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What Are the Conditions of HDB Loan and How to Qualify


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HDB Loan and HLE Letter


Introduction

HDB loan is an alternative financing method to bank loan for people who are intending to purchase a HDB flat. The HDB Loan Eligibility (HLE) Letter is like the In-principle Approval (IPA) of bank loans.


HDB Loan Concept

For HDB loan, buyers will need to use the monies in their CPF OA first. They can keep an amount of up to $20,000 in their CPF OA per person if they want to. Assuming that valuation price is the purchase price (otherwise COV will be topped up in cash), if the CPF OA monies used do not meet 10% of the prices, any shortfall after the loan and CPF monies will be topped up in cash. On the other hand, if CPF OA used is more than 10% of the price, then the rest is financed by the HDB loan (which will be less than 90%). By any means, your CPF OA savings will still be used first. There is no minimum cash downpayment except the option fee and exercise fee, which is $5,000. However, this also assumes that you meet all CPF and loan requirements, able to get 90% loan and there is no COV.

The income ceiling of HDB loan is the same as grants and purchasing subsidized flats. Below is a summary of the income ceiling for the different types of flats and marital status.

Income ceiling (when taking grant/HDB loan/subsidies)


  • Singles: $7,000
  • 2 room flat with 99 year lease: $7,000
  • 2 room flat with 15-45 year lease: $14,000
  • 3 room flat in non-mature estates: $7,000 or $14,000, depending on project
  • 3 room flat in mature estates: $14,000
  • 4 room flat or bigger: $14,000
  • 4 room flat or bigger with extended families: $21,000

By taking up a HDB loan, it is considered that you have used up one time of your subsidy. So the maximum number of HDB loan that you can take is two.

The following are the requirements and conditions for taking HDB loan

Requirement:


  • 10% CPF
  • Up to 90% loan
  • Automatically uses the CPF OA (each person can keep up to $20,000 in CPF OA)
  • Loan the remaining value
  • If CPF used is more than 10% of the loan value, the remaining loan value will be less than 90% (assuming your LTV limit is 90%)
  • If CPF used is less than 10% of the loan value, the remaining has to be topped up in cash and the maximum loan is 90% of the loan value (assuming your LTV limit is 90%)
  • Repay till 65 years old or 25 years loan tenure, whichever is shorter
  • Interest rate of 2.6%
  • Mortgage Servicing Ratio (MSR) of 30%
  • Can use CPF OA up to 100% of valuation limit (purchase price or valuation, whichever is lower)
  • Minimum 5 years of HDB Fire Insurance

Repayment of HDB loan


  • Cannot get another HDB loan within 30 months from loan disbursement
  • CPF and cash can be used to service the installments through GIRO
  • Installments are payable on the first day of each month
  • Late payment charge will be imposed based on the outstanding installments at the end of the month
  • Payments made will be used to settle the late payment charge first, then the outstanding charges, and finally the installment itself
  • Required to give one month prior written notice to HDB if making full or partial capital repayment
  • For redemption after complete disbursement of loan, client should pay the whole of the principal sum then the outstanding and all other monies due including interest up to the date of payment
  • Each partial capital repayment shall not be less than $500

For HDB loan, if loan is still outstanding when CPF withdrawal is at 100% of VL, client can still use CPF savings to repay housing loan, provided they are able to set aside the prevailing retirement sum cash component in their CPF SA and CPF OA.

For clients with private property (including EC), and have used zero or one grant/HDB loan/subsidies, they will be required to dispose all their private properties and wait for 30 months before becoming eligible to be a first timer or second timer in benefitting from the subsidy.

For divorce cases, please refer the article on grants as it follows the same concept as grants. Please click here for the article. For Right Sizing Policy, please click here. For priority of sale proceeds with HDB loan, please click here. For Contra Payment Facility, please click here.


HLE Letter

Requirements of HDB Loan Eligibility (HLE)


  • Minimum 1 Singaporean
  • Income ceiling of $21,000 for extended family
  • Income ceiling of $14,000 for family
  • Income ceiling of $7,000 for singles
  • Have not taken 2 HDB loans
  • Does not own any private residential property in Singapore or overseas
  • Have not disposed any private residential property within the past 30 months
  • Does not own more than 1 market/hawker stall or commercial/industrial property in Singapore or overseas
  • Own 1 market/hawker stall or commercial/industrial property and operate business themselves

HDB Loan Eligibility (HLE)


  • Obtain before booking of flat
  • Valid for 6 months as long as buyer and occupier remains the same. Reapply if HLE expire

Information in the HLE


  • Eligibility for an HDB loan
  • Maximum loan amount eligible
  • Maximum loan repayment period
  • Monthly loan installment
  • Gives an indication of the eligible loan amount only, final decision still lies with HDB

Revocation of HLE letter


  • Change in buyers
  • Change in occupiers
  • Buyer becomes ineligible for HDB loan
  • Buyer gives any incorrect and untrue information in the application of HLE Letter

Procedure in the application for HLE Letter


  • Submit HLE application online on the website
  • Print and sign HLE application
  • Submit latest pay slips / income documents for proof of income and duly signed HLE application to HDB
  • HDB checks for eligibility of loan
  • If eligible, applicants will receive HLE Letter from HDB
  • If not eligible, applicants have to apply for bank loan

When taking a 2nd HDB loan, there are cut off dates for using your sale proceeds. Do remember to let HDB know of your intentions with the sale proceeds and plan your timeline before the date to prevent any problems later on.

