Over 80% of Singapore's resident population buy or rent their homes from the Housing & Development Board (HDB). The HDB provides home loans for up to 90% of property value. A 10% down payment is required, but you can also tap into your Central Provident Fund (CPF) to help cover this. To qualify for a loan from the HDB, your loan tenure must be no longer than 25 years.
If you are thinking of applying for an HDB home loan, there are a few terms that you should familiarize yourself with.
Mature vs. non-mature estates. A mature estate generally refers to an established residential area, usually containing schools and often shopping and recreational facilities. A non-mature estate is a recent residential development that may not have as many amenities. The cost of housing in a non-mature estate is usually quite a bit lower.
Mortgage Servicing Ratio or MSR is the percentage of your income that will go towards paying off your home loan. You will not be eligible for HDB home loans that require you to spend more than 30% of your income on mortgage payments. For example, if your total monthly income is $5,000 you will only be approved for an HDB loan if the mortgage payments aren't more than $1,500 a month.
Loan tenure refers to the amount of time you have to completely pay off your loan. HDB loans have a maximum tenure of 25 years. If you get a $250,000 loan for an HDB flat including interest on mortgage payments, then you will have to pay $833 a month to pay off the flat in 25 years.
Consider that your MSR cannot be more than 30% of your income. In this case you would have to earn a minimum of $2,780 to be eligible.
Your income. To qualify for a HDB loan, your monthly household income must not exceed $12,000 for a family, or $18,000 for an extended family. Singles buying a resale flat with 5 rooms or less in a non-mature estate under the Single Singapore Citizen (SSC) scheme cannot have an income exceeding $6,000.
But your income isn't the only factor in deciding whether you are eligible for an HDB loan. Here are a few more things that can affect the results of your application.
Executive condo. You will not be eligible for an HDB loan if the home you plan to buy is an executive condo.
Previous HDB loans. If you have taken two or more HDB concessionary interest rate loans, you will not be eligible for another loan.
Owning property. If you own any residential properties, either in Singapore or overseas, you will not be eligible for an HDB loan. You can own one industrial or commercial property (including a market or hawker stall) if that property provides your sole source of income.
As you can see, there are a number of requirements that must be met in order to be considered for an HDB loan. If you do not qualify, then you might be able to obtain a bank loan instead.