The total debt servicing ratio (TDSR) considers all your other loans. After adding the HDB monthly repayments, you should not exceed 55% of your monthly income. If your monthly income is $14,000, 55/100*14,000 = $7,700. Your total loan repayments should not exceed $7,700 monthly.
- Mortgage servicing ratio (MSR): Your home loan repayments should not exceed 30% of your gross monthly income. If your gross monthly income is $ 7,000, your loan repayment cannot exceed $2,310.
- Loan-to-value limits: How much of your future home’s price can you borrow? Your LTV cannot exceed 80% if it’s your first home. After evaluating your age, the limit will be decided if you have other existing loans and the loan tenure.
- 80% of $300,000 is $240,000 if you want a flat costing $300,000. Hence, you cannot qualify for an HDBloan above $240,000. However, this can be subject to other conditions and should be verified.
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Understanding HDB Loans In Singapore
You must ascertain your eligibility before submitting your HDB loan application. To find out if you are eligible, go through the following criteria.
- You will not be eligible for HDB if your household income is over $7,000 (single), $14,000 (family), and $21,000 (extended).
- You or your partner must be a Singaporean.
- You don’t run a market or hawker stall or own more than one business or industrial property.
- If you own a private residence in Singapore or elsewhere, you won’t be eligible for a HDB loan. Additionally, you cannot have sold a private house within 30 months of applying for a loan.
- The article states that only two HDB loans are available in your lifetime. This is not entirely accurate. While it’s true that there are restrictions on getting multiple HDB loans, the “two loans” rule is not a standard HDB policy.
- This is not a standard requirement. The remaining lease is a consideration, but there’s no fixed rule that it should cover the youngest buyer up to 95 years.
After ensuring you meet all eligible requirements, examine the advantages and disadvantages of bank loans and HDB before choosing. If you are looking for an alternative lender, you can visit Horison Credit to see the various loan options.
See the following table listing the advantages and disadvantages of HDB vs Bank Loans:
|Due to the higher loan-to-value, you must put down a smaller amount than you would for a bank loan.||Simple eligibility criteria.|
|You can pay the down payment with cash, CPF, or housing grants.||It is easier to negotiate an interest rate that works for you.|
|No penalties for early repayment.||Keep refinancing every couple of years.|
|You can go from an HDB loan to a bank loan, not vice versa.||You have an unlimited number of borrowing opportunities.|
|A maximum loan length of 25 years.||Loan terms are longer than 25 years.|
|Easier to obtain an extension or alternative repayment agreements.|
|Interest rates are higher than those on bank loans.||A larger down payment. MAS caps loans at up to 75% of the residence’s sale price.|
|You cannot use HBD to buy private residences.||For early repayment, the majority of banks impose penalties.|
|Has a lifetime maximum of two loans per individual.|
Application Procedure For HDB Loans
The application procedure can begin as soon as you meet all of the above criteria.
- Request for a credit score from the credit bureau. You will be better positioned to qualify with an AA credit score.
- The first step is to request an HDB Loan Eligibility (HLE) Letter. You can apply for it online. Ensure you have all the required documents for an easy time. The letter is only valid for 6 months from the date of issue.
If you want an option to buy from a seller of resale flats, you’ll need an HLE letter, or when you want to reserve a new flat from HDB. You’ll need the letter if you’re asking for the transfer of ownership of an HDB apartment.
The HLE letter confirms your eligibility for an HDB loan after submitting the required documents.
|Employees with CPF monthly contribution||Employees without CPF monthly contribution||Self-employed|
|Payslips from the most recent three months.||Payslips from the last six months.||Bank statement from the most recent six months.|
|The past 15 months of CPF contributions.||The most recent six-month bank statement.||Certified yearly statements of accounts from an auditing company or the most recent IRAS notice of assessment.|
|A six-month payslip if the income varies and/or includes allowances.||Credit bureau report.||Credit bureau report.|
What exactly does the HLE letter include?
- It indicates the maximum loan amount you are permitted to accept
- The duration of the loan
- The monthly payments
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