Buying an HDB flat in Singapore involves a lot of planning and financial considerations. Most of the buyers who do not have enough funds to buy a property can consider other options such as loans from the Housing and Development Board or the banks. Grants are also available for the first time buyers who want to purchase flats with a certain market value.
How to Get Housing Loans from HDB?
Applicants for HDB flats can apply for HDB housing loans in accordance with the mortgage loan policy guidelines. Applicants may apply for up to two concessionary housing loans if they meet the eligibility criteria.
An applicant who has received a housing loan previously can apply for the next concessionary rate housing loan for moving to a bigger HDB flat. However, those who buy a private property after selling an HDB flat will not be eligible for a second HDB housing loan. Buyer's age, the prevailing loan ceiling, income level and available balance in the CPF account are factors that determine whether a loan will be sanctioned to an applicant.
Applicants must meet certain eligibility criteria in order to get housing loans from the Housing and Development Board.
- The applicant should not have taken two or more concessionary interest rate loans.
- The applicant has availed one HDB interest rate loan and one housing subsidy.
- The applicant has taken one housing subsidy, one HDB concessionary interest rate loan and a residential property which was disposed off last is not a private property.
- The applicant must not own any private residential property in Singapore or overseas that includes executive condos or HUDC flats.
- The applicant should not have disposed any private residential property within 30 months before the date on which he/ she has applied for HDB loan eligibility (HLE).
- The applicant should own an industrial/ commercial property or a hawker/ market stall and be operating a business himself/ herself.
Those who are eligible for a housing loan from HDB can consult the on line sales financial plan to calculate the loan amount and monthly installments.
Couples applying for a loan for the first time can opt for the Staggered Down Payment Scheme (SDS), which allows down payment for the loan in two stages. To qualify for the SDS scheme, an applicant and his/ her spouse must be at least 30 years old at the time of application. The down payment for the loan which got reduced to 10% from 20% in the year 2005 (19 July) can be paid in two stages.
Applicants who have applied for a flat on or after this date shall have to pay 5% at the time of signing of agreement for lease. The rest of the down payment (i.e. 5%) can be paid at the time of taking possession of the new flat after two to three years.
How to Get a Housing Loan from the Banks?
Those who are not eligible for an HDB housing loan, can take loans from licensed banks that provide loans to potential buyers. Banks generally provide loans as much as 90% of the purchase price or the market valuation of the proposed flat. Individuals may opt for a bank loan if:
- They have already enjoyed two interest rate mortgage loans either for buying flats directly from HDB or from the open market.
- They have already enjoyed one interest rate mortgage loan and a housing subsidy and are not planning to buy a flat that is bigger than their current one.
- They have already enjoyed one interest rate mortgage loan and a housing subsidy and the property last disposed off is a private residential property.
- They own two or more owner operated market/ hawker stalls inside or outside Singapore.
- They own one market/ hawker stall or any other industrial/ commercial property but not operating a business themselves.
The loan applicants can consult reputed banks on the amount of loan that they can get depending upon their income. They can take the help of the ‘Cash Flow Planner’ to calculate their monthly expenses and cash for paying loan installments.
Apart from this, the other factors that should be considered for obtaining a loan from a bank are the CPF withdrawal limit, Cash down payment and Priority of Payment.
CPF Housing Grant
This grant is usually meant for the lower income groups with a steady household income. It provides these families with financial assistance in situations when they want to buy a subsidized HDB flat.
An applicant who qualifies under its guidelines is given this grant in addition to the existing housing subsidies. Thus, it helps families with lower income to get a bigger housing subsidy for buying an HDB home.
To qualify for this grant, which is only given once to a family, an individual should be eligible to meet certain criteria:
- Family Nucleus: The applicant’s family must comprise his/ her spouse or fiancé/ fiancée or parents and siblings or children under his/ her legal custody (in case the applicant is widowed or divorced).
- Special Condition: The applicant must submit a copy of his/ her marriage certificate to the HDB on or before taking possession of the flat.
- Income Ceiling: The average gross household income of the applicants who have booked their flats on or after 2007 (24 August) should not be more than SGD 4,000 per month.
- Employment Status: The applicant or the co-applicants should be in continuous employment for two years before applying for a loan to buy an HDB.
Additional CPF Housing Grants
Apart from these, the amount of AHG (Additional CPF Housing Grants) that applicants are eligible for are based on their average monthly household income for the past two years.
The AHG is given only to the citizens of Singapore and not to their spouses who may be a Permanent Resident of Singapore.
In case of sole applicants, a full grant is given while in case of joint applications, half of the grant is provided to each applicant.
When joint applications do not involve a husband and a wife (e.g. parents, married siblings or children), the grant is given to any one eligible applicant per household.
AHG can be used only to reduce the mortgage loan amount or as a capital payment or to make initial payments for purchasing a flat.
Purchasing HDB flats in Singapore is a long term financial commitment involving careful financial planning. Therefore, it is recommended that a buyer should keep all options open before purchasing a flat.
