At present, Singapore is a leading country in terms of the home-ownership rate at 90%, of which 78.8% are assisted by the Housing Development Board through public housing. The numbers are very satisfactory, and HDB has been consistently finding solutions and improving the services to allow Singaporeans to acquire their own home and live comfortably.
Choosing a suitable home loan is never a straight and paved road and does require careful considerations. And if you’ve already forked your financing options and an HDB loan is deemed more advantageous for you, the next hurdle is to qualify for an HDB loan eligibility. In this article, we will walk you through the HDB Concessionary Loan qualifications, the steps on how to secure your HLE Letter, and the factors that will affect your actual loan amount.
But before we go to the steps, let’s have an overview of the most important prerequisite:
What is HDB Eligibility Letter (HLE)?
Similar to the in-principle home loan from a bank where your credit score is crucial, HLE Letter is a document that serves as a reference for the Housing Development Board to determine your financial standing and that you meet the eligibility conditions before granting the loan. Consider the HLE Letter as a financial planning tool as the document will indicate the following information that will help you set up your budgeting and repayment strategy:
- Maximum loan amount
- Monthly instalment
- Repayment period
- Flat Type
- Flat Lease
- Expiry date
- Other terms and conditions
An HLE Letter is valid for up to 6 months unless any changes in the applicant’s or family member’s financial position occur. An expiring HLE Letter may be reapplied a week before the validity ends. Moreover, a valid HLE letter is also required when you want to book a new HDB flat after successfully balloting for a queue number or obtaining an Option to Purchase (OTP) of a resale flat. It also applies when taking over ownership of a flat (by way of transfer) or when you decide to resell your flat.
Eligibility Conditions for HDB Housing Loan
First-time applicants must meet the following criteria to qualify for the loan, thus securing an HLE Letter:
Citizenship
- At least one Singapore citizen (SC) buyer
Household status
- Have not previously taken two or more housing loans from HDB
- Have taken one housing loan from HDB, and the last owned property is not private residential property (local or overseas), including a HUDC flat, a property acquired by gift, a property inherited as a beneficiary under a will or as a result of the Intestate Succession Act, a property owned/acquired/disposed of through nominees
Income ceiling
- $14,000 for families
- $21,000 for extended families
- $7,000 for singles buying a 5-room or smaller resale flat or a 2-room new flat in a non-mature estate under the Single Singapore Citizen (SSC) Scheme
Ownership
- Must not own or have disposed of any private residential property in the 30 months before the date of application for an HDB Loan Eligibility (HLE) letter
- You can’t own a private residential property (local or overseas), which includes a property acquired by gift, a property inherited as a beneficiary under a will, or as a result of the Intestate Succession Act, a property owned/acquired/disposed of through nominees.
- You also do not own more than one market/ hawker stall or commercial/industrial property. If only one market/ hawker stall or commercial/industrial property is owned, you must be operating the business there and have no other income sources.
Remaining lease
- The loan amount will depend on the extent to which the remaining lease can cover the youngest buyer to the age of 95.
It is important to note that if the applicant’s or the extended family’s annual assessable income exceeds the income ceiling, they must secure a bank loan instead. You may review the full list of criteria from the HDB website. Alternatively, you may check your eligibility by taking the HDB Questionnaire.
While you may have various income sources, be it a stable income stream or not, these sources do not influence your financial standing when it comes to qualifying for the loan:
- Alimony or maintenance fees
- Bonuses
- Claims/reimbursement/expenses
- Director’s fees
- Dividend income or interest from deposit accounts
- Income from ad hoc overtime work
- National Service allowance
- Occupier’s income
- Overseas cost of living allowance
- Pension
- Rental income
- Scholarship overseas allowance
Steps on How to apply for HDB Concessionary Loan
Now that we’ve covered the eligibility criteria, you might be wondering how much you can actually loan. While your age, income, and financial standing are the three main factors that will influence your loan amount, the actual number you will be eligible to borrow also depends on the following:
- Loan-To-Value Limit (LTV) – This type of loan is the maximum loan amount you are actually permissible to pay with loan funding and is generally equal to 90% of the property’s value.
