The Housing and Development Board (HDB) of Singapore is the primary responsible agency for public housing in the country. HDB’s role in maintaining the exceptionally high rate of home ownership in Singapore and the clearing of informal settlers or squatters in the country cannot be overstated.
At present Singapore is among the world leading countries in terms of home-ownership rates at a whopping 90%. This rate is extremely high because 78.7% of Singaporeans are given public housing. This is why the majority of Singaporeans resort to the loans and services offered by the HDB.
This is why getting an HDB loan is always a good idea. These properties cost less and are accessible through various means. Application and eligibility requirements are also not difficult to fulfill. So if you are considering applying for an HDB loan learn about their requirements and the application process below.
Preparing the HDB Loan Documents
Unlike other kinds of loans like a personal loan and a bank loan, where a good income and high credit score would suffice, HDB loans require a number of conditions in order to be considered eligible.
This is often referred to as HDB Loan Eligibility (HLE). HDB Loan Eligibility requires a number of preconditions that applicants need to meet. For first time applicants, the condition are as follows:
Citizenship
- At least one member of the household should be a Singaporean citizen for the family to be eligible for public housing
Household Status
- The household should not have previously owned or acquired two or more HDB housing loans.
- The household’s last owned property should not have been a private residential residential property in Singapore or in other countries. This includes an HUDC flat, property given as gift, property acquired as inheritance, or property acquired/owned/disposed through nominees.
Income Ceiling
This varies according to the prospective occupants of the house.
- for families, the income ceiling is at $14,000
- for extended families, the income ceiling is at $21,000
- for those whose status is still single buying 5-room or smaller flat for resale or a 2-room new flat an estate that has not matured yet under the Single Singapore Citizen Scheme, the income ceiling is at $7,000.
Moreover, applicants should take note that for non-salaried incomes (e.g. income acquired through odd jobs or as a freelance worker) might undergo a haircut where only 70% of earnings considered. Aside from this, it should be noted that the HDB does not consider the following as part of the monthly household income:
- alimony
- bonuses
- claims and reimbursements
- director’s fees
- dividend and interests from deposit accounts
- income from an ad hoc work
- overtime pay
- National Service allowance
- Occupier’s income
- overseas cost of living allowance
- rental income
- pension
- scholarship overseas allowance
Ownership
In order to have an HDB loan eligibility you should also meet the following conditions regarding ownership:
- You should not have owned or disposed any private residential property for the last two and a half years
- You should not currently own a private residential property including those that you have acquired through gift or inheritance. This also includes properties owned and acquired through nominees.
- You should not be an owner of two or more market or hawker stall, or any commercial property. If you are an owner of one then you should be running the business and should not have any other source of income.
Remaining lease
The loan amount depends on how the remaining lease would cover the youngest buyer until 95 years old.
Once you have met the HDB loan eligibility/HLE then you can start preparing for the HDB documents. The first of which is the HDB loan eligibility/HLE letter.
Requesting for HDB Loan Eligibility (HLE) Letter
What is HLE?
The HLE letter is a piece of paper that indicates the amount of money that you will get through an HDB loan. The letter will also indicate the repayment period, monthly installments, flat type, flat lease, and the letter’s expiry date.
The loan amount indicated in the HLE letter, your cash savings, and the amount of the CPF for HDB housing grant would decide the budget available for a flat. Aside from this, the loan amount from the HDB is likewise dependent on three factors:
- Your age
- Your income
- Your financial standing
Younger applicants have a higher chance to be given a higher loan amount by the HDB. This is because younger people have more working years remaining and are thus perceived to be more able to carry on the loan in the long term. Your income is to be proven by a proof of income and your financial standing is to be proven by bank statements and other proofs like bills.
Applying for an HDB Loan/HDB Concessionary Loan
HDB Loan application is now done through the HDB portal. The HLE letter is applied online through HDB InfoWEB. You will have to upload the documents and requirements that will prove your HLE. This is a pretty fast process as long as you have all of the requirements complete.
Below is the list of the requirements that you will have to submit in your HDB concessionary loan application depending on your employment status:
If you are an employee with CPF contributions you will have to provide:
- pay slips for the past three months
- the latest 15 months CPF contribution history
If you are an employee but is not a CPF contributor you will have to provide:
- pay slips for the past six months or more
- Credit Bureau report
- bank statements for the past six months or a copy of your passbook
If you are self-employed you will have to provide:
- latest Notice of Assessment from IRAS or a Certified Annual Statement of Accounts from a legitimate auditing firm
- Credit Bureau report
- bank statements for the past six months or a copy of your passbook
If you are a commission based or a part-time worker, provide the following:
- commission statements or pay slips for the past six months or more
- CPF contribution history for the last 15 months
- Credit Bureau report
- bank statements for the past six months or a copy of your passbook
If you are an odd-job worker, provide the following:
- latest Notice of Assessment from IRAS or a recent letter from your employer that indicates and certifies your job designation, commencement date, and salaries for the past six months or more.
- CPF contribution history for the last 15 months
- Credit Bureau report
- bank statements for the past six months or a copy of your passbook
If you are unemployed, provide the following:
- Income proof for the preceding month(s) from your latest employer that states your gross monthly income and last day of service
- CPF contribution history for the last 15 months
Once you have acquired the HLE letter then your HDB concessionary loan application will now be up for assessment by the HDB. The process usually takes up two weeks of 14 days. Upon applying you will have a myHDB account where you can track the progress and status of your housing loan application.
Loan Features
Loan Amount
Your loan amount is determined by your age, income, and financial standing. The younger you are then the more chances that the loan amount to be loaned to you is higher because you are still far from being a retiree.
Your income will also play a role because it determines both your need and the capacity to pay. While a good income may be an advantage, there is also an income ceiling because HDB loans are intended to be availed by Singaporean who cannot afford to acquire private residential properties.
Interest Rate
Compared to a bank loan or a housing loan from a private lender, an HDB concessionary loan has a more stable interest rate. It has not increased in many years. This makes sense because HDB is a government board intended to provide basic services.
However, at 2.6 per cent, this may seem higher than that of the banks’ which are usually pegged at 2 per cent. But given the stability, and in the context of a volatile market economy, this is not a bad deal at all.
HDB also allows you to take a loan that would finance 90% of the cost of your flat. Banks only loan for as much as 75%. So considering the difference in loan amount a stable 2.6 percent interest rate, albeit being a tad higher than the banks, sounds like a better investment.
Downpayment
Downpayment for an HDB concessionary loan is pegged at 10 percent of the total purchase price. The payment may be done through your CPF savings or through cash. Both ways are good.
Always take the down payment amount in consideration in deciding over a flat purchase. Your CPF savings and that of your spouse or other household members should be able to take care of it.
Unless of course, you have a remaining stash of cash in your savings and investments. Being able to pay the downpayment up front would also make your repayments easier and more affordable.
Closing
HDB invests in the people. The loans offered by HDB are not there to earn government revenue. It is there to help Singaporeans get a shot at decent housing so that they can worry about something else, or get a more gainful employment, start earning more, and perhaps, with some hard work and fortune, move out of the HDB flat and get a private residential property.
The key to a more prosperous society is in learning how to lift each other up. This is what HDB is doing through their loan services. They are giving everyone a shot at decent housing.
What are you waiting for? Make that requirement checklist and head over to the HDB website and have your own Singaporean home. At the end of the day residential property is the best investment that you will acquire for yourself and for your future children.
In need of some financial support? You can always count on us at Bugis Credit to help borrowers with any shortcomings. Contact us today to learn more about everything that we can do for you.
