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How Much Can You Borrow For Your HDB Housing Loan In Singapore? Eligibility & Requirements
Written by 1AP Credit on May 10, 2021
Once you reach your late twenties or thirties, you will likely be starting a family and buying a home.
For that, you might need a HDB housing loan.
HDB housing loans are affordable and practical solutions for Singaporeans who need homes. You can get a considerable amount, but you have to get through all the bureaucracy first.
Read this guide to understand your eligibility criteria and how much you can borrow. We know that many Singaporeans have a source of passive income, or at least know how to generate passive income.
We’ll give you plenty of examples, and we’ll also tackle the self-employed situation.
Keep reading below.
Requirement 1: Citizenship & Household Status of Buyers
| Annual income | Singapore citizens and permanent residents | Foreigners residing in Singapore |
|---|---|---|
| Below $10,000 | $3,000 | $500 |
| At least $10,000 but below $20,000 | $3,000 | $3,000 |
| At least $20,000 | 6x the monthly income | 6x the monthly income |
Requirement 2: Income Cap
| Personal Loans | Renovation Loans | |
|---|---|---|
| Loan Amount | Up to $250,000 | Up to $30,000 |
| Loan Use | Flexible and can be used for expensive purchases, education, home renovations, etc. | It can only be used for home repairs or renovations |
| Interest Rate | Starts from less than 4% p.a. | Starts from less than 3% p.a. |
| Loan Eligibility | 21-65 years with a minimum income of $20,000 | You must own the home or be a family member. |
| Disbursement Speed | From 15 minutes | Depends on the bank and the borrower's circumstances |
| Repayment Duration | One to five years | One to five years |
Requirement 3: Ownership/ Interest in Property
| Pros | Cons |
|---|---|
| 20% of the purchase price must be paid as a downpayment, which a CPF payment can fully cover | Has a higher interest rate of 0.1% above the interest rate of the CPF OA |
| Your loan limit is up to 80% of the buying price | Higher LTV, combined with a higher interest rate, would result in an expensive home |
| Its interest rate is less prone to fluctuations because it is tied to the CPF OA interest rate | |
| You can opt for flexible refinancing as it doesn’t have a lock-in period | |
| You can pay off the loan early without incurring any penalty fees |
Requirement 4: Remaining Lease on Property
| Pros | Cons |
|---|---|
| Lower interest rate package than HDB loans | Your ability to repay a bank loan early is restricted by the lock-in period, and will result in an early repayment penalty of 1.5% of the loan balance |
| You can renegotiate your mortgage for the lowest interest rates available | A downpayment of up to 25% of the purchase price is required. Out of which, at least 5% must be paid in cash |
| Fewer application restrictions (e.g. no income ceiling conditions) | During the mortgage period, switching to a HDB loan is not possible |
| The maximum bank loan for HDB depends on your Mortgage Servicing Ratio (MSR) | Interest rates are inconsistent and constantly changing in response to market changes |
Remember that the maximum loan amount you can borrow for your HDB flat depends on the factors below:
- Your credit evaluation
- Loan-to-Value limit
- The leftover duration for your flat’s lease
- HDB policies
The Income Ceiling For Extended Family
If you have an extended family, here’s how you should calculate the average household income per month:
The average gross monthly household income of extended families is calculated as follows:
Annual Income Of Borrower Singapore Citizens And Permanent Residents Foreigners Residing In Singapore Less than $10,000 $3,000 $500 At least $10,000 but not up to $20,000 $3,000 $3,000 At least $20,000 Up to 6x their monthly income Up to 6x their monthly income
- The parents don’t have to be still married; widowed or divorced people can still apply.
- When it comes to a married child or their extended family, you can still apply if the child isn’t legally married yet through the Fiancé/ Fiancée Scheme
- These income caps apply for applications received after 11 September 2019. For previous applications, the maximum incomes are $12,000 for families and $18,000 for extended families.
Let’s take an example.
Let’s say a married couple with two working children wants to get an HDB housing loan. Their average gross incomes per month are:
- Husband: $5,000
- Wife: $5,000
- Child 1: $6,000
- Child 2: $3,000
Here’s how you assess your average gross income per month if you’re this sort of an extended family:
- Group A Income is parents and one child. This income group has to be below $14,000. If you add the husband’s, wife’s, and second child’s income, you get $13,000 – below $14,000.
- Group B Income has to be below $14,000 too. This section is where the first child can fit in. His average gross income per month is $6,000, so it’s below the $14,000 cap.
- The income ceiling of the extended family needs to be below $21,000. If you add the four average gross incomes per month, you get $19,000. Therefore, the extended family meets all the criteria.
How Much Can You Really Borrow For Your HDB Housing Loan?
The eligibility requirements and maximum amounts we’ve explained above are from the HDB website. But how much are you actually eligible for? And what if you’re self-employed?
Let’s review the application process first:
You need to submit your HLE letter before applying for your flat. This letter’s validity is just six months. Conversely, BTO flat needs at least two years before it’s finished, which means your HLE has expired.
If that happens, you’ll have to get a second HLE. Make sure this application covers 90% of your flat’s price. Otherwise, you’ll have to use your CPF contributions, savings account, or a loan to cover the difference.
If you don’t have enough money, you’ll lose your flat and the down payment.
What about self-employed people?
You’ll have to bring more documents:
- ACRA or valid business license
- Notice of Assessment
- Credit bureau report
- Latest 12 months’ bank statements
Pro tip: If you don’t have a fixed income and are paid in cash, deposit this money into your bank account as soon as you get it. Also, make accurate IRAS declarations. Otherwise, you won’ be able to prove your income, and you won’t be eligible for a sufficient loan.
Now let’s see how much you qualify for. Use HDB’s calculator.
Before applying, consider that home loan repayments can’t be more than 30% of your gross income per month. So, if you’re earning $4,500, you can only use $1,500 for your housing loan.
This sum is smaller if you have other debt. You can’t spend more than 60% of your gross income per month towards your loans, including car or education loans in Singapore.
If you are already in debt or have a bad credit score, you can consider taking a personal loan to improve your financial health.
You can also take a personal loan if you are facing problems with your monthly HDB loan repayments.
So, now you know the issues that affect your HDB loan amounts and the application requirements. Use this information to prepare for your purchase wisely. Check out several home loans to ensure you’re getting an affordable deal!
