Choosing financing for your home is an essential part of the property buying process that usually boils down to two options: Housing Development Board (HDB) loan vs bank loan.
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What is an HDB loan?
The HDB offers a housing loan to eligible flat buyers, whether they are buying a home as a single or with a family, at a concessionary rate. This is currently 2.6% p.a.
But as of 29 September 2022, HDB will introduce an interest rate floor of 3% p.a. to compute your eligible HDB loan amount, BUT you will still be charged 2.6.% p.a. This means that the interest rate used to compute the eligible loan amount for HDB’s concessionary housing loan will be the higher of 3% p.a. or 0.1%-point above the prevailing CPF Ordinary Account (OA) interest rate, which is 2.5%.
To be eligible for the HDB loan, flat buyers must meet the following conditions:
| Citizenship | At least one buyer is a Singapore Citizen |
| Household Status | – Have not previously taken two or more housing loans from HDB – Last owned property is not private residential property* (local or overseas) *This includes a Housing and Urban Development Company flat or properties that are acquired by gift, inherited as a beneficiary under a will or as a result of the Intestate Succession Act, or owned/ acquired/ disposed of through nominees. |
| Income Ceiling | Average gross monthly household income does not exceed: – $7,000 for singles buying a 5-room or smaller resale flat; or a new 2-room flat in a non-mature estate, under the Single Singapore Citizen (SSC) Scheme – $14,000 for families – $21,000 for extended families |
| Ownership/ Interest in Property | – Must not own or have disposed of any private residential property in the 30 months before the date of application for an HDB Loan Eligibility (HLE) letter – Do not own more than one market/ hawker stall or commercial/ industrial property – If the buyer owns only one market/ hawker stall or commercial/ industrial property, he/she must be operating the business there, and have no other sources of income |
| Remaining Lease | Flat buyers may apply for an HDB housing loan up to the 80% Loan-to-Value (LTV) limit* if the remaining lease of the flat can cover the youngest buyer till the age of 95 |
Keep in mind that to qualify for an HDB loan, one will need to have stable work and a regular income to pay the monthly mortgage instalments.
These are the HDB’s income guidelines flat buyers must meet when taking an HDB loan:
| With monthly CPF contribution | If basic salary is fixed: Be in continuous employment for at least 3 months If basic salary is variable: Be in continuous employment for at least 6 months |
| Without monthly CPF contribution | – Be in continuous employment or trade for at least 6 months – Have good credit standing – Have consistent positive cash flow, as evident from bank statements, for at least 6 months which can be used to service a housing loan |
The following types of income/allowance are excluded from the credit assessment:
- Alimony/ maintenance fee
- Bonuses
- Claims/ reimbursement/ expenses
- Director’s fee
- Dividend income/ interest from deposit accounts
- Income from ad hoc overtime work
- National Service allowance
- Occupier’s income
- Overseas cost of living allowance
- Pension
- Rental income
- Scholarship overseas allowance
All about the HDB Loan Eligibility (HLE) letter
Flat buyers who are eligible for an HDB loan will need to submit an HLE letter, which is a document indicating their eligibility for the loan.
It will highlight the following important information:
- Eligible loan amount
- Monthly instalments
- Repayment period
- Amount of cash proceeds from the sale of the existing or previous flat to be used to pay for the next flat (if applying for a second HDB loan)
- Terms and conditions
How to apply for an HDB HLE letter
Step 1: Prepare documents
When submitting the HLE letter application, flat buyers will need to produce personal particulars and other supporting documents as proof of income.
