Tuesday, February 25, 2014

How much money does a couple need to earn in order to afford a $300,000 HDB flat?

You have been dating your partner for the past few years and now it seems like the time to settle down. Apart from the proposals and wedding preparations, most couples will apply for a HDB BTO flat even before they get married. This is to ensure they have their house ready for them to move in by the time they get married. This is the dream of owning a home of your own for many young couples.



Everyone knows that property prices have risen by a substantial amount over the past few years. Young people are getting increasingly worried about not being able to afford a HDB flat. Getting a flat may be the first time you'll be getting into debt. The word "debt" scares many people and the thought of paying a monthly instalment for the next 20-30 years is a burden. How much income do you need to buy a flat? How much loan can you take? These are some questions which many young couples would want to know. So can you really afford a HDB flat in Singapore? Let's find out.


Typical Scenario

HDB flat price: $300,000 (4 room flat)
Down payment: $30,000 (10%)
Number of years of loan: 25 years 
Loan amount: $270,000
HDB loan interest rate: 2.6%
Monthly housing loan instalment payable: Estimated $1225 (Calculated from HDB loan calculator)


Here i put the HDB flat price at $300k. This is typically the price of a BTO 4 room flat. If you are able to get yours at a cheaper price because of the various grants, then you can expect a lower monthly payment. If yours is more expensive, you can adjust accordingly.



Here are a few things a couple should note when buying a house:

1) Downpayment of 10%.
This means if you don't have $30,000 in your CPF account, prepare to pay some in cash. You need this amount to settle the first part of your house. However, you can pay 5% first when you apply for the BTO and 5% later when it is completed before you move in. This gives you more time to save up that amount. 

2) Number of years of loan from HDB is limited to 25 years currently. You can't get more than that. Previously it was 30 years but it was brought down during the cooling measures last year. 

3) HDB loan interest rate is fixed at 2.6% currently. Banks offer a lower interest rate but they are floating. This means the interest rates of banks changes depending on economic conditions. With HDB loan, you don't have to worry about interest rates rising

4) A maximum of 30% of your gross monthly income can go into home loan repayments currently. If you earn $3000, only $900 can be used to pay for your housing loan. This is known as the Mortgage Servicing Ratio(MSR) Also take note that housing loan repayments, after adding all your repayment obligations (student loans, credit card debts, car loans, personal loans, etc.), cannot exceed 60% of your income. This is the Total Debt Servicing Ratio(TDSR). 


*All the above factors may change as the government adjusts their housing policies. Info correct as at 24/02/14 as stated on HDB website.


How much money does you and your spouse need to earn in order to afford a $300,000 HDB flat? 

If monthly instalment is $1225 for a $300,000 HDB flat with 25 years loan repayment period, you and your spouse's combined gross income must be at least approximately $4100. The magic number is $4100. This is to meet the 30% criteria of the maximum gross monthly income that can go into home loan repayment. Any income below that level and HDB may not grant you the loan you need. 

Even before that, you need to come up with the $30,000 for the down payment. With a combined income of $4100, you and your spouse need to work for 34 months(~3 years) before your CPF savings have the $30,000. (calculated based on monthly CPF contributions to ordinary account only. Approximately 63.9% of total monthly CPF contribution goes to ordinary account. The rest goes to special and medisave account respectively)

Let's summarise it. To afford a $300,000 HDB flat, you and your spouse should have a combined gross income of at least $4100, work at least for 32 months to save up for the down payment ($30k) and pay $1225 monthly for the next 25 years. 

However, do note that with $4100 combined gross income, it is not enough to pay for all of your housing loan by CPF since only $900+ goes into your Ordinary Account (OA). You and your spouse need to have a combined gross income of about $5500 to pay for all your housing loan by CPF and without cash.

I hope the above information helps you in planning to buy your first home. 

*Disclaimer - The above calculations are based on estimation and calculated using tools on HDB website. It does not reflect the actual loan that you will qualify. When in doubt, check with HDB or a licensed financial institution.

P.S: If you're unsure about your loan eligibility or wish to apply for a new housing loan, contact me at sgyi@homeloanwhiz.com.sg for a complimentary consultation today. I'm a mortgage broker who have links to 16 different banks and financial institutions in Singapore to provide you the best housing loan package at the lowest interest rates. Refinancing enquires are welcomed too. Click here for more information on the services I provide.

Here are some facts from HDB website:


Maximum Loan Quantum

The maximum loan amount that may be granted depends on:-

(a) maximum repayment period;
The maximum loan repayment period is 65 years minus the buyer’s age or 25 years, whichever is shorter. 

(b) applicable interest rate;
Computation of the maximum loan will be based on the prevailing interest rate which may be revised from time to time. The interest on the HDB loan will be computed on a monthly rest basis or such other basis as the HDB may decide. 

(c) monthly instalments; and
This is capped at 30% of the gross monthly income.

