How To Check Your Eligibility For A HDB Loan

Are you in the market for a HDB flat and looking for a loan to finance the purchase? If so, you’ll want to check your HDB loan eligibility.

The reason is simple: The Housing & Development Board (HDB) offers a housing loan to eligible singles or family people at a concessionary rate. This loan is known as a HDB concessionary loan.

This blog post will outline the application process, HDB loan eligibility criteria, factors determining the loan amount, and other helpful information.

So keep reading to find out if you’re eligible and learn more about the process.

Eligibility Conditions

You must meet the following criteria if you wish to apply for an HDB loan:

Citizenship Status

At least one buyer needs to be a Singapore citizen.

Monthly Income Brackets

Your monthly income must not exceed the following:

• $7,000 if you’re a single buyer under the Single Singapore Citizen (SSC) scheme
• $14,000 if your family is buying the flat
• $21,000 if your extended family is buying the flat

Household Status

Applicants or essential occupiers named in the application:

• Must not have taken two or more housing loans from HDB before this application
• Must not have a last owned property that is a private residential property (local or overseas), if they have taken out one HDB loan.

This includes a HUDC flat, a gifted property, an inherited property as a beneficiary under a will or as a result of the Intestate Succession Act, a property owned/acquired/disposed of through nominees.

Property Ownership

Any applicant or essential occupiers named in the application:

• Must not own or have disposed of other (local or overseas) private residential property, including houses, executive condominium (EC) units, buildings, land, and privatised HUDC flats, in the last 30 months before the date of application.
• Must not own more than one market or hawker stall or commercial or industrial property

However, you are allowed to own one market or hawker stall or commercial or industrial property if you operate the business by yourself and have no other sources of income.

These are the requirements to be eligible for an HDB loan application. If you meet the HDB loan eligibility, it’s time to apply for the HDB Loan Eligibility (HLE) letter. 

But first, you must fulfil the credit assessment criteria.

Credit Assessment Criteria

HDB flat buyers must fulfil the credit assessment criteria, which essentially determines your income’s regularity and stability. Here’s what it verifies.

If you earn a monthly income with a CPF contribution, you must have:

• Continuous employment for at least three months with a fixed basic salary

Or

• Continuous employment for at least six months if the basic salary varies

On the other hand, if you earn a monthly income with a CPF contribution, you must have:

• Continuous employment or trade for at least six months

Or

• A good credit score
• Six months’ worth of bank statements showing positive cashflow

Keep in mind that the following income types are excluded from the credit assessment:

• Director’s fee
• Interest from deposit accounts/dividend income
• Alimony/maintenance fee
• Bonuses, pension, or rental income
• Claims/reimbursement/expenses
• Income from ad-hoc overtime work
• National Service allowance
• Occupier’s income
• Overseas scholarship or cost of living allowance

If you fulfil these credit assessment criteria, it’s time to move to the next step: applying for the HLE letter.

Let’s find out what the letter is and how long it is valid for.

HLE Letter And Validity Period

The HLE letter is a document that confirms your eligibility for an HDB loan. The letter indicates the maximum HDB loan amount for your flat purchase.

Plus, it includes the following information:

• Interest rate (2.6%)
• Repayment period
• Amount of proceeds from the previous flat sale (if applying for a second HDB loan)
• Monthly installments
• Flat type
• Flat lease
• Letter’s expiry date
• Other terms and conditions

Remember that an HLE letter is valid for six months only, so make sure you plan everything in advance to ensure a smooth loan application process.

Now, let’s look at the whole application process.

How, Where, And When To Apply For A HDB Housing Loan

First, you need to have a valid Singpass for the main applicant and your spouse (if applicable). Apply for Singpass if you don’t have it.

Then, you must have all your income and supporting documents saved in a soft file (PDF or JPG).

The documents required for obtaining the HLE letter will depend on employment type and CPF contributions.