The documents needed to be uploaded will depend on their type of employment and Central Provident Fund (CPF) contributions:
| Employee with CPF contributions | As an applicant or occupier: – 3 months’ payslips or a recent letter from the employer certifying job designation, commencement date and salaries for 3 months before the month of HLE application; and – Latest 15 months’ CPF contribution history |
| Employee without CPF contributions | As an applicant: – 6+ months’ payslips or a recent letter from the employer certifying job designation, commencement date and salaries for 6 months before the month of HLE application; and – Credit Bureau report – Latest 6+ months’ bank statements/passbook As an occupier: – 3 months’ payslips or a recent letter from the employer certifying job designation, commencement date and salaries for 3 months before the month of HLE application |
| Self-employed | – Latest Notice of Assessment from IRAS or Certified Annual Statement of Accounts from an auditing firm – Credit Bureau report – Latest 6+ months’ bank statements/passbook |
| Commission-based and part-time workers | As an applicant or occupier: – 6 months’ commission statements or payslips, or a recent letter from the employer certifying job designation, commencement date and salaries for 3 months before the month of HLE application; and – Latest 15 months’ CPF contribution history – Credit Bureau report – Latest 6+ months’ bank statements/passbook |
| Odd job worker | – Latest Notice of Assessment from IRAS or a recent letter from the employer certifying job designation, commencement date, and commission/salaries for 6+ months – Latest 15 months’ CPF contribution history – Credit Bureau report – Latest 6+ months’ bank statements/passbook |
| Unemployed | Full-time students (18-62 years old): Submit a valid Student Pass Unemployed person for less than 3 months: – Income proof for the preceding month(s) from the previous employer stating your gross monthly income and last day of service – Latest 15 months’ CPF contribution history |
Do note that all employer’s letters must have the company letterhead/ stamp, and the name, signature and designation of the certifying officer.
A copy of the Credit Bureau report can be requested online or at any SingPost Branch. Each report will be charged a fee.
If a flat buyer’s HLE letter application is successful, the Board will contact him/her to finalise the home loan requirements, including the mode of payment (cash or CPF).
Step 2: Submit application online
Retrieve a draft HLE application from the MyHDB portal and submit it with the necessary documents on the same site. Only applications with a complete set of required documents will be reviewed.
The HDB will usually reply within 14 days on the outcome of the HLE application.
The HLE letter is valid for six months from the date of issue.
Step 3: Authentication
Authenticate the HLE letter application via SingPass.
When to produce an HLE letter
1. When taking an HDB loan
The HDB requires all potential flat buyers who wish to get an HDB loan to first obtain an HLE letter before committing to a flat purchase.
Applicants without a valid HLE letter when booking a flat will not be eligible to apply for an HDB loan in the future.
2. When booking a flat with HDB
For new Build-to-Order flats, buyers will need to produce a valid HLE letter at the point of flat selection.
If you have purchased an uncompleted flat from the HDB, the Board will review your financial position nearer to the date of completion to ensure your eligibility for the HDB loan. This is to confirm that there is no change in your ability to service it.
3. When exercising the Option to Purchase (OTP)
For resale HDB flats, once the seller has accepted the offer, he or she will grant the OTP. After which, the buyer will have 21 days to exercise the OTP with a valid HLE letter on hand.
4. When applying to take over the ownership of a flat (by way of transfer, not resale)
Before the transfer of flat ownership application, buyers must ensure that they meet the eligibility criteria and fulfil one housing scheme to take over the flat. They will also need to assess if they are able to finance the transfer of ownership.
A mortgage loan is required if the buyer’s available CPF savings for housing and cash are not sufficient to pay the amount required. A valid HLE letter will then affect the transfer of ownership.
However, flat buyers who are not eligible for a loan from the HDB may choose to finance their home from a bank. Get the 5-factor guide to HDB loan vs bank loan.
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Frequently asked questions about HDB HLE letter
Can I apply for an HDB loan and obtain an HDB letter multiple times?
If you have previously taken an HDB loan, you have to wait for 30 months from the date of disbursement before you can apply for another loan.
What situations require a review of an HLE letter?
The loan offer will be reviewed by the HDB if:
- Any given information is untrue or incorrect
- There are any changes in your household income, family nucleus, or other circumstances that may affect your eligibility for an HDB housing loan and purchase.
- You and the family members listed in the application do not comply with any of the terms and conditions to buy a flat and/ or take an HDB housing loan
- There are any changes in HDB policies that may affect your eligibility to buy a flat and/ or take an HDB housing loan
How much HDB loan can you get?
It is based on several factors, such as your credit standing, income and age. Consider the Mortgage Servicing Ratio (capped at 30%) and Loan-to-Value limit (at 90% for HDB flats). Also, keep in mind that the remaining lease of the flat should cover the youngest buyer up to 95 years.
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