HDB Concessionary Loans (HLE) Eligibility: What Do Flat Buyers Need to Know?

By Dawn Chew|Updated 27 Apr 2021 5 minutes

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Some of you may have enough cash on hand to pay for your HDB flat in full. For the rest of you who do not, you will need to get a loan to finance your purchase, either from a bank or the HDB itself. The HDB concessionary loan is a popular option, and in this article we will look at the eligibility conditions and what you should know before taking it.

Your HDB loan eligibility is based on certain factors. If the annual assessable income for both applicants exceeds the income ceiling ranging from $14,000 to $21,000, you may need to take a bank loan instead.

Although HDB loans are finance mortgages made with stable terms for flat buyers or applicants with a lower household income, having a lower income will still affect the maximum loan amount you are eligible to receive.

What are the HLE conditions?

So, how do you figure out if you are eligible for an HDB concessionary loan? In order to gauge the amount you can get from HDB loans, you can calculate an estimated amount based on certain factors.

HDB buyers can take on up to a maximum of 30% of their monthly income in any mortgages and outstanding loans. For example, if your household income is $10,000 each month but $1,000 is spent on paying off a car loan monthly, then a maximum mortgage with a monthly instalment that doesn’t exceed $2,000 a month is applicable.

Plus, any part-time income will also be included into your total household income. However, only 70% of that income is considered for the loan application. If based on the previous example, then in this case, the household can only take on a maximum monthly instalment of $1,100 each month.

There are also eligibility criteria that applicants must meet in order to be eligible for an HDB Concessionary Loan:

More explicitly, The HDB considers several factors, all of which determines your HDB Loan Eligibility (HLE).

More explicitly, the HDB’s website includes these conditions that it considers for first-time family applicants’ HLE:

Citizenship • At least one buyer must be a Singaporean citizen
Household status • Not previously taken two or more housing loans from the HDB
• Taken one housing loan from HDB, and the last owned property is not a private residential property (local or overseas), including a HUDC flat, a property acquired by gift, a property inherited as a beneficiary under a will or as a result of the Intestate Succession Act, or a property owned/acquired/disposed of through nominees
Income ceiling • $14,000 for families
• $21,000 for extended families
• $7,000 for singles buying a 5-room or smaller resale flat or a 2-room new flat in a non-mature estate under the Single Singapore Citizen (SSC) Scheme
Ownership/interest in property • Must not own or have disposed of any private residential property in the 30 months before the HLE application date. A private residential property can be local or overseas, and includes:
     o Property acquired by gift
     o Property inherited as a beneficiary under a will or as a result of the Intestate Succession Act
     o Property owned/acquired/disposed through nominees
• Not own more than one market/hawker stall or commercial/industrial property. For those that own one market/hawker stall or commercial/industrial property, it must be the only source of income
Remaining lease • The loan amount will depend on the extent the remaining lease can cover the youngest buyer to the age of 95

Note that if you do not have a salaried income (such as freelancers and part timers) your monthly income figure might be adjusted to 70% for the purpose of the loan application.

The HDB also does not recognise the following as part of your household’s monthly income:

  • Alimony or maintenance fees
  • Bonuses
  • Claims, reimbursements, and expenses
  • Director’s fee
  • Dividend income or interest from deposit accounts
  • Ad hoc overtime pay
  • National Service allowance
  • Income from rent
  • Overseas cost of living allowance
  • Overseas scholarship allowance
  • Pension
  • Rental income
Vector

Considerations

You can apply for the HLE letter if you meet all the requirements. If you are unsure or want confirmation of your eligibility, you can take the HDB’s questionnaire to confirm if you are eligible.

Keep in mind that the loan amount you are eligible for depends on:

  • Loan-to-value (LTV) limit: This is the maximum loan amount that can be issued to you for a particular property. It is expressed as a percentage of the property’s market value. For HDB loans, this can go up to 90%.
  • Mortgage servicing ratio (MSR): This is the portion of your monthly income that goes towards repaying property loans. It is capped at 30% of your monthly income, and only applies to housing loans for HDB flats and executive condominiums.
  • Total debt servicing ratio (TDSR): This is how much of your monthly income that you can put towards your monthly debt repayments, including credit card bills, car loans, student loans, and other property loans (including the one you are applying for). Your TDSR should be no more than 60%.

What is an HLE letter, and how can you apply for it?

For more information on the HLE letter, and its application process, please see What Is The HDB Loan Eligibility (HLE) Letter? How Can You Apply For It?

What is the HDB’s interest rate?

The HDB’s current interest rate is 2.6%, which is listed on its website. Although this might seem rather high – the interest rate for bank loans has not exceeded 2% in the past decade – the HDB’s rate has been consistent for quite some time now; this consistency can be appealing to your financial planning. More importantly, the HDB also allows you to finance up to 90% of your flat’s cost, whereas bank loans usually only finance up to 75%.

For more information on the differences between bank and HDB loans, check out HDB Loan vs Bank Loan? The Ultimate HDB Financing Comparison

What about downpayment?

The HDB lists down the payments you need to make on its website. Downpayment for the HDB concessionary loan is 10% of the purchase price, which can be made through the savings in your CPF Ordinary Account, or with cash.

This downpayment sum can be substantial and is likely to be a significant factor affecting your buying decision, as any downpayment that is not fully covered by the CPF must be done with cash.

Are you eligible for a BTO purchase?

The minimum purchasing age for a Build To Order (BTO) flat is 21 years old. At least one of the buyers must be a Singaporean citizen, while the other must at least be a permanent resident of Singapore. Your monthly gross income should not exceed $14,000 for a 4-room or larger flat. You may also own any property or have previously received a HDB grant.

Are you eligible for an HDB concessionary loan?

To qualify, your household’s gross monthly income cannot be more than $14,000 ($21,000 for extended families and $7,000 for singles). The maximum LTV is 90% (so you need to be able to provide at least a 10% downpayment), while your MSR and TDSR is capped at 30% and 60% respectively.

Do I need to take a loan?

If you have the wherewithal to do so (such as through a combination of CPF and cash savings), you may indicate while making your purchase that you will not be taking a loan. This allows you to bypass getting an HLE letter from the HDB and any other loan application process.

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