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What is a HDB Loan? A HDB Loan is a special home loan offered by the Housing & Development Board, or HDB, exclusively to Singapore citizens for buying an HDB flat.
Think of it as a government-backed option to help you pay for your home. It’s designed to be a more stable and accessible choice compared to home loans from commercial banks, making it a popular option for many Singaporeans buying their first flat.
HDB Loan vs Bank Loan
You will hear a lot of people talking about taking a “HDB loan vs bank loan”. Don’t take anyone else’s opinion too easily. Both have their pros and cons, and the right choice for you depends on your financial situation and what you’re looking for.
| HDB Loan | Bank Loan | |
|---|---|---|
| Eligibility | Income ceiling applies. For Singaporeans buying HDB flats only. | No income ceiling. Available to all property types (HDB, private, etc.). |
| Interest Rate | Stable and fixed at 2.6%. Predictable monthly repayments. | Can be lower, but often variable. Monthly repayments can fluctuate. |
| Downpayment | 20% (can be fully paid with CPF) | 25% (at least 5% must be in cash) |
| Loan-to-Value (LTV) | Can loan up to 75% of the property value | Can loan up to 75% of the property value |
| Flexibility | Less flexible | More flexible. Wide range of loan packages and promotions. |
| Peace of Mind | High. Stable rates make budgeting simple | Lower. Rates can change, creating uncertainty. |
The HDB Loan interest rate is always at 2.6% - pegged at 0.1% higher than the CPF Ordinary Account (OA) interest rate.
HDB Loan Interest Rate
The biggest thing to know about an HDB Loan is its interest rate. It’s a very steady 2.6%, and it’s linked to your CPF savings account rate. This means the interest rate doesn’t change much, so you won’t have to worry about sudden increases that could affect your monthly repayments. This predictability is a huge plus and gives you peace of mind when budgeting for your new home.
HDB Loan Downpayment
A downpayment is the initial, upfront sum of money you pay towards a large purchase, such as a house. For example, if a HDB flat costs $400,000 and the downpayment is 25%, you’ll pay $100,000 from your own pocket, and your loan will be for the remaining $300,000.
This downpayment exists for a couple of important reasons. First, it reduces the risk for the lender, which in this case is the HDB. By asking you to pay a portion of the cost upfront, the HDB can be more confident that you’re a serious buyer and less likely to MIA on the loan. It shows you have a personal stake in the property.
Secondly, it also helps you, the buyer, by reducing the overall amount you need to borrow. This means you’ll have smaller monthly repayments and will pay less interest over the many years you have to pay the loan.
When you take out a loan with the HDB to buy a flat, the HDB loan downpayment you need to pay is 25% of the HDB flat’s purchase price. A great benefit of getting an HDB loan is that this entire 25% can be paid using the money in your CPF Ordinary Account (OA), so you might not even need to use any cash. This is different from a bank loan, which usually requires you to pay a 5% portion of the downpayment in cash.
HDB Loan requires a 25% downpayment. The remaining 75% will likely be your loan amount.
HDB Loan Amount
A ‘loan amount’ is the exact sum of money you borrow from a lender—like HDB or a bank—after you’ve made your downpayment. Think of it as the remaining balance you have to pay for your flat. In this case, the HDB Loan amount you can take is up to 75% of your flat’s price. The other 25% was paid in your earlier downpayment, remember?
This is the amount you’ll be paying back monthly over the years.
HDB Loan CPF
Can I use CPF to pay for my HDB loan? Yes, you absolutely can use your CPF to pay for your HDB loan. The money in your CPF Ordinary Account (OA) is specifically for major purchases like property. It’s a huge help for many people, as it means you can pay your monthly loan instalments without having to dip into your cash savings.
The process is quite straightforward. HDB will set up a regular, automatic deduction from your CPF OA each month to cover your loan’s repayment. It’s a convenient way to ensure you never miss a payment and can help you manage your cash flow for other expenses.
Just keep in mind that the CPF system is designed to provide for your retirement, too. Because of this, there are rules on how much of your CPF savings you can use for your home. But for a beginner, the key takeaway is that your CPF OA can be a massive help in paying for your HDB flat, making homeownership a lot more accessible.
HDB Loan Tenure
You have up to 25 years to pay off your HDB loan, which gives you plenty of time.
