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
|Citizenship||At least one of the buyers is a Singapore citizen.
|Household Status||• People who have taken over two HDB housing loans are not eligible.
• If you’ve taken one previous loan, the last property you owned shouldn’t be a private residential one in Singapore or abroad, including:
1. HUDC flat
3. An inheritance if you’re the beneficiary of a will or Intestate Succession Act
4. Property owned/ acquired/ disposed of through nominees
Requirement 2: Income Cap
|Income Cap||The maximum average income per month gross should be:
• $14,000 for families
• $21,000 for extended families
• $7,000 if you’re single and buying: A five-room or smaller resale flat OR A two-room new apartment in a non-mature estate
|• These conditions apply for HLE letter and flat applications received after 11 September 2019.
• If you’ve been unemployed for fewer than three months, your average income will be calculated considering the number of months you’ve been employed.
• Read the income guidelines to find out the correct paperwork.
Requirement 3: Ownership/ Interest in Property
|Ownership/ Interest in Property||• You must not have owned or disposed of private residential property during the past 30 months before applying for your HDB Loan Eligibility Letter.
These properties include:
• Inheritances from wills or Intestate Succession Acts
• Anything you own/ have acquired/ disposed of through third-party nominees
|• You can only own a maximum of one stall in a market or hawker market.
• You can only own one commercial or industrial property.
• If you’re the owner of one of these properties at the previous two points, you’re obligated to run your business there. This business should be your sole income source.
Requirement 4: Remaining Lease on Property
|Remaining Lease||• The amount you borrow depends on the duration that the leftover lease can cover from the youngest aged buyer to 95 years old.|
• You should check with the payment plan calculator to find out the size of your installments. Make sure your budget can cover these expenses.
|The remaining lease of the flat is more than twenty years, covering the youngest buyer until the age of:||HDB Housing Loan|
|Equal to or over 95 years||The housing loan depends on:
1. A 90% limit to the Loan-to-Value (LTV)
2. The duration of your loan is the shortest of these three options below:
• 25 years; or
• 65 years minus the average buyers’ age; or
• The remaining lease tenure when you apply minus 20 years
|Under 95 years||The housing loan depends on:
90% of the pro-rated LTV limit
The duration of your loan is the shortest of the three option below:
• 25 years; or
• 65 years minus the average buyers’ age; or
• The remaining lease tenure when you apply, minus 20 years
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:
Category Income of Group A
Income of Group B
(maximum $14,000/ month)
Income Ceiling of Extended Family
Parents with single children Parents with a single working child Other single children Total incomes of Groups A and B must not exceed $21,000
Parents with a married child Parents with single working children (if any) Married child’s family Total incomes of Groups A and B must not exceed $21,000
- 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!