HDB Loan Eligibility: How to make sure you are Eligible
Housing & Development Board (HDB) is the statutory board of the Ministry of National Development responsible for public housing in Singapore. It was established in 1960. Public housing in Singapore is developed & managed by HDB.
The main goal of HDB is to be able to provide affordable houses/flats to as many people as they can. The authority launched several new housing schemes and increased its attempt to attract residents in its provision of public housing.
You can either take a loan from the bank or HDB to apply for an HDB house/flat. But banks offer this loan at lower interest rates than HDB. For the cheapest HDB loan, click here.
HDB Loan Eligibility
The HDB loan scheme is designed by the banks to make home loans with fixed terms available for those who could not buy a house with their income. You can also check HDB Loan eligibility with the help of the HDB Loan Eligibility Calculator.
The eligibility criteria to apply for this loan is as follows:
- You should be a Singapore citizen.
- Age should be 21 or more.
- Your gross monthly income has to be less than S$7000 for a single person, S$ 14,000 for a couple(S$ 21,000 for extended families).
- You should not have owned any residential property in the last 30 months before applying for an HDB loan.
- You do not own more than one market/ stall/ commercial/ or industrial property.
- If you have any operational market/stall/commercial/ or industrial property, you have to work in it yourself.
For more information on eligibility criteria, click here.
The amount you will be eligible to borrow depends upon the following factors:
Loan to Value (LTV):
Maximum amount of loan that can be issued to you for a particular property is Loan to Value. It is the percentage of the market value of the property. For HDB loans, it’s 90%.
Mortgage Servicing Ratio (MSR):
This is part of your monthly income that goes towards the repayment of the loan. It is 30% of your monthly income in the case of HDB loans.
Total Debt Servicing Ratio (TDSR):
This refers to the portion of your monthly income that goes towards the payment of your debts such as credit card bills, car loan, education loan, etc. This has to be less than or equal to 60% in order to apply for an HDB loan.
HDB Loan Eligibility Letter
HDB Loan Eligibility Letter is a document that declares the approval of your loan application. It affirms that HDB is willing to lend the loan amount you applied for. It is financial planning too; that helps you to plan a budget for your new purchase.
Other than that, it also conveys the following:
- Amount of HDB that you are eligible to receive
- Repayment period
- Interest rate
- The amount of proceeds derived from the sale of a previous property so that it can be utilised to purchase a new one
- Terms and conditions
How to apply for an HDB HLE Letter
The process of applying for an HDB loan requires at least 30 minutes. You should be ready with all the documents mentioned above in order to complete it fast. For a complete guide on how to apply for an HDB HLE letter, click here.
- First of all, you will need Singpass to apply for the loan.
- Sign up for Myinfo on HDB’s official website. And retrieve your personal information.
- You can retrieve a draft of the HLE application to submit your electronic signature and supporting documents.
- Finally, you can apply for your HLE letter.
HDB Loan Documentation
Along with an HDB Loan application form, the following documents must be attached to apply for an HDB Loan:
- National Registration Identity Card (NRIC) for Singaporeans and PR and Passport for foreigners
- HDB flat & financial information
- Valuation report of the property confirmed by HDB
- Latest 3 month’s salary crediting account statement
- Latest 3 months payslips
- Latest 12 month’s CPF contribution history
- 12 month’s bank statement
- Latest credit report (any other loan, credit card bills)
HDB Loan Interest Rates
Taking an HDB loan means enjoying a concessionary interest rate. The interest rate of HDB loans is fixed at 0.10% above the prevailing CPF rate which may be rearranged in accordance with the CPF interest rate revisions.
There are 2 concessionary interest rates for 2 quarters. Currently, the interest rate for the 2 quarters is:
- 1 April 2021 to 30 June 2021 – 2.60% p.a.
- 1 July 2021 to 30 Sept 2021 – 2.60% p.a.
HDB Loan Eligibility criteria generally include documentation related to your citizenship, household status, income status/proof, your commercial or residential property documents, and your credit score. All this sums up to a good application status for an HDB loan.
But wait! Should I take a loan from a bank instead?
- The interest rate offered by the banks is comparatively lower than the HDB.
- The repayment amount of an HDB loan by a bank varies and is typically 1-2% lower than a fixed rate.
- The Loan to Value limit by HDB is 90% whereas it is 75% if applied through a bank.
- The downpayment is 10% and needs to be paid fully to HDB using CPF and in the case of a bank, it is 5% in cash and 20% in cash or CPF.
Considering all the above points, taking an HDB loan from a bank is always a good decision. Plus, you get all the assistance at the backend for comparing and preparing documents to apply for a loan.