(d) loan ceiling.
The loan that can be granted for the purchase of an HDB flat is subject to:
Direct purchase flats:  90% of the purchase price
Resale flats:      90% of the resale price or 90% of the market value, whichever is lower
*If you have selected your flat before 19 Jul 2005, your loan ceiling is capped at 80%.
*The above info is quoted from HDB website. For more info, visit: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/HLHDBWhat?OpenDocument

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135 comments:

  1. HI,

    Very nicely written, i am sure it will help all the potential new owners. :)

    ReplyDelete
    Replies
    1. Hi Solace,

      I've been contemplating to write on this because I may get my facts wrong. After researching and asking people who have just bought their first house, then I know more about the various measures in place. Hope the post did its job well in educating readers. :)

      Delete
  2. This is a very useful article for those intending to gat married soon and buying a flat..

    ReplyDelete
    Replies
    1. Hi Freeza,

      Thanks for your kind words. Do share it with people whom you know may be getting a house soon.

      Delete
  3. Most Singaporeans pay monthly installments using their CPF OA. So based on the gross $4100 combined income, most Singaporeans don't need to fork out cash.

    Regards,
    SG Wealth Builder (www.sgwealthbuilder.com)

    ReplyDelete
    Replies
    1. Hi Gerald,

      Actually no. Based on $4100, the cpf contribution is $1476. However, only $940+ goes into the Ordinary account. So, still need to come out cash unless you earn more money.

      Delete
    2. Not really. If your CPF OA has sufficient fund, the extra balance can be deducted from OA. So no need to fork out cash at all. I know I know, upon buying the flat, CPF board requires you to wipe out your OA savings to pay the flat. But that's a way to go about it. I did that when I first bought my HDB flat.

      Delete
    3. Hi Gerald,

      Yup, OA account will be wiped out to pay for the flat first. If you have sufficient savings more than the down payment then your monthly loan amount will of course be lower. Then maybe you do not need to come out cash.

      Delete
    4. There is still that 1-3 mths of extra CPF payment due to the various bonuses. So typically there should be about 14 to 15mths worth of CPF per annum. So minimal cash needed.

      Delete
    5. Hi,

      Yes with bonuses it'll be enough to cover most of the loan by cpf.

      Delete
  4. Hi SGYI

    Great write up!!!

    Do you happen to know if this $900 happens to be the same quantum for condo purchase?

    ReplyDelete
    Replies
    1. Hi B,

      From what I know, the 30% mortgage servicing ratio (MSR) also applies to execitive condos brought directly from developers. Others I'm not so sure about it. Probably need to refer to MAS website.

      Delete
  5. Hi SGYI,

    Thanks for your informative write up. Just to add, if your combine income is less than $5,000, you are eligible for AHG.

    Will you be writing up on the affordability of owning a Condo?

    ReplyDelete
    Replies
    1. Hi Derek,

      Oh yes, AHG is there so most young people can buy their house cheaper. My cousin got the maximum grant of $40k coz she was still studying and her bf was in army back then.

      On the affordability of owning condos, some of the criterias are different and I have to research on it further. If I gather enough info I may write on it.

      Delete
    2. I was thinking of a condo as well... Hope to see a post! Or perhaps I'll just find out the answer myself.

      Delete
    3. Hi Kenogi,

      The condo post is up. But do take note the post does not include stamp duties, admin expenses etc. You can read it here: http://sgyounginvestment.blogspot.sg/2014/02/how-much-money-do-you-need-to-own.html

      Delete
  6. Gut feel, their pay would have easily doubled after 10-15 years. Well Car and Baby are another matter to consider.

    ReplyDelete
    Replies
    1. Hi Cory,

      That is true if both are educated. In educated, I mean at least to degree level. For a diploma holder, doubling of pay is very very hard.

      Delete
    2. Hi SGYI,

      For diploma holders, doubling of pay is hard if he's in the corporate world. If he's a regular then his salary would have tripled.

      Delete
    3. Hi,

      I agree. I'm working in a diploma level job myself. I know there's pay cap and all that and the pay raise is much slower for diploma level jobs. But there's always a workaround. We can upgrade ourselves by taking a degree or start a part time business to have more income.

      Delete
  7. Just to add another point to the article, ones Ordinary Accoubt contribution is reduced when they are 35 onwards. Hence that is another factor to consider when working the finances.

    ReplyDelete
    Replies
    1. Hi,

      Thanks for the info. 35 onwards contribution to OA will be lesser. Indeed its another factor to consider

      Delete
  8. Not too bad an article! But I find it missing a few important stuffs that may help in HDB financing for some.

    --

    First, for the relatively lower income, there's 2 grants.

    First, Special Housing grant. This may not be a small amount, but it can go up to 20k for initially downpayment. So in situation where then couples just started out working, this is a pretty helpful scheme. It has recently just helped my friend with his downpayment.

    2nd, Additional housing grant. This can go up to 40k. Useful for when it comes to reducing the total of your remaining amount before monthly payment. It may be just 5k, but better than nothing?

    And for the relatively higher income, should they feel that resale is a better choice.. (Yes I'm super aware that it's more expensive haha)

    Well, first you possibly won't worry about the downpayment. Both CPF should be enough to cover. I'm making an assumption that the couple should have already started working for a while.

    First timer buyer Additional grant
    If you are buying a resale, and able to actually buy a HDB.. Which means income below 10k total... This grant is pretty confirm chop get. Ranging from 30-40k. This is a pretty huge sum which would really matter haha.

