If you need financing to buy your dream home, you should secure a housing loan from HDB or a bank regulated by the Monetary Authority of Singapore (MAS) before you commit to the flat purchase.
When applying for an HDB Loan Eligibility (HLE) Letter, HDB conducts loan assessment to determine the loan amount. The HDB encourages aspiring homeowners not to overstretch their finances.
Wonder why some loan applications get rejected? These factors determine your chances of getting the sweetest “Yes!” from the HDB.
4 Main HDB Loan Assessment Considerations
1. Stable Income
This factor is not different from the eligibility assessment of any CPF Housing Grant like the new Enhanced CPF Grant (EHG). The EHG, for example, requires first-time flat applicants to have worked continuously for 12 months prior to the flat application.Plus, applicants should still be working at the time the flat application was submitted.
Having a stable income tells HDB that you can pay for your home loan’s monthly mortgage instalments.
2. Regular Savings
The HDB checks your ability to have cash savings every month to pay any cash portion of the monthly mortgage instalments and safeguards against rainy days.
While it may be tempting to borrow as much as possible if you can afford the monthly instalments, this can be risky. Your CPF Ordinary Account contributions may reduce as you grow older. This means that you may need to use more cash to meet the loan instalments.
Remember to budget for emergencies and future expenses.
3. Age Limit
The maximum loan repayment period is 25 years or up till the home buyers’ age of 65 years old, whichever is shorter.
Which means that if you get an HDB loan at the age of 30, you should fully pay your loan on your 55th birthday (based on 25 years).
But if you are 45 years old at the time of loan approval, you should fully pay your loan at 65 years old (after 20 years).
4. Good Credit Standing
A credit standing or score is a number used by lenders as an indicator of how likely an individual is to repay his debts and the probability of going into default. It is an independent assessment of the individual’s risk as a credit applicant.
Credit Bureau (Singapore) Pte Ltd (CBS) is Singapore’s most comprehensive consumer credit bureau that has full-industry uploads from all retail banks and major financial institutions. CBS aggregates credit-related information amongst participating members and presents a more complete risk profile of a customer to credit providers. This helps credit providers to determine the likelihood of the customer repaying, thus enhancing their risk assessment capabilities.
In short, you need to spend within your means to have a good credit rating for HDB to approve your loan.
Once you get the HDB’s home loan approval, should there be changes in your financial position, HDB may review their loan offer.
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