Please note that even if buyers already have the HLE Letter, it does not mean that the buyer is automatically eligible for the HDB loan and the amount stated in the HLE Letter. Buyers will still be assessed during the booking of flat.


Others

Fire Insurance can be purchased on the Key Collection Appointment itself if client is taking the HDB loan

Things to bring for HDB Appointment (related to HDB loan)

  • HDB loan eligibility letter (HLE Letter)
  • Latest pay slips if taking a HDB loan
  • Fire Insurance Certificate
  • Proof of Home Protection Insurance

When you book a flat or when you are required to sign the Agreement for Lease, HDB will verify eligibility for a HDB loan and determine the amount of mortgage loan that can be granted to the buyer based on your HLE Letter. The signing of mortgage document and the agreement for HDB loan is done during key collection.


HDB loan can be refinanced by bank loans if the buyers wish to. However, the process is irreversible and bank loans cannot be refinanced by HDB loan later.

You can be exempted from the HPS when taking a HDB loan if you already have an existing private insurance policy. However, the buyer will need to apply for the HPS exemption at the CPF website.

There are many different classifications of incomes and buyers need to make sure that they submit the right type of documents for the right type of income. For more information, please click here.

Your HDB loan can be redeemed early before the end date and tenure. Similarly, partial capital repayment can also be made. If your loan commencement is before 1 April 2012, the minimum amount for partial capital repayment is $500. If your loan commencement is after 1 April 2012, the minimum amount for partial capital repayment is $5,000, with increments in multiples of $1,000. Buyers need to make an application to HDB for early redemption of loan and partial capital repayment.


Conclusion

The HDB Loan is one of the most important things to many people. We hope this article has helped you to understand a little more on HDB loan.



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HDB Loan and HLE Letter


Introduction

HDB loan is an alternative financing method to bank loan for people who are intending to purchase a HDB flat. The HDB Loan Eligibility (HLE) Letter is like the In-principle Approval (IPA) of bank loans.


HDB Loan Concept

For HDB loan, buyers will need to use the monies in their CPF OA first. They can keep an amount of up to $20,000 in their CPF OA per person if they want to. Assuming that valuation price is the purchase price (otherwise COV will be topped up in cash), if the CPF OA monies used do not meet 10% of the prices, any shortfall after the loan and CPF monies will be topped up in cash. On the other hand, if CPF OA used is more than 10% of the price, then the rest is financed by the HDB loan (which will be less than 90%). By any means, your CPF OA savings will still be used first. There is no minimum cash down payment except the option fee and exercise fee, which is $5,000. However, this also assumes that you meet all CPF and loan requirements, able to get 90% loan and there is no COV.

The income ceiling of HDB loan is the same as grants and purchasing subsidized flats. Below is a summary of the income ceiling for the different types of flats and marital status.

Income ceiling (when taking grant/HDB loan/subsidies)


  • Singles: $6,000
  • 2 room flat with 99 year lease: $6,000
  • 2 room flat with 15-45 year lease: $12,000
  • 3 room flat in non-mature estates: $6,000 or $12,000, depending on project
  • 3 room flat in mature estates: $12,000
  • 4 room flat or bigger: $12,000
  • 4 room flat or bigger with extended families: $18,000

By taking up a HDB loan, it is considered that you have used up one time of your subsidy. So the maximum number of HDB loan that you can take is two.

The following are the requirements and conditions for taking HDB loan

Requirement:


  • 10% CPF
  • Up to 90% loan
  • Automatically uses the CPF OA (each person can keep up to $20,000 in CPF OA)
  • Loan the remaining value
  • If CPF used is more than 10% of the loan value, the remaining loan value will be less than 90% (assuming your LTV limit is 90%)
  • If CPF used is less than 10% of the loan value, the remaining has to be topped up in cash and the maximum loan is 90% of the loan value (assuming your LTV limit is 90%)
  • Repay till 65 years old or 25 years loan tenure, whichever is shorter
  • Interest rate of 2.6%
  • Mortgage Servicing Ratio (MSR) of 30%
  • Can use CPF OA up to 100% of valuation limit (purchase price or valuation, whichever is lower)
  • Minimum 5 years of HDB Fire Insurance

Repayment of HDB loan


  • Cannot get another HDB loan within 30 months from loan disbursement
  • CPF and cash can be used to service the installments through GIRO
  • Installments are payable on the first day of each month
  • Late payment charge will be imposed based on the outstanding installments at the end of the month
  • Payments made will be used to settle the late payment charge first, then the outstanding charges, and finally the installment itself
  • Required to give one month prior written notice to HDB if making full or partial capital repayment
  • For redemption after complete disbursement of loan, client should pay the whole of the principal sum then the outstanding and all other monies due including interest up to the date of payment
  • Each partial capital repayment shall not be less than $500

For HDB loan, if loan is still outstanding when CPF withdrawal is at 100% of VL, client can still use CPF savings to repay housing loan, provided they are able to set aside the prevailing retirement sum cash component in their CPF SA and CPF OA.

