In Singapore, you may have the option to take out a HDB loan, also referred to as a HDB term loan, if you are purchasing a HDB flat. 

A HDB loan, which is a unique type of mortgage issued by the government, offers an alternative to obtaining a loan from a bank. 

Here is our comprehensive guide to all you need to know about HDB loan eligibility if you’re considering purchasing a HDB, including the criteria for a home loan, interest rates, and the required downpayment.

How To Apply For A HDB Loan And Who Is Eligible

Before applying for a HDB loan, you should ask whether you qualify. 

The following are the key requirements for HDB loan eligibility that first-time HDB loan applicants must satisfy:

Citizenship

The applicant must be a Singaporean. If the applicants are a couple, one, if not both, must be a Singapore citizen.

Income Ceiling For An Applicant 

Under the Single Singapore Citizen (SSC) Scheme, the monthly average gross household income cannot exceed: 

• $7,000 for singles purchasing a five-room or smaller resale flat, or a new two-room flat in a non-mature estate
• $14,000 for families
• $21,000 for large families

Status Of The Household

The applicant must not have taken out more than two HDB loans. If he or she has taken out one HDB loan, the most recent property owned cannot be a private residential property.

Ownership/Interest Of Property In Singapore Or Abroad

An applicant must not possess or own a stake in any privately owned residence, local or abroad.

No private residential property may be owned or sold in the 30 months prior to the date on which an application for a HDB Loan Eligibility (HLE) letter is submitted.

The applicant also should not possess more than one market stall, commercial property, or industrial building. 

If the buyer owns just one of these things, he or she must use it for business purposes and have no other income sources.

The Flat’s Remaining Lease

The loan amount to be allotted depends on the remaining lease. It also depends on whether it can cover the youngest purchaser up to the age of 95 or older.

Credit Assessment Criteria

Remember that having a stable job and a consistent source of income to cover the monthly mortgage installments are prerequisites for receiving a HDB loan.

Flat buyers must adhere to the following income requirements when applying for a HDB loan:

• For those with a CPF contribution each month:
  • If the basic pay is fixed: be employed continuously for at least three months
  • If the basic wage is flexible: be employed continuously for at least six months

• Those lacking a monthly CPF contribution should have:
  • Continuous employment or trade for at least six months
  • A good credit standing
  • A minimum of six months of consistent positive cashflow used to pay a mortgage.

HDB Loan Eligibility (HLE) Letter

Buyers of flats who qualify for a HDB loan must submit an HLE letter to prove their qualifications.

It will draw attention to the following significant details:

• Periodic payments
• Repayment time frame
• Conditions and terms
• Loan amount that one qualifies for
• The amount of money from selling the current or previous flat that is used to finance the new flat if a second HDB loan is requested

Given that the HLE letter specifies the precise HDB loan amount you are eligible to borrow, it can be thought of as a budgeting tool that aids in determining what kind of HDB flat you can afford.

What Are The Application Procedures For A HDB (HLE) Letter? 

Step 1: Prepare The Documents 

Flat buyers must provide personal information and other supporting documentation as proof of income when uploading the HLE letter application.

Based on their employment status and CPF contributions, specific documents must be uploaded.

All letters from employers must include the organisation’s stamp or letterhead, as well as the certifying officer’s name, signature, and title.

You can request a copy of the credit bureau report online or at any SingPost branch. There will be a fee for each report.

If a flat buyer’s application for an HLE letter is approved, HDB will contact them to finalise the home loan specifications, including the payment method – CPF, or cash.

Step 2: Submit Your Online Application 

Use the MyHDB portal to access a draft HLE application and submit it along with the required supporting documents. Only applications that include all necessary documentation will be reviewed.

The HDB typically responds to a HLE application within 14 days. 

Step 3: Verification

Use Singpass to verify the HLE letter application.

Validity Of The HLE Letter

The HLE letter is valid for six months from the date of issuance. 

There is no need for reassessment if there are no negative changes to the applicant’s or occupiers’ incomes or financial situation during this time. 

You may reapply one week before the current HLE letter expires if you are still purchasing a home by then.

