• The Housing & Development Board (HDB) offers housing loans at a concessionary interest rate for the purchase of new or resale HDB flats. The concessionary interest rate is pegged at 0.1% above the prevailing CPF rate, currently totaling 2.6%.

• The interest rate of a HDB housing loan could be lower than a loan from a bank, which are usually dependent on the prevailing SIBOR or SOR rate
• Interest rates for bank loans are also more likely to fluctuate in comparison to the CPF rate

• The loan tenure is capped at 25 years or until the buyer is 65 years old, whichever is shorter
• The loan-to-value (LTV) ratio is 90% of the purchase price for new flats and 90% of the purchase price or market value of a resale flat, whichever is lower.
• The Mortgage Servicing Ratio (MSR) or monthly instalment is capped at 30% of applicants’ monthly income.

Eligibility conditions

Borrowers must meet these conditions to apply for a HDB housing loan:

• At least 1 buyer is a Singapore citizen
• Have not previously taken 2 or more housing loans from HDB
• Previously taken 1 housing loan from HDB but the last property owned is not a private residential property
• Average gross monthly household income does not exceed:

• $12,000 for families
• $18,000 for extended families listed as occupiers of the same flat
• $6,000 for singles buying a 5-room or smaller resale flat, or a 2-room new flat in a non-mature estate

• Must not own or have disposed of any private residential property within 30 months from the date of application for a HDB Loan Eligibility (HLE) letter.
• Do not own more than 1 market/hawker stall, or commercial/industrial property

• If you own a market/hawker stall, or commercial/industrial property, you must be operating the business yourself and do not have other sources of income

The flat must have a balance lease of at least 60 years. Otherwise, the HDB housing loan may be reduced or disallowed. Flats with a balance lease of less than 20 years are not eligible for a HDB housing loan.

Buyers of flats with a balance lease of 20 to 59 years are eligible to apply for a HDB housing loan if the balance lease is enough for the buyers to reside until 80 years of age, based on the average age of the buyers. The loan tenure will be the shorter of:

• 25 years
• 65 years minus the average age of the buyers
• Balance lease minus 20 years

HDB Loan Eligibility (HLE) letter

Borrowers must apply for an HLE letter before purchasing the flat. A valid letter is required when:

• Booking a new HDB flat
• Exercising an Option to Purchase (OTP) for a resale flat
• Apply to take over the ownership of a flat in a transfer

The HLE letter includes information on:

• Borrowers’ eligibility for HDB housing loan
• Maximum loan amount
• Maximum loan tenure
• Monthly instalments
• Amount of cash proceeds to be used to pay for the next flat (for second HDB loan application)

The HLE letter is valid for 6 months provided there is no change in financial position and the buyers and occupiers (family nucleus) remain the same. Borrowers can apply for a new HLE letter one week before the expiry of the existing letter.

Applying for HLE letter

The following types of income are excluded from credit assessment:

• Rental income
• Interest from fixed deposit or savings account
• Alimony allowance
• Bonuses
• Dividend income
• Director fees
• Overtime
• National Service allowance
• Claims/reimbursements/expenses
• Overseas allowance for scholarships
• Occupier’s income

The HDB has different criteria for supporting documents depending on the employment, retirement and home applicant/occupier status. The supporting documents include:

• Latest 12 months’ commission statements/payslips or a recent letter from the employer certifying job designation, commencement date and salaries for the last 12 months
• Credit bureau report
• Latest 12 months’ bank statements or passbook
• Latest 15 months’ CPF contribution history
• Valid Accounting and Corporate Regulatory Authority (ACRA) Computer Information (Business Profile) or valid license of business/trade
• Latest Notice of Assessment from IRAS or Certified Annual Statement of Accounts from an audit firm

Applicants who have previously taken an HDB housing loan

• Each borrower is allowed a maximum of two housing loans from the HDB

• The loan quantum for the second loan will be reduced by the entire CPF proceeds and part of the cash proceeds from the disposal of the existing or previously owned HDB flat
• The amount of cash proceeds to be deducted will be determined by the HDB

• Applicants who own an existing HDB flat

• Borrowers who buy a HDB flat before disposing of the existing flat will have to apply for a loan with interest rates pegged to the 3-month average non-promotional interest rate for HDB flats offered by the three local banks
• This loan can be redeemed using the full CPF proceeds and part of the cash proceeds from the sale of the existing flat, after which the interest rate will be converted to the concessionary rate pegged to the CPF rate

Using CPF savings

CPF members can use their CPF Ordinary Account (OA) to finance all or part of the purchase price of a new or resale HDB flat

• All CPF OA savings must be used to pay for the flat before a HDB housing loan is granted

• CPF OA savings can be used to pay up to the full amount of the purchase price or market value of the flat, whichever is lower
• Borrowers can set aside CPF OA savings to pay for stamp duties, registration and conveyancing fees, and Home Protection Scheme (HPS) premium
• There are limits to the amount of CPF savings that can be used for flats with balance lease of less than 60 years

Source: HDB, CPF, The Edge Property