Credit to Finance a Flat Purchase

The final consideration to our ABCs of financial planning is the need to be aware of the ‘Credit terms and conditions’ to take a housing loan.

If you need financing, you will have to secure a housing loan from HDB or a financial institution (FI) regulated by the Monetary Authority of Singapore before committing to the flat purchase.

HDB and the FIs offer housing loans with different terms and conditions and you have to meet the eligibility conditions of the mortgage loan provider.

Checking the Credit terms and conditions

Evaluate your options carefully and make an informed financing decision.

Choose your housing loan

Learn about the key considerations to decide whether to take a housing loan from HDB or the FIs.

Housing Loan from HDB Housing Loan from Financial Institutions (FIs)
Applicable interest rate

To encourage flat buyers to borrow prudently, HDB uses the higher of the following to compute an eligible housing loan amount:

  • Interest rate floor (currently at 3.0% per annum); and
  • Prevailing HDB housing loan interest rate.
 Prevailing HDB housing loan interest rate
Concessionary interest rate Pegged at 0.1%-point above the prevailing CPF Ordinary Account interest rate and reviewed quarterly.  
Commercial interest rate where charged, for flat buyers taking a second HDB housing loan and buying an HDB flat before disposing of their existing one

Pegged to the average non-promotional interest rates for HDB flats offered by the three local financial institutions, subject to a minimum of the concessionary interest rate.

The interest rate will be converted to the concessionary rate after the flat buyer has disposed of the existing flat and used the CPF refund and 50% of the cash proceeds received to reduce the second HDB housing loan amount.

Read more on the conditions to take a second HDB housing loan.

Varies among different FIs and may change with market conditions

View and compare housing loan packages offered by the participating FIs

Repayment period

Capped at whichever is shortest:

  • 25 years;
  • Up till the buyer is 65 years old; and
  • Remaining lease of the flat minus 20 years.
Up to 30 years
Loan-to-Value (LTV) Limit

Refers to the maximum amount of housing loan a flat buyer may take up, expressed as a percentage of the lower of the flat price and value of the flat.

The LTV limit and conditions are different when you take a housing loan from HDB or an FI:

Housing Loan from HDB^ Housing Loan from Financial Institutions
New flats Up to 80% of the flat price Up to 75% of the flat price
Resale flats Up to 80% of the lower of the resale flat price and value Up to 75% of the lower of the resale price and value
Conditions If the remaining lease of the flat does not cover the youngest buyer to the age of 95 and above at the point of flat application, the LTV limit will be pro-rated from 80% FIs may have restrictions for purchase of flats with shorter remaining leases and/ or if you have additional housing loan(s)

^ For flat applications submitted on or after 30 Sep 2022.

Flat buyers who have booked a flat with HDB or submitted a resale application will be provided with a customised financial plan, which will include the applicable LTV limit at the point of the flat application (if they are taking an HDB housing loan), and the payments required at the various milestones of their flat purchase.

Minimum cash payment No minimum cash payment if you have sufficient savings in your CPF OA and housing loan for the remaining balance.

At least 5% of the flat price or value (whichever is lower) has to be paid in cash. The balance can be paid in cash, CPF savings in your OA, and/ or housing loan.

The minimum cash payment will depend on the flat buyers’ age, loan period, and whether there are any outstanding housing loans.

CPF utilisation

You may retain up to $20,000 in your CPF OA.

Remaining CPF savings in your OA must be used for the flat purchase (up to the applicable limits).

You may use any amount in your CPF OA for flat purchase (up to the applicable limits).

The following limits for CPF usage are applicable to both housing loan options:

  • The total amount of CPF savings that can be used to buy or take over the flat and pay the monthly mortgage instalments depends on the extent the remaining lease of the flat can cover the youngest buyer or transferee up to the age of 95; and
  • Applicable CPF usage limits for the purchase of:

When the allowed CPF amount is used up, you need to pay for the balance purchase price and/ or the monthly mortgage instalments in cash.

For more information on the use of CPF savings, you may use CPF Board’s calculator.

Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR)
  • MSR: Not more than 30% of your monthly income for housing loan instalments
  • TDSR: Not applicable
  • MSR: Not more than 30% of your monthly income for housing loan instalments
  • TDSR: Not more than 55% of your monthly income for your financial commitments (e.g., credit card bills, car loans and housing loans)
Conditions to take a second HDB housing loan

You need to use the full CPF refund and part of the cash proceeds from the sale of the existing flat or last-owned HDB flat, to reduce the housing loan for the next flat purchase.

Find out more on the conditions to take a second HDB housing loan.

Not applicable
Early repayment of housing loan

Not applicable.

Find out how to manage the payments of your HDB housing loan.

You may incur fees, depending on the terms and conditions of the FI’s housing loan package (e.g., lock-in period).
Refinancing You may refinance the HDB housing loan with one from an FI without any penalty.

You may refinance the FI housing loan with one from another FI or a different interest rate package from the same FI. Do check with the FI on the terms and conditions (e.g., lock-in period).

You cannot refinance to an HDB housing loan.

Be sure to check your eligibility with the financier and understand the terms and conditions of your housing loan before making a decision and committing to a flat purchase.

Check your eligibility and apply for a housing loan

Find out how much you can borrow and the financing requirements.

For a start, complete the questionnaire for a preliminary assessment of your eligibility to buy a new or resale flat, apply for CPF housing grants and an HDB housing loan.

Apply for the housing loan from your preferred financier early to find out how much you can borrow before proceeding to find a flat that is within your housing budget. Do note that there is no mortgage loan for the purchase of a short lease 2-room Flexi flat or Community Care Apartment; you have to pay for the flat using your cash and/ or CPF savings.

Find out the financing requirements to apply for:

Considerations for financial sustainability

Minimise the housing loan amount and repayment period to save interest costs.

As the purchase of a flat is a long-term commitment and payment of the monthly instalments may stretch up to 25 years or more, it is important to exercise prudence to minimise borrowing and ensure that the monthly payment is what you can sustain.

Take a long-term view by considering the following:

Cater for future changes

Your ability to keep up with the monthly loan instalments may be affected by:

  • Increase in household expenses (e.g., children’s education, healthcare for aged parents)
  • Unforeseen circumstances that may lead to reduction in income (e.g., retrenchment, business failure, medical conditions)
  • Changes in mortgage loan interest rate, CPF contribution rates, or the applicable limits for CPF usage over the years. This means that you may need to use more cash to meet future loan instalments.

Hence, consider paying in cash upfront to reduce the loan amount required to give yourself more flexibility to deal with emergencies and future expenses. You can also save on interest payments by taking a smaller housing loan amount or shorter loan period.

Choose a shorter repayment period

A longer repayment period means that the mortgage loan amount will be repaid at a slower pace and more interests will have to be paid.

Opting for a shorter loan repayment period is more prudent as there is a shorter period of exposure to fluctuations in loan interest rates, incomes and expenses, etc. In addition, you will also save on the interest payments.

Target to pay off your mortgage loan as soon as possible so that you can start saving more for retirement. It may be a stretch if you are paying off your mortgage loan and preparing for retirement at the same time.