Did you know that more than 80% of EC buyers in Singapore use bridging loans? These loans help them buy new properties before selling their HDB flats. It shows how important bridging loans are in the property market. In this quick guide, we’ll give you the key details on EC bridging loans if you’re holding onto an HDB flat.
A bridging loan helps owners finance their new property when there’s a gap in funds. This happens between buying a new property and selling the current one. For EC buyers, it can be a great way to get their new EC property before selling their HDB flat. We’ll discuss important points about these loans, like who can get them, how much you can borrow, the time you have to pay back, interest rates, and how to avoid risks. In Singapore, the typical bridging loan amount for EC purchases ranges from SGD 200,000 to SGD 400,000, with an average repayment period of 6 to 12 months. Interest rates for these loans usually range between 5% and 6% per annum.
What is an EC Bridging Loan?
An EC bridging loan helps people in Singapore who want to buy a new Executive Condominium (EC). It gives them the money they need before they sell their current HDB flat. This way, they don’t have to wait to buy the EC. There are different kinds of these loans. One lets you only pay the interest until you sell your old home. The other makes you pay some of the loan amount each month.
Short-Term Loan for Property Purchases
This loan is a way for homebuyers to get their new EC fast. It means they can move into their new place without waiting for their old home to sell. The loan covers the cost of the new EC until the money from their old flat is ready.
Bridging the Funding Gap
EC buyers use this loan to make their first and later payments on the new property. With the loan, they can buy their EC even before they’ve sold their HDB flat. This is because selling their flat takes time, but they need the EC money right away. According to recent data, the average time to sell an HDB flat in Singapore is around 4 to 6 months.
Types of Bridging Loans
There are mainly two kinds of bridging loans for EC buyers. One lets you pay only the loan interest till you sell your old home. Then you pay back the full loan. The other type asks you to pay some of the loan plus the interest every month.
Eligibility for EC Bridging Loan
To get an EC bridging loan in Singapore, choose the ec deferred payment scheme. This means you make a 20% downpayment first and pay the rest later. You also need to have an hdb flat as collateral for bridging loan.
If you want this loan, you must be a citizen or resident of Singapore. You should also be 21 or older. Don’t forget to gather needed papers like OTPs, CPF withdrawals, and bank loan statements.
Opting for Deferred Payment Scheme
To qualify for an EC bridging loan, pick the deferred payment scheme. It lets you pay the 80% later. This way, you can buy a new place before selling your HDB flat. This deferred payment scheme typically allows you to defer the bulk of your payment for up to 24 months, providing ample time to sell your existing property and manage your finances accordingly.
Existing HDB Flat as Collateral
It’s key to have an hdb flat as collateral for bridging loan. Your HDB flat acts as a safety net for the bank. It makes sure you can get the bridging loan.
Other Requirements
Besides the deferred payment scheme and using your HDB flat as backup, there are more must-haves. You still need to be a citizen or resident of Singapore and meet the age requirement. Also, gather documents like OTPs, CPF withdrawals, and bank statements. These are crucial to securing the loan.
Maximum Bridging Loan Quantum
The most a bridging loan quantum can be is the sale price of the buyer’s HDB flat, minus what they still owe on their mortgage. It usually is 75% of the HDB flat’s market value. The bridging loan amount is what’s left after taking out the new EC’s value or purchase price and the home loan the buyer can get.
Calculation Based on Existing Property Value
Lenders look at the current value of the buyer’s HDB flat to figure out the top loan amount. This value is typically thought to be 75% of the flat’s market value. Then, the loan amount is the gap between the new EC’s cost (or its value) and the loan the buyer can qualify for.
| Calculation Factor | Details |
|---|---|
| Existing HDB Flat Value | 75% of the actual market value |
| Bridging Loan Amount | Difference between new EC purchase price/valuation and eligible home loan |
Options to Optimize Bridging Loan Amount
When choosing a bridging loan for an Executive Condominium (EC) in Singapore, buyers have two choices. They can take a lower LTV ratio bridging loan. This means, they borrow only what’s needed to cover the gap between their mortgage and the EC’s price. Or, they might go for the maximum bridging loan amount. They use sale returns from their HDB flat to lessen their EC’s mortgage. This reduces the money owed and cuts their interest costs.
Lower LTV Ratio
Choosing a loan with a lower LTV ratio means you’ll borrow less. This lowers the interest you pay and lessens your risk. It’s about borrowing just what you need to cover the gap. A lower LTV ratio, typically around 55% to 60%, minimizes your debt and secures better loan terms. For example, borrowing with a 55% LTV ratio on an SGD 1,000,000 property results in a loan amount of SGD 550,000, significantly reducing overall interest payments.
Maximize Bridging Loan for Lower Mortgage
On the other hand, some prefer the maximum bridging loan amount. They do this based on what they’ll get from selling their HDB flat. The extra money helps lower their EC mortgage. This leads to a lower mortgage amount and less interest over time. It’s a good move for those sure they’ll sell their flat soon.
Loan Tenure and Interest Rates
Getting an EC bridging loan in Singapore means you can get up to 6 months to pay it back. It helps when you need time to shift from your old HDB flat to a new EC without cashing out first. This way, you can buy your new place and then sell your old one without too much of a rush.
Maximum Loan Tenure
Usually, borrowers of this loan have to pay it back in 6 months. This means you need to sell your HDB quickly once you’ve bought your EC. But having to pay it back fast gets people to sell their HDB places quickly.
