For most people, buying a home is a major milestone and a long-term investment. However, it’s not always easy to figure out the financing options available and the criteria that lenders use to determine eligibility. If you are a first-time buyer in Singapore looking to purchase a flat from the Housing Development Board (HDB), it’s essential to understand the HDB loan eligibility requirements. In this blog post created with Tradition Credit, we’ll delve into the ins and outs of HDB loans and help you determine if you qualify for one.
HDB Loan Eligibility Requirements
To apply for an HDB loan, you must meet the eligibility criteria set by the HDB, which includes age, citizenship, income, type of flat, and ownership of other properties. Firstly, you must be at least 21 years old when applying for the loan and a Singapore citizen or permanent resident. Additionally, the total monthly household income should be less than $14,000 for families and $7,000 for singles, and the property must be your first residential property purchase. Finally, you must not own or have disposed of any private property within 30 months before the application.
Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR)
HDB loan applicants must also adhere to the Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR) frameworks. The MSR limits the amount borrowed to 30% of the borrower’s gross monthly income, while the TDSR, which accounts for all of the borrower’s existing debts, including credit card bills, car loans, and other housing loans, cannot exceed 60% of the gross monthly income. Additionally, HDB applies a more restrictive TDSR limit of 50% on loans for flats with renovations or extensions beyond the basic design and structural features.
Loan Amount and Down Payment
The HDB loan amount offered to eligible borrowers depends on factors such as monthly income, age, repayment period, and property type. The maximum loan amount for the flat is up to 90% of the purchase price or valuation (whichever is lower) and the balance must be paid through a down payment. First-time applicants who are Singapore citizens or permanent residents can use their CPF Ordinary Account (OA) savings to pay for the down payment of the flat. For singles, the down payment is 10% of the flat price, while for families, it is 5%.
Loan Tenure and Interest Rates
The HDB applies a fixed interest rate of 2.6% per annum for the HDB loan and the repayment period can range from 15 to 25 years. Applicants can choose the tenure that suits their budget and repayment ability when completing the loan application. It’s worth noting that the loan interest rates and maximum loan tenure are reviewed periodically by the government, and borrowers may have to make adjustments to their monthly payments if changes are made.
Buying a flat in Singapore can be complex, but with the help of a professional mortgage broker like Tradition Credit, it’s possible to navigate the financing requirements and eligibility criteria more easily. As a first-time homebuyer, it’s crucial to understand the HDB loan eligibility requirements and the factors that influence the loan amount, down payment, interest rate, and repayment period. By having a clear understanding of the HDB loan application process, you can make informed choices that fit your budget and long-term goals.