What Is The Downpayment For A HDB Loan?

A 20% downpayment is required for a HDB loan. This is a 10% increment from what was initially required. 

The change was implemented as part of property cooling measures that aim to deter people from purchasing homes solely to lease them for passive income.

Other than the higher downpayment needed, nothing has changed. 

Cash or funds from the CPF Ordinary Account (OA) may be used to repay the HDB loan amount. Thus, whether you should apply for a HDB loan should be greatly influenced by this 20% downpayment.

Before selecting an apartment, it’s a good idea to determine how much of a downpayment you can afford.

Can You Use Your CPF To Pay For A HDB Flat?

The following options are available to buyers and transferees: 

• Keep $20,000 of the available savings in each of their CPF OAs.
• Use the funds in the CPF OA to pay the CPF Home Protection Insurance premium and the stamp, registration, and legal fees.

Before you can be approved for a HDB housing loan, you must first use the remaining funds in your CPF OA to purchase a new apartment or take ownership of an existing one.

The total amount of CPF savings used to acquire an apartment or take possession of it and cover the recurring mortgage payments depends on:

• The age of the youngest purchaser or transferee. Up to 95 years are covered by the remainder of the lease on the apartment 
• Applicable CPF usage restrictions for buying:
  • Brand-new apartments
  • Resale apartments

You must pay the remaining purchase price balance and monthly cash payments for the mortgage once your allotted CPF amount has been depleted.

Factors That Determine How Much Housing Loan You Can Get

Being at ease with the costs required is just one aspect of affordability and HDB loan eligibility.

To purchase the property, you must also comply with the legal requirements established by the authorities.

Required Minimum Downpayment

In Singapore, you must make a downpayment of 20%, of which at least 5% must be in cash before purchasing your first property. 

Your CPF funds, cash, or a combination cover the remaining 15% of the total. 

The bank can only lend you a maximum of the remaining 80%, which is known as the loan-to-value (LTV) limit.

Total Debt Servicing Ratio 

In addition, property buyers must stay within the permitted Total Debt Servicing Ratio (TDSR) to obtain a loan from a bank. 

All other loan repayment commitments that a buyer has will be taken into account by the TDSR. 

These include any outstanding balances from your credit cards, and secured or unsecured loans you may have, such as for your home, car, education, or renovations.

Buyer Stamp Duty

Some buyers don’t factor in Buyer Stamp Duty (BSD) until they’ve purchased a property. But because it is paid in cash or CPF, it’s a sizeable expense you cannot afford to overlook.

You should factor it into your planning process, along with your cash downpayment to know how much money you will need to fork out.

Mortgage Servicing Ratio 

The percentage of a borrower’s gross monthly income used to pay off all mortgages on properties, including the loan he or she is applying for, is known as the mortgage servicing ratio (MSR). 

Only HDB flats or executive condominiums purchased directly from the developer are eligible for the MSR, which is capped at 30% of the borrower’s gross monthly income.

Maximum Loan Term

Taking a longer loan tenure to spread out the loan is one solution to get around the TDSR and MSR. As a result, buyers can lower their monthly mortgage payments.

There are already regulations in place for this from the Monetary Authority of Singapore (MAS). The maximum loan term for HDB flats is 30 years, and 35 years for private properties.

Due to lower permitted LTV limits, if you take out a loan with a tenure of more than 30 years for non-HDB properties or more than 25 years for HDB properties, you will also be required to make a larger downpayment.

Get All Your Information Before Applying For A HDB Loan

Before taking out a HDB loan, it is important to be familiar with the HDB loan eligibility, downpayments, HLE letters, and validity periods.

You should also be aware of the factors that affect the amount of your housing loan, such as stamp duties, the number of properties you have already purchased, and your nationality. 

Giving careful consideration to all these factors is essential to increase your chances of being approved for a HDB loan.

If you’re looking for fast access to cash, BST Credit has a simple loan application process to ensure fast disbursement with limited hassle. 

We offer flexible terms on all our loans. Contact us now or apply for a loan today.