Fixed and Floating Interest Rates
There are two main kinds of interest rates for these loans in Singapore. Fixed rates stay between 4% and 6% yearly. They give you a clear idea of what you’ll pay each month. Floating rates, linked to the 3-month SORA, are from SORA plus 0.8% to SORA plus 2.4%. They can change, bringing a bit of a risk but also potential for lower costs.
Interest Expense Calculation
To figure out how much interest you need to pay for an EC bridging loan, look at the loan amount, interest rate, and how many days you have the loan. You should always think about how long it’ll take you to sell your old flat and the type of interest rate. This affects how much interest you’ll end up paying over the loan period.
EC Bridging Loan Risks and Mitigation
The main risk with an EC bridging loan is if the sale of your HDB flat falls through. This could cancel the bridging loan disbursement. There’s often a 1.5% fee if this happens.
Risk of Existing Property Sale Fallthrough
If the sale of your HDB flat gets canceled, it’s a big worry with a bridging loan for EC. Without the sale completing, your bridging loan won’t come through. This can hit your finances hard.
Cancellation Fees
Canceling an EC bridging loan means you pay about 1.5% of the loan as a fee. The lender charges this to handle the paperwork and costs of setting up the loan.
Advance Marketing of Existing Property
Buyers can lessen EC bridging loan risks by starting the sale of their HDB flat early. Getting the sale done before the bridging loan ends is key. This boosts the chance of selling your old place on time and avoiding the loan’s risks.
Repayment of Bridging Loan
In Singapore, repaying an EC bridging loan is flexible without a lock-in period. Borrowers can choose the best time to pay back the loan. This matches their financial state and the sale timing of their HDB flat.
No Lock-in Period
An EC bridging loan has a great benefit: no lock-in period. This means borrowers aren’t tied to a set repayment plan. They can decide to repay the ec bridging loan when it works best for them, with no extra charges.
Cash and CPF Repayment Options
With an EC bridging loan, borrowers choose how to pay it back: using cash or CPF funds. This method helps them save money. But remember, only cash can cover the monthly interest expense of the loan.
Knowing they have a no lock-in period and can choose cash and CPF repayment options is big for homebuyers. It helps them handle their finances well during their EC purchase.
EC Bridging Loan
Buyers often team up with their real estate agent to find an ec bridging loan. This loan helps with the sale and purchase of properties. The agent will show them different loan options and their interest rates.
Sourcing Bridging Loans
It’s helpful to work closely with a real estate agent when looking for an ec bridging loan. The agent can explain the process and help compare different loans from various lenders.
Credit Requirements
If a buyer’s credit history isn’t great, banks might not easily give a bridging loan. Lenders really look at the borrower’s credit history, how much they earn, and what debts they already have. This info helps them decide to give the loan. In Singapore, a good credit score typically ranges from 800 to 900. Borrowers with scores below this range might face challenges in securing a bridging loan. Additionally, lenders prefer applicants with a stable income and manageable existing debts to ensure they can meet the loan repayments
Final Thought
Using an EC bridging loan is a strategic move for buyers in Singapore looking to purchase an Executive Condominium (EC) while still owning an HDB flat. These loans bridge the financial gap, allowing buyers to secure their new property without waiting for the sale of their existing one. It’s crucial to understand the application requirements, loan amounts, interest rates, and potential risks involved. Working with reliable lenders like Tradition Credit, one of the best money lenders for bridging loans in Singapore, can streamline this process. With their expertise, buyers can navigate the complexities of bridging loans, ensuring a smoother transition to their new EC home. Being well-informed and prepared can significantly enhance the chances of a successful property purchase and financial management.
Conclusion
Using an EC bridging loan is a smart move for those in Singapore. It can help with buying an Executive Condominium (EC) while keeping their HDB flat. It’s good to know about the application rules, the most you can borrow, and the costs.
This kind of loan closes the money gap between buying the new EC and selling the HDB flat. It makes buying the EC easier and smoother for buyers. Knowing the loan details helps buyers use it well and avoid risks.
Deciding to take an EC bridging loan depends on your situation and goals. Being well-informed is key. Working with real estate agents and lenders can help you use this loan wisely for your dream home.
FAQs on EC Bridging Loan in Singapore
What is an EC bridging loan?
An EC bridging loan helps people in Singapore who want to buy a new Executive Condominium (EC). It provides the necessary funds before they sell their current HDB flat. This way, buyers don’t have to wait to purchase the EC. There are different types of these loans, including those where you only pay the interest until you sell your old home.
How does an EC bridging loan benefit buyers?
An EC bridging loan allows homebuyers to get their new EC quickly without waiting for their old home to sell. This loan covers the cost of the new EC until the money from the sale of their old flat is ready. It helps bridge the funding gap, enabling buyers to secure their new property immediately.
What are the types of EC bridging loans available?
There are two main types of bridging loans for EC buyers: one where you pay only the loan interest until you sell your old home, and another where you pay both some of the loan amount and the interest every month. This flexibility helps buyers choose the best option based on their financial situation.
What are the eligibility requirements for an EC bridging loan?
To qualify for an EC bridging loan in Singapore, you need to choose the deferred payment scheme, make a 20% downpayment first, and have your HDB flat as collateral. Additionally, you must be a citizen or resident of Singapore, be at least 21 years old, and gather necessary documents like OTPs, CPF withdrawals, and bank loan statements.