With the latest cooling measures introduced in August 2024, you might be wondering how these changes will affect your plans to buy an HDB flat. The government’s adjustments—lowering the Loan-to-Value (LTV) limit and increasing the Enhanced CPF Housing Grant (EHG)—are designed to promote financial prudence while still providing the support you need to make homeownership a reality. But what does this actually mean for you? Let’s break it down.
- Understanding the lower LTV limit
- Old vs new LTV limits (Effective August 20, 2024)
- The silver lining: Increased EHG to offset higher downpayments
- New EHG Amounts (Effective August 20, 2024)
- When the new EHG takes effect
- How the EHG and LTV changes work together
- What the Aug 2024 cooling measures mean for you
- Ready to take the next step toward owning your dream home?
- FAQs about the LTV limit
Understanding the lower LTV limit
One of the most significant changes in the new cooling measures is the reduction of the LTV limit for HDB loans from 80% to 75%.
What is LTV?
The LTV limit determines how much you can borrow from HDB or a bank for a housing loan.
LTV limit and minimum downpayment
| Outstanding housing loans | LTV limit | Minimum cash downpayment |
|---|---|---|
| None | 75% or 55% | 5% (for LTV of 75%)10% (for LTV of 55%) |
| 1 | 45% or 25% | 25% |
| 2 or more | 35% or 15% | 25% |
Read More: Is The New 75% LTV Limit Enough to Lower HDB Prices?
Old vs new LTV limits
- Old LTV Limit: Up to 80% of the flat’s value could be financed by an HDB loan.
- New LTV Limit (Effective August 20, 2024): Now, only up to 75% of the flat’s value can be financed through an HDB loan. This change means you will need to cover the remaining 25% through a combination of your CPF savings, cash, and any grants you are eligible for.
For example, if you’re buying a 4-room BTO flat priced at $400,000:
- Before the Changes: You could borrow up to $320,000, meaning you needed a 20% down payment of $80,000.
- After the Changes: You can now borrow up to $300,000, so your down payment increases to 25%, or $100,000.
This higher down payment might feel like a setback, but it’s part of a broader strategy to ensure that buyers are not overextended financially. By borrowing less, you’re likely to have smaller monthly mortgage payments, which can help you manage your finances better in the long run.
The silver lining: Increased EHG to offset higher downpayments
To balance out the impact of the lower LTV limit, the government has also increased the Enhanced CPF Housing Grant (EHG). This increase is particularly beneficial for lower- to middle-income families, providing you with more financial support when buying your first home.
Key Features of the EHG
- Eligibility: The EHG is available to first-time buyers of both new (BTO) and resale HDB flats. It is a means-tested grant, meaning the amount you receive depends on your household income.
- Income Criteria: The lower your household income, the higher the grant amount you can receive.
- How EHG is used: The grant is credited to your CPF Ordinary Account (OA) and can be used for the downpayment, reducing the amount of loan required, and helping with your monthly mortgage payments.
New EHG Amounts (Effective August 20, 2024)
- For Families: The maximum EHG has been increased from $80,000 to $120,000.
- For Singles: The maximum EHG has been increased from $40,000 to $60,000.
Here’s how the EHG works based on your income
| Average Monthly Income | EHG for Families (New Amounts) | EHG for Singles (New Amounts) |
|---|---|---|
| ≤ $1,500 | $120,000 | $60,000 |
| $3,000 – $3,500 | $90,000 | $45,000 |
| $5,000 – $5,500 | $55,000 | $27,500 |
| $7,000 – $7,500 | $25,000 | $12,500 |
This increased EHG can significantly reduce the financial burden of the higher down payment required under the new LTV limits.
When the new EHG takes effect
The revised EHG will apply to eligible first-time households who:
- Apply for a New Flat: The revised EHG will be available for applications from the October 2024 BTO exercise onwards. If you have an existing HDB Flat Eligibility (HFE) letter but haven’t applied for a flat yet, HDB will update your HFE letter to reflect the revised EHG amount. You’ll be notified individually by email, so there’s no need to re-submit your HFE application.
- Submit a Resale Flat Application: If you submit a resale flat application on or after August 20, 2024, you will be eligible for the revised EHG amount. If your resale transaction is pending completion, the additional grant amount will be credited to your CPF account within two months after the transaction is finalized. There’s no need to approach HDB for this; the process will be handled automatically.
For those who apply for an HFE letter on or after August 20, 2024, the revised EHG amount will automatically apply. If you’ve already submitted your HFE letter application before this date, HDB will still extend the revised EHG amount to you when issuing your HFE letter, so there’s no need to apply for a fresh one.
How the EHG and LTV changes work together
For instance, if you’re a family with a monthly income of $4,000:
- Before the Changes: You would have needed to cover a remaining down payment of $25,000 after receiving $55,000 in EHG.
- After the Changes (Effective August 20, 2024): With the EHG increased to $70,000, your remaining down payment would only increase slightly to $30,000, despite the higher upfront requirement.
Here’s a detailed comparison:
| Cost Component | Before the Changes | After the Changes |
|---|---|---|
| Flat Price | $400,000 | $400,000 |
| Loan-to-Value (LTV) Limit | 80% ($320,000) | 75% ($300,000) |
| Down Payment Required | 20% ($80,000) | 25% ($100,000) |
| Enhanced CPF Housing Grant (EHG) | $55,000 | $70,000 |
| Remaining Down Payment After EHG | $25,000 | $30,000 |
| Total Loan Required | $320,000 | $300,000 |
What the Aug 2024 cooling measures mean for you
The August 2024 cooling measures are all about balance. On one hand, the lower LTV limit encourages you to borrow less and manage your finances carefully. On the other hand, the increased EHG provides you with the financial support needed to make that larger down payment more manageable.
While you might need to save a bit more upfront, the overall benefits—such as smaller loans and more government support—mean that you can step into homeownership with greater confidence and less financial stress. The key is to plan carefully, understand how these changes impact your budget, and take advantage of the support available to you.
Ready to take the next step toward owning your dream home?
At Ohmyhome, our Super Agents are here to guide you every step of the way. Whether you’re a first-time buyer or looking to secure a flat near your parents, our team is dedicated to making your homeownership journey smooth and stress-free.
To get started: Drop us a message on WhatsApp or chat with us via our Live Chat at the bottom of the screen.
FAQs about the LTV limit
How is LTV calculated?
The Loan-to-Value (LTV) ratio is calculated by dividing the mortgage amount (MA) by the appraised property value (APV): LTV ratio= MA/APV.
What is HDB LTV now?
Effective 20 August 2024, the maximum Loan-to-Value (LTV) ratio for HDB loans is 75%.
What are the factors affecting maximum LTV?
Your maximum LTV can be affected by factors like the type of property (HDB or private), whether you’re getting a loan from a bank or HDB, and your current financial situation, such as existing loans or credit history.
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