Documents Required

Here’s an overview of the documents needed for different cases. 

For employees with CPF contributions

• Three months’ payslips
• Latest 15 months’ CPF contribution history

For employees without CPF contributions

• 6+ months’ payslips
• Credit Bureau report
• Latest 6+ months’ bank statements/passbook

If you are self-employed, an odd job worker, or a part-time or commission-based worker, you’ll need the following documents:

• Latest Notice of Assessment from IRAS or Certified Annual Statement of Accounts from an auditing firm
• Credit Bureau report
• Latest 6+ months’ bank statements/passbook
• 6+ months’ commission statements or payslips (for part-time or commission-based workers)
• Latest 15 months’ CPF contribution history (for part-time, commission-based, or odd job workers)
• Latest employment details certifying job designation, commencement date, and commission/salaries for 6+ months (for odd-job workers)

If you are unemployed, you will need to submit:

• Income proof for past months from your previous employer
• Latest 15 months’ CPF contribution history

When Should You Apply For An HLE Letter?

You must have the HLE letter before:

1. Booking a new HDB flat
2. Obtaining an Option to Purchase (OTP) to submit a resale flat application
3. Applying to take ownership of an existing flat (by way of transfer)

Once you have your Singpass and documents ready, apply for your HLE letter and upload your documents at the HDB’s official website/portal.

HDB will review your documents and send a reply in 14 days. Meanwhile, you may track your application status on HDB’s online portal.

But how much will you get for your HDB loan? Let’s see.

Factors That Determine How Much Housing Loan You Can Get 

The HDB loan amount depends on the following factors:

• Loan-To-Value (LTV) Limit – The LTV is expressed as the property’s market value percentage that varies from 80% to 90%.

The LTV equals the maximum HDB loan amount which can be granted for a property. 

• Mortgage Servicing Ratio (MSR) – Capped at 30%, the MSR refers to your monthly income portion used for repaying your property loans. The ratio only applies to loans taken for HDB flats and executive condominiums.
• Total Debt Servicing Ratio (TDSR) – The TDSR refers to your monthly income portion that will be used to pay your overall monthly debt payments. 

This includes credit card bills, any kind of current loans (property, car, and student loans) you already owe, and the one you are applying for.

For a HDB loan, your TDSR should not exceed 55%.

All of these factors combined will determine your HDB housing loan amount.

However, remember that your age, income, and credit standing will also play an important role in determining your loan amount.

Next, you’d want to learn about the downpayment and monthly repayments of an HDB loan. Can you use your CPF, or does it have to be paid in cash?

Let’s find out.

Can You Use Your CPF?

The downpayment of the HDB loan used to be 10%, but it changed in Dec 2021. Now, you have to make a 20% downpayment for your HDB loan.

Thankfully, you can use savings from your CPF Ordinary Account (OA) for it. In fact, you could also use your CPF for servicing the monthly loan repayments.

However, the total CPF savings to be used to purchase or take over an HDB flat and pay the monthly repayments will depend on:

• The extent that the flat’s outstanding lease can cover the youngest buyer or transferee up to 95 years
• HDB defined CPF usage limits for new and resale flats

Moreover, you may also choose to make selected payments with your CPF OA savings.

For example, HDB allows you to pay the registration, stamp, and legal fees separately with your CPF. Plus, you may also pay the premium for your CPF Home Protection Insurance if you’re buying it.

Remember, HDB doesn’t force you to empty your OA for your HDB flat purchase. 

Instead, it allows buyers or transferees to retain up to $20,000 of the available savings in their CPF OA to enjoy interest benefits.

This is why HDB loans are more popular than bank housing loans.

Still not sure if an HDB loan is the right option for you?

Get in touch with our seasoned loan advisors at 1AP Capital for expert advice. 

As a trusted licensed money lender, we’ve helped thousands of Singaporeans make sound financial loan decisions over the years.

Contact us now or apply for a loan today.