When it comes to financing your home purchase in Singapore, two primary options stand out: Housing Development Board (HDB) loan and bank loan. If you opt for an HDB loan for your flat, it’s crucial to understand the eligibility criteria, application process, and necessary documents to secure one.
What is an HDB Loan?
The HDB offers housing loans to eligible flat buyers, whether individuals or families, at a concessionary interest rate, currently set at 2.6% p.a. However, as of 29 September 2022, an interest rate floor of 3% p.a. has been introduced to compute the eligible HDB loan amount. Nevertheless, buyers will still be charged the concessional rate of 2.6% p.a. The interest rate used to compute the eligible loan amount will be the higher of 3% p.a. or 0.1%-point above the prevailing CPF Ordinary Account (OA) interest rate, which is 2.5%.
Eligibility Criteria for HDB Loan:
To qualify for an HDB loan, flat buyers must meet the following conditions:
- Citizenship: At least one buyer must be a Singapore Citizen.
- Household Status:
– Buyers must not have previously taken two or more housing loans from HDB.
– The last owned property should not be a private residential property, either locally or overseas. This includes properties acquired through gift, inheritance, or nominee arrangements.
- Income Ceiling: Average gross monthly household income should not exceed specific limits based on the type of flat and family situation.
- Ownership/ Interest in Property:
– Buyers must not own or have disposed of any private residential property in the 30 months before applying for an HDB Loan Eligibility (HLE) letter.
– They must not own more than one market/ hawker stall or commercial/ industrial property. If they own only one such property, they should operate their business there and have no other sources of income.
- Remaining Lease: Buyers can apply for an HDB housing loan up to 80% Loan-to-Value (LTV) limit if the remaining lease of the flat can cover the youngest buyer till the age of 95. This applies to any BTO or resale flat applications received by HDB on or after 30 Sep 2022.
Income Guidelines for HDB Loan Eligibility:
Flat buyers must fulfill specific income guidelines based on their employment type and CPF contributions. The income/allowance types excluded from credit assessment include alimony, bonuses, claims, director’s fee, rental income, and more.
Understanding the HDB Loan Eligibility (HLE) Letter:
The HLE letter is a document indicating a buyer’s eligibility for the HDB loan and contains crucial information such as the eligible loan amount, monthly installments, repayment period, and more. Here’s how to apply for an HLE letter:
Step 1: Prepare Documents
Flat buyers must provide personal particulars and supporting documents as proof of income based on their employment and CPF contributions.
Step 2: Submit Application Online
Retrieve a draft HLE application from the MyHDB portal and submit it along with the necessary documents. The HDB will review complete applications within 14 days.
Step 3: Authentication
Authenticate the HLE letter application via SingPass.
When is the HLE Letter Required?
The HLE letter is essential in several stages of the home buying process:
- When Taking an HDB Loan: All potential flat buyers must obtain an HLE letter before committing to a flat purchase if they plan to take an HDB loan.
- When Booking an HDB Flat: For new Build-to-Order flats, buyers need to produce a valid HLE letter during flat selection.
- When Exercising the Option to Purchase (OTP): For resale HDB flats, buyers must have a valid HLE letter when exercising the OTP.
- When Applying to Take Over the Ownership of a Flat: Before the transfer of flat ownership application, buyers must ensure their eligibility and assess their financing options.
The HDB loan is a favorable option for eligible flat buyers, offering a concessionary interest rate and flexible eligibility criteria. By understanding the HDB loan eligibility, application process, and required documents, home buyers can make informed decisions and navigate the home buying journey with confidence. Should flat buyers not qualify for an HDB loan, alternative financing options from banks are available to consider. Take time to assess your financial situation, explore loan offerings, and choose the best option that aligns with your needs and capabilities. Remember, a well-informed decision will lead to a successful and satisfying home purchase.