Choosing the right financing for your home is an important part of the homebuying process. You must decide whether you want to get a housing loan from a bank or HDB.
If you choose to get financing from HDB, then it’s important to know how to check your HDB loan eligibility.
In this post, we’ll discuss how to check your HDB loan eligibility and what determines the HDB loan amount that you can access. It’s vital to know the restrictions on applicants and the eligibility process.
Do your research beforehand so that you are aware of how to check your eligibility for a HDB loan and the documents you will need for a successful application.
Let’s take a look at some of these requirements now.
HDB offers housing loans to Singaporeans to enable them to purchase HDB properties at a concessionary rate. It offers housing loans at a rate of 2.6% per annum to those who meet the criteria for HDB loan eligibility.
The eligibility criteria are as follows:
Alternatively, you must be in continuous employment or trade for at least six months.
HDB flat buyers must apply for a HDB loan eligibility (HLE) letter. The letter will advise whether you have met the HDB loan eligibility and credit assessment criteria.
It shows you the loan amount you qualify for, the interest rate, the loan tenure, and other terms and conditions.
You should apply for the letter if you:
Couples who are buying their first property or still in National Service can qualify for an income assessment deferment. All borrowers must have a HLE letter when they apply for a flat.
During the application process, you must have the following:
After the submission and authentication of the documents, the HLE letter will be assessed.
A loan offer will be offered if the letter is approved. It will be valid for six months. If there are no changes in your income and financial position during the six months, there will be no reassessment.
However, a reassessment may be required if any the following occurs:
If you purchase an incomplete HDB flat, there will be an assessment when it is complete. This is to confirm there are no changes in your financial position that may hinder you from paying the loan.
Before you apply for a HLE letter, you need to have all the income documents.
During the HLE process, the lender will carry out a credit assessment. The documents needed depend on your current work situation, and they are as follows:
During the assessment, the following income is not considered:
If you are applying for your second HDB loan, you will need to submit additional documents such as:
Here is the procedure to follow when buying a flat through HDB.
The loan amount you can get from HDB depends on several variables. Here are the main factors that determine the maximum HDB loan you can get.
The housing loan amount you can access depends on your income. It’s important to be able to make monthly repayments.
The loan-to-value (LTV) ratio is capped at 55% if the loan tenure exceeds 25 years or if the loan tenure extends beyond 65 years.
This means if you take a loan, you must be able to pay it back by the time you turn 65. To enjoy a higher LTV, you must be able to pay the loan before you turn 65.
If you have an outstanding loan, the LTV of the second loan falls to 45%. The balance of 55% is the downpayment you will need to pay. Out of which, half must be paid in cash. You can use your CPF funds for the rest.
Those with two outstanding loans get an LTV ratio of 35% for a loan with a tenure of fewer than 30 years.
Properties with a lease term of 36 to 40 years left on the lease have a maximum LTV of 60%. You are allowed to pay up to 15% of the property price using your CPF funds.
If you opt for a property with a lease of less than 30 years, then you will not qualify for a loan.
Your credit rating will determine how much the lender is willing to give for the property. If it considers it a risk to lend you the money, the LTV will fall.
The LTV you can access can decrease based on the location and state of the property. Run-down properties and those with defects will cause a lender to offer a lower LTV.
In addition, if a property is located in an undesirable location, you may receive a lower LTV.
You can use your CPF funds to purchase a HDB flat. First-time Build-To-Order (BTO) buyers can use all of their CPF funds, with the exception of $20,000, to purchase the property. The $20,000 is set aside for future needs.
CPF savings can be used to pay for your HDB flat, repay the housing loan, pay for the stamp duty, legal fees, and other related costs. You can also use your CPF savings to cover the cost of upgrading your HDB flat under the HDB main upgrading programme.
You can’t use your CPF savings for the following:
Now that you know how to check your eligibility for an HDB loan, it’s time to get started on the process. Fortunately, the process is straightforward and can be done entirely online.
With a few clicks, you’ll be able to find out whether you qualify for a HDB loan and how much you will be able to borrow. Get started on the process now and you will be on your way to owning a home.
Those looking to buy a home and need the finances to pay for expenses not covered in their CPF savings and HDB loans can turn to Katong Credit.