If you have been planning to buy an HDB flat and do not have cash in hand to sort you out, you need to read this and get enlightened on how you can get a loan to finance your project. With an HDB loan, you can afford to buy your home of choice. The down payments are as little as 20%, and one is at liberty to use your CPF, which can help you save thousands of dollars during the purchase.
However good it may look, you must ensure that you meet the eligibility conditions before applying for the HDB loan. Below is a list of eligibility to guide you on how to start the process.
Since the loan is advanced to any interested borrower, there are various caps instituted, and these are as below;
- Singles are capped at $7,000
- Families are capped at $14,000
- Extended Families are capped at $21,000
This means that this income is stable enough to enable you to make monthly installments without straining.
If you are making the application as a single person, then you must be a Singapore Citizen.
When applying as a couple, one spouse must be a Singaporean.
One must not have obtained two or more HDB housing loans in the past; if you have one, it must not be a private residential property in Singapore or abroad.
To qualify for property ownership, the below conditions must be met;
- One cannot be the owner of a recently bought or sold property within 30 months that precede the date of application.
- You should also not be the owner of any piece of a commercial property, market stall, industrial real estate, or hawker’s stall
- If you own any of those mentioned above, you must be working from that location and confirm that you do not have any other source of income.
Other Key Indicators
In addition to what we have mentioned above, other factors to confirm eligibility are as follows
The Loan-to-value Ratio– HDB loans acceptable LTV is 80%
Total Debt Servicing Ratios– This refers to the total monthly debt and loan obligation, which is capped at 55%
Mortgage Servicing Ratio- This helps to determine the monthly installments and must be not more than 30% of your salary.
Remaining Lease of the Flat- The period should be 20 years and above and should cover the youngest buyer at the age of:
95 years and above-If it is an HDB resale loan, then it should be 80% of the resale value, and in the case of an HDB new flat loan, then it should be up to 80% of the buying price
For Less than 95 Years, then a lower loan limit is pro-rated from 80%
When to use your CPF on HDB loans
Many will ask questions regarding the Use of CPF. Indeed, it is possible to use your CPF for the following;
- Registration fee
- Stamp fee
- The premium for the CPF Home protection insurance
- Legal Charges.
You can also use your CPF account by disbursing the down payment and the HDB loan installments. But this will depend on factors such as specified limits of the new and resale of the HDB loans or determining the period between the youngest buyer upto the age of 95 years is determined.
Exceptions of Income that are not considered during HDB loan application
When assessing the eligibility, the below incomes are not considered in determining the approval of HDB loans
- Alimony and Maintenance fees
- Overtime payments
- Reimbursement from claims
- Bonuses and directors’ fees
- Rental Income
- Scholarship travel allowance
- National Service Allowance
- Dividends or income from investments
How to Apply for an HDB Loan
When buying a flat through an HDB loan, there are steps that one needs to follow through, and these are detailed below;
- Registration of the determination to buy. It prompts the HDB to assess your eligibility.
- Application for HLE letter. You need to log in to the HDB website with your sing pass to access the letter. It shows the amount you can apply for, the maximum loan tenure, and the interest payable.
- Once you receive the HDB letter, log in to the HDB page and start the application process.
Importance of HLE Letter
The HLE letter is the most important document because it is the official communication of your determination to get a loan with HDB. As mentioned, when making the application, you will need to have the singpass to have it processed. Once the application starts, several documents will be requested depending on how you generate your income. Some of these are;
- For the self-employed, you are required to submit the Last Notice of Assessment from IRAS, Credit Bureau report, Statement of Accounts from your Auditors, and the last six months statements
- When employed with monthly CPF contributions, you will be required to provide three months’ statements if your income is fixed or six monthly pay slips for variable salaries
- If employed without CPF contributions, you will submit six months of payslips, a contract letter from your employer, Six months of bank statements, and a Credit Bureau report.
- Commission Based people are required to submit six months’ commission statement, Credit Bureau report, 15 months’ CPF contribution report, and six months’ bank statements
- If you are unemployed, you must submit income proof for the previous months and your contributions history for your previous employer. In the case of students, they can submit their students’ pass or get a letter from the institution they are studying from.
Now we trust that you got the information on how you can be eligible for your HDB loan. It’s time to start the process. With just a few clicks, you will know how much you can get and enjoy being part of the HDB family as you own your new home.
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