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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.
Evaluate your options carefully and make an informed financing decision.
Learn about the key considerations to decide whether to take a housing loan from HDB or the FIs.
To encourage flat buyers to borrow prudently, HDB uses the higher of the following to compute an eligible housing loan amount:
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
Capped at whichever is shortest:
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:
^ 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.
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.
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).
The following limits for CPF usage are applicable to both housing loan options:
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.
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.
Find out how to manage the payments of your HDB housing loan.
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.
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:
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:
Your ability to keep up with the monthly loan instalments may be affected by:
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.
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.
Understand the different terms and considerations between taking a housing loan from HDB and the financial institutions, and make an informed housing and financing decision.
Find out more about the types of HDB flats available for sale and design features of new flats.
Get started with your flat purchase by finding out about the buying process of a flat from HDB.
Understand and follow the resale procedures to ensure a smooth flat buying journey. Find out more about the process before committing to a flat purchase.