This is the starting point when purchasing any property. Will you need a loan to finance a home, or can you afford to pay in cash? Most people will need a loan. It is crucial to evaluate how much you could comfortably afford to spend every month on a mortgage payment.
Maximum loan periods are capped at 25 years for an HDB flat using an HDB loan, 30 years for an HDB flat using a bank loan, and 35 years for a private property using a bank loan.
Remember: Property is a long-term commitment!
For the same amount of money borrowed, a longer loan tenure means your monthly payment is lower, but your overall interest paid is MUCH larger!
The type of home you’ll be able to afford will vary depending on your income, expenditures/liabilities, cash savings, investments, CPF Ordinary Account savings, sales proceeds from your current home (if any), and your creditworthiness. We do not recommend taking out new credit lines, such as a credit card, shortly before you plan on purchasing property, as this will likely have an impact on your credit score.
To see HDB’s budget calculator, click here.
You can borrow money from the Housing Development Board or a private financial institution (bank) to buy your property.
For more information about housing loans, click here.
If eligible, HDB flats can be purchased with a loan from the HDB. You can borrow up to 85% of the property’s purchase or valuation price, whichever is lower. Any loan from a financial institution must be from one regulated by the Monetary Authority of Singapore. You cannot refinance any loan from a financial institution with an HDB housing loan later on.
Use the HDB Flat calculator tool here.
The lender will assess how much you can borrow using the following methods:
If you take out a loan from the HDB, the interest rate is fixed at 0.1% over the CPF Ordinary Account (OA) interest rate. The CPF OA interest rate is amended in accordance with the amendment of CPF interest rates. As of September 2023, the CPF OA interest rate is 2.5% (the legislated minimum rate.)
Suppose you take out a loan from a private financial institution. In that case, you have two types of home loans available:
You can switch an HDB loan to a bank loan, but you can’t switch a bank loan to an HDB loan.
Though this may seem a good idea, you could be penalised! If you’ve taken out a bank loan, you may incur fees for early repayment, so read the small print carefully, or talk to an experienced professional, such as a mortgage broker. Fortunately, HDB loans have no such penalty.
WAYS TO FINANCE YOUR HOME. COMPLETED. ✅
Sources:
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