- Mortgage Servicing Ratio (MSR) – With MSR, an applicant is only allowed to pay off the 25-years of HDB loan and is capped at 30% of your monthly income in repayments.
- Total Debt Servicing Ratio (TDSR) – This determines how much of your monthly income should go to repayments of your debt, including an average Singaporean’s commitments like a car loan, housing loan, and even credit card instalment, etc. Your TDSR should not be more than 60% of your monthly income. Keep in mind that only 70% of your variable income will be included in TDSR.
Step 1: Apply for an HLE Letter online via HDB InfoWEB. Logging in will require your SingPass. The application will require to fill out some personal information requirements and other income supporting documents.
Step 2: Upload the necessary documentation on HDB Portal once you received your HLE LEtter from HDB.
Below are the type of documents you will need to prepare for uploading:
Employee with CPF contributions:
- Three months’ payslips
- Latest 15 months’ CPF contribution history
Employee without CPF contributions:
- 6+ months’ payslips
- Credit Bureau report
- Latest 6+ months’ bank statements/passbook
Self-employed applicants:
- Latest Notice of Assessment from IRAS or Certified Annual Statement of Accounts from an auditing firm
- Credit Bureau report
- Latest 6+ months’ bank statements/passbook
Applicants who are commission-based or a part-time worker:
- 6+ months’ commission statements or payslips
- Latest 15 months’ CPF contribution history
- Credit Bureau report
- Latest 6+ months’ bank statements/passbook
Odd job workers:
- Latest Notice of Assessment from IRAS or a recent letter from the employer certifying job designation, commencement date, and commission/salaries for 6+ months
- Latest 15 months’ CPF contribution history
- Credit Bureau report
- Latest 6+ months’ bank statements/passbook
Unemployed Applicants:
- Income proof for the preceding month(s) from the previous employer stating your gross monthly income and last day of service
- Latest 15 months’ CPF contribution history
You may review the full list of income guides and other documents relevant to your application here.
Step 3: Track your application by logging in to the website, and it usually will take up to 14 days of processing after receiving the full set of documents. HDB will contact you after your successful application and will discuss with you your mortgage payment options, which could be through cash or your co-applicant’s CPF-OA funds.
How Much Is the HDB Loan Interest Rate?
The running rate of interest for an HDB Loan is 2.6%, which seems rather higher than the bank’s housing loan.
But take into account the more consistent and stable percentage of HDB Loan interest rate in the past 10 years, making it more appealing to homeowners who can peacefully plan and budget their monthly repayment without worrying about unexpected interest rate changes.
Also, compared to banks, an HDB loan can cover up to 90% of your flat’s value, whereas banks can grant 75% at its maximum also, that the interest rate for an HDB Concessionary Loan is pegged at 0.1% above the CPF-OA account interest rate.
How Much Is the Downpayment?
The downpayment covers 10% of your flat’s purchase price if you have decided to take an HDB loan to finance your house. The 10% can be sourced from your and or your co-applicant’s CPF Ordinary Accounts.
Should you find that your current CPF (OA) fund is not enough to cover the downpayment, the remainder may be paid with cash, or select a flat with a value that could fit into your CPF (OA) pocket.
It is also important to know other fees on top of the downpayment, such as option fees when booking a flat, legal and stamp duties, and others. The complete details of cost and fees are listed on the HDB Website.
Conclusion
A loan, when managed well, is a big realiser of dreams, especially when it is as significant as the life goal of owning your very own home. With the right information and sound decision-making, as hassling it may be, it is just as important as securing your own space where you and your family could grow together.
With all that said, if you find yourself in any circumstances where you need safe and quick financial assistance, you can always count on1 Fullerton Credit. With our different loan types, we can tailor-fit a loan to your needs with simple and flexible repayment terms without rigid requirements and processes.
