Ravi Chandran
HDB resale prices rose since last year and more buyers are paying cash over valuation (COV) confirmed the Ministry of National Development (MND)
The Minister for National Development, today confirmed that HDB resale prices rose to 6% in the first half of 2021. This is an increase from the 5% increase it registered for the whole of last year.
Even if HDB prices rose majority of buyers did not have to pay any COV
The Minister revealed this statistics in replying to a parliamentary question. The proportion of buyers who paid a cash-over-valuation (COV) increased from around one in five in 2020 to slightly above one in three in the first half of 2021. The majority of buyers did not have to pay any COV, and the median COV has remained at $0.
“For flat buyers who have been affected by BTO delays and who cancel their BTO flats to buy a resale flat due to urgent housing needs, HDB will consider waiving the forfeiture of the option fee or five per cent of the flat purchase price based on an assessment of the flat buyers’ specific circumstances. HDB will also consider waiving the one-year wait out period to allow first-timer families with urgent housing needs to receive housing grants if they decide to buy a resale flat.
Resale flats are generally available for immediate occupation, and buyers can choose from a wide range of flats, according to their preferences and budget. Eligible first-timer families can receive up to $160,000 in grants when they buy a resale flat. We will continue to monitor the market situation to ensure that it remains stable and sustainable.”
Mr Desmond Lee, Minister for National Development explaining how HDB resale price rose since last year
Mr Paul Ho, chief officer at iCompareLoan, said: “As HDB resale prices rose, buyers should ask themselves if it is better for them to take a bank loan or HDB loan.”
What is a HDB loan?
For a HDB flat, you have the choice of choosing a bank loan or a HDB loan.
Housing development board (HDB) offers a concessionary home loan and interest rate for family members that meet eligibility conditions. Buyings of HDB flat can submit a HLE (HDB Loan Eligibility) letter online.
- You can “Apply for an HLE letter and upload your documents at www.hdb.gov.sg/hleapply” (Source HDB)
In short, a HDB loan is a Housing loan offered by the HDB, whereas a bank loan is a loan for the HDB flat offered by the Bank.
What does HDB Loan consider for Credit Assessment
HDB does not consider or take into account the following incomes for 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” (Source HDB)
So do not mistakenly think that HDB loan is easier to get approved.
If your income is still insufficient, you may not find much help with opting for a HDB loan. If your credit is not too bad, you have been rejected by bank loan, you can try to appeal with HDB for a HDB loan.
HDB Loan is more lenient when you are unable to keep up repayment
If you are unable to keep up your HDB Loan repayment, based on anecdotal feedback, HDB does not take back your house immediately. However you are still best to avoid taking this path if you can afford to repay your home loan.
HDB Loan has Higher Loan to value compared to Bank Loan
If your incomes are justified, you can generally apply for up to 90% of the property valuation. But you must also make sure that you are not buying a HDB flat with too few years remaining on the lease.
Age limit is 65 years old while the maximum tenure is 25 years. The remaining lease must cover the youngest buyer’s age up to age 95.
Scenario of Person A = Age 45 and Person B = Age 40.
The HDB flat has a remaining lease of 50 years. That means that at the age of 90 years old (partner’s age 40 + 50 years remaining lease), assuming that the younger partner is still alive, he or she will be without a home. Hence for the loan to be accepted, the remaining lease must then be 55 years or more.
For those families who may not have sufficient downpayment of 25%, taking a HDB loan that allows you up to 90% Loan-to-value and hence a lower downpayment of 10% may allow you to quickly buy a HDB flat.
What is the HDB loan income criteria?
Your instalment must be no more than 30% of your monthly income currently based on 2.6%. Based on a bank loan, MSR of 30% is based on a 3.5% stress test interest rate.
If you jointly earn $4,500 a month, that means that your monthly home loan servicing should not exceed $1,500 a month.
For families, the maximum household income must be less than $14,000 (per month) or less than $21,000 (per month) including extended families and $7,000 for single person applying for HDB loan.
* For HLE applications and flat applications received before 11 September 2019, the income ceilings are $12,000 for families, $18,000 for extended families, and $6,000 for singles.
Generally it is not easy to get a HDB bank loan as you can only spend up to 30% of your gross income on the installment of the property. This is also known as MSR < 30%.