For clients with private property (including EC), and have used zero or one grant/HDB loan/subsidies, they will be required to dispose all their private properties and wait for 30 months before becoming eligible to be a first timer or second timer in benefitting from the subsidy.

For divorce cases, please refer the article on grants as it follows the same concept as grants. Please click here for the article. For Right Sizing Policy, please click here. For priority of sale proceeds with HDB loan, please click here. For Contra Payment Facility, please click here.


HLE Letter

Requirements of HDB Loan Eligibility (HLE)


  • Minimum 1 Singaporean
  • Income ceiling of $18,000 for extended family
  • Income ceiling of $12,000 for family
  • Income ceiling of $6,000 for singles
  • Have not taken 2 HDB loans
  • Does not own any private residential property in Singapore or overseas
  • Have not disposed any private residential property within the past 30 months
  • Does not own more than 1 market/hawker stall or commercial/industrial property in Singapore or overseas
  • Own 1 market/hawker stall or commercial/industrial property and operate business themselves

HDB Loan Eligibility (HLE)


  • Obtain before booking of flat
  • Valid for 6 months as long as buyer and occupier remains the same. Reapply if HLE expire

Information in the HLE


  • Eligibility for an HDB loan
  • Maximum loan amount eligible
  • Maximum loan repayment period
  • Monthly loan installment
  • Gives an indication of the eligible loan amount only, final decision still lies with HDB

Revocation of HLE letter


  • Change in buyers
  • Change in occupiers
  • Buyer becomes ineligible for HDB loan
  • Buyer gives any incorrect and untrue information in the application of HLE Letter

Procedure in the application for HLE Letter


  • Submit HLE application online on the website
  • Print and sign HLE application
  • Submit latest pay slips / income documents for proof of income and duly signed HLE application to HDB
  • HDB checks for eligibility of loan
  • If eligible, applicants will receive HLE Letter from HDB
  • If not eligible, applicants have to apply for bank loan

When taking a 2nd HDB loan, there are cut off dates for using your sale proceeds. Do remember to let HDB know of your intentions with the sale proceeds and plan your timeline before the date to prevent any problems later on.

Please note that even if buyers already have the HLE Letter, it does not mean that the buyer is automatically eligible for the HDB loan and the amount stated in the HLE Letter. Buyers will still be assessed during the booking of flat.


Others

Fire Insurance can be purchased on the Key Collection Appointment itself if client is taking the HDB loan

At various stages of the buying process, there will be documents that you need to present to the HDB Officers. If you want to learn about a comprehensive buying process of a new flat, you can click here to be redirected to another article.

Things to bring for HDB Appointment (related to HDB loan)

  • HDB loan eligibility letter (HLE Letter)
  • Latest pay slips if taking a HDB loan
  • Fire Insurance Certificate
  • Proof of Home Protection Insurance

When you book a flat or when you are required to sign the Agreement for Lease, HDB will verify eligibility for a HDB loan and determine the amount of mortgage loan that can be granted to the buyer based on your HLE Letter. The signing of mortgage document and the agreement for HDB loan is done during key collection

Factors that affect the amount that can be pledged:


  • Outstanding housing loan amount (include other non-housing loan if bank loan was taken. If it is HDB loan, just outstanding housing loan amount will do)

HDB loan can be refinanced by bank loans if the buyers wish to. However, the process is irreversible and bank loans cannot be refinanced by HDB loan later.

You can be exempted from the HPS when taking a HDB loan if you already have an existing private insurance policy. However, the buyer will need to apply for the HPS exemption at the CPF website.

There are many different classifications of incomes and buyers need to make sure that they submit the right type of documents for the right type of income. For more information, please click here.

Your HDB loan can be redeemed early before the end date and tenure. Similarly, partial capital repayment can also be made. Buyers can either shorten the loan tenure or decrease the monthly repayment when a partial capital repayment is made. If your loan commencement is before 1 April 2012, the minimum amount for partial capital repayment is $500. If your loan commencement is after 1 April 2012, the minimum amount for partial capital repayment is $5,000, with increments in multiples of $1,000. Buyers need to make an application to HDB for early redemption of loan and partial capital repayment.


Legal Fees and Other Transaction Cost

Other transaction cost when taking a HDB loan


  • HLE
  • Home Protection Scheme (HPS)
  • Fire insurance
  • Right sizing policy (if taking 2nd grant or HDB loan)
  • Legal Fees
  • Survey Fees

As the topic on its fees can be huge, we suggest that you refer to our article here on fees here.


Conclusion

The HDB Loan is one of the most important things to many people. We hope this article has helped you to understand a little more on HDB loan.



Date first posted on 18 June 2019; Last Edited on 18 June 2019

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