If you can’t complete paying off your HDB loan within the maximum 25-year period, HDB might offer solutions like helping you replan your loan or looking into a different repayment plan that better suits your income. In some rare cases, they might even be able to extend the loan tenure if you’re still within a certain age limit, but 25 years is usually the maximum.
If you’ve explored all the options with HDB and there’s no way you can make the repayments, the final and most serious step is for HDB to repossess the flat - meaning HDB would then sell the flat to get back the money you still owe them from the loan. It’s a difficult situation, so the best thing to do is to contact HDB as soon as you start facing financial trouble—don’t wait until you’ve missed a payment.
The HDB Mortgage Servicing Ratio is at 30% of your monthly income.
HDB MSR (Mortgage Servicing Ratio)
The HDB Mortgage Servicing Ratio (MSR) is a financial rule designed to protect you from getting into debt you can’t handle. In simple terms, it limits the amount of money you can use each month to pay off your home loan. It’s a safety measure put in place to ensure you can comfortably afford your HDB flat without overstretching your finances.
So, why does it exist? The main reason is to make sure you have enough money left over each month for all your other expenses. The MSR takes into account your total monthly income and your total loan repayments for your flat. It ensures that you’re not spending so much on your mortgage that you’re left with very little for things like food, bills, or transport. It’s a way for HDB to make sure that homeownership is sustainable for you in the long run.
For HDB loans, the MSR is capped at 30%. This means that your total monthly loan payments for your HDB flat, along with any other loans you might have for the property, cannot exceed 30% of your total gross monthly income. For example, if you earn $4,000 a month, your total monthly mortgage payments for your HDB flat cannot be more than 30% - in this case, it’s $1,200. This helps keep homeownership within a responsible budget for everyone.
Monetary Authority of Singapore has set the Total Debt Servicing Ratio at 55%.
HDB TDSR (Total Debt Servicing Ratio)
The Total Debt Servicing Ratio (TDSR) is a financial rule that limits how much of your total monthly income can be used to pay off all your debts combined. Unlike the MSR, which is just for your home loan, the TDSR looks at your complete financial picture. Think of it as a “total debt safety limit” to ensure you don’t take on more debt than you can handle.
So, why does it exist? The main reason is to make sure that you can comfortably manage all of your financial commitments. The TDSR considers all your existing monthly payments, including your home loan, car loan, student loans, and credit card bills. It’s a way to ensure that even with all these payments, you’ll still have enough income left each month to live comfortably and save for the future. It’s a crucial safeguard to prevent homeowners from getting into serious financial trouble.
For a new loan, in Singapore, the Monetary Authority of Singapore (MAS) has set the TDSR at 55%. This means that your total monthly payments for all your loans and credit facilities, including your new HDB loan, cannot exceed 55% of your total gross monthly income. For example, if you earn $4,000 a month, the total of all your debt payments—from your HDB loan to your car loan—cannot be more than $2,200. This ensures that your financial commitments are kept at a manageable level.
HDB Loan Calculator
A HDB Loan Calculator (hyperlinked, opens to new window) is a simple online tool that helps you figure out your housing budget - what you can afford.
Instead of trying to work out all the sums yourself, you just plug in a few key details, like your income, age, and existing debts. The calculator then works its magic to tell you roughly how much HDB is willing to lend you and what your monthly loan payments might be.
It’s a really useful first step in your home-buying journey. By using the calculator, you can quickly find out your estimated loan amount, get an idea of the monthly instalment, and see how much you’ll need for the downpayment. This helps you to plan your finances effectively and saves you from a lot of stress down the line.
HDB Loan Eligibility
When it comes to eligibility, not everyone can get an HDB Loan. It’s primarily for those who don’t have a high monthly income, and there’s a limit to how much your household can earn each month to qualify. You also can’t own any private property, either in Singapore or overseas.
- Citizenship: At least one of you must be a Singaporean Citizen.
- Family Status: You must be buying a flat with a family member. This could be your spouse, your parents, or your fiancé(e). If you’re single, you can apply for a flat on your own after 35 years old.
- Age: You need to be at least 21 years old when you apply.
- Income Ceiling: Your total household monthly income must not go above $14,000 for a family and $7,000 for a single person.
- Property Ownership: You cannot own any other private property, whether it’s in Singapore or overseas. You also must not have bought or sold more than one subsidised flat from HDB in the past.