    --

    This is just top of my head about info I know because I'm also looking for my house. (: As well as knowledge from friends around me who are getting theirs. So, not providing actual data/requirements.

    And of course I am also well aware of there are sandwiched couples who don't happen to qualify. Just a general outline of how "normal" couple could get help from.

    ReplyDelete
    Replies
    1. Hi Jing,

      Thanks for the additional points. I'm sure readers here will benefit from it. Anyway, you can refer here for more info on the AHG: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatCPFGrantAHG?OpenDocument

      Delete
  9. Welcome to Singapore, small house with many digit. That's just plain stupid!

    ReplyDelete
    Replies
    1. Hi,

      I predict it will get smaller and even more expensive just like HK and Japan. In the end many people would not be able to own one but have to rent it. Or in the case of Japan it takes 3 generations just to pay finish the housing loan.

      Delete
  10. Beside downpayment, also gt stamp fee / admin fee etc that will cost a few k!

    ReplyDelete
    Replies
    1. Hi Jax,

      You're right! Hopefully 300k is enough to cover all those after the various grants. If below 300k will be better.

      Delete
  11. What about buying a $300,000 flat on a single income? there are families who don't believe that women should work.

    ReplyDelete
    Replies
    1. Hi,

      On a single income, the husband should have an income of more than $4100. Anything lower than $4100 the family would not qualify for a HDB loan for a $300,000 flat. They can choose to get a smaller and cheaper flat. 3 room would be a good size if can't afford 4 room flat.

      Delete
  12. Do note that the monthly income that is used in the calculation of the maximum loan quantum does not include any allowances at all. So if you your gross is $6k/month, but your basic is only $1.5k, they will only use your basic to calculate the max loan you can get.

    ReplyDelete
    Replies
    1. Hi Nigel,

      Thanks for pointing that out.

      Delete
  13. Not 100% correct. Grants can help offset the downpayment, First timers can use 5% + 5% staggered payment.

    ReplyDelete
    Replies
    1. Hi Ed68,

      You're right. It's 5%+5%. Well, it's better to know the full cost so we're better prepared. Most likely a lot of people find it hard to pay 10% at once so that's where the 5% first comes in.

      Delete
  14. Useful article. Jesu onething, I thought the hdb loan was pegged to prevailing cpf rates + 0.1%?

    ReplyDelete
    Replies
    1. Hi Donn,

      HDB loan rates is 0.1% higher than prevaling cpf rates. CPF rates is at 2.5% now so HDB loan is at 2.6%. This rate is fixed when you qualify for the loan. The rates does change but you will not be affected once you already took the loan.

      Delete
  15. Hi, thanks for this!

    Just a note - when someone uses his/her CPF to pay for the housing mortgage, other than the 2.6% interest, they also have to pay a 2.5% interest back to CPF for the CPF monies taken out.

    In other words, they have to pay at least 5.1% interest. This means that the $300,000 flat would actually cost more than $700,000. And even if the person sells the flat after 20 or 30 years, they will still make a loss.

    More charts depiction here:

    https://www.facebook.com/photo.php?fbid=222378547946462&set=pb.100005229540577.-2207520000.1393556533.&type=3&src=https%3A%2F%2Ffbcdn-sphotos-f-a.akamaihd.net%2Fhphotos-ak-prn2%2Ft31%2F1495136_222378547946462_254726022_o.jpg&smallsrc=https%3A%2F%2Ffbcdn-sphotos-f-a.akamaihd.net%2Fhphotos-ak-prn2%2Ft1%2F1453222_222378547946462_254726022_n.jpg&size=1520%2C877

    https://www.facebook.com/photo.php?fbid=152553348278616&set=a.103049196562365.1073741827.100005718543555&type=3&src=https%3A%2F%2Ffbcdn-sphotos-c-a.akamaihd.net%2Fhphotos-ak-ash3%2Ft31%2F1097048_152553348278616_1405522266_o.jpg&smallsrc=https%3A%2F%2Ffbcdn-sphotos-c-a.akamaihd.net%2Fhphotos-ak-ash3%2Ft1%2F526484_152553348278616_1405522266_n.jpg&size=1111%2C707

    ReplyDelete
    Replies
    1. Hi,

      Hmm, that I'm not too sure so can't comment much on it. Are those facebook post really true? If it is then it seems quite bad.

      Delete
    2. We need more discussion on the REAL interest that we are actually paying for our HDB... But as for now, it seems that it is true to me.. Locals are [fill_in_the_blanks]!!!

      Delete
    3. What you said is true, please refer to this forum thread for an illustration.

      http://forums.hardwarezone.com.sg/homeseekers-homemakers-74/hdb-cpf-query-please-explain-3935891.html

      Delete
    4. Hard truth...

      http://www.mycarforum.com/topic/2672281-cpf-accrued-interest-for-cpf-used-for-property/

      Delete
    5. no, please. not 5.1%. The loan principal is either loan from bank or 'loan' from your own cpf account. so the interest is partially bank interest and partial cpf interest.
      If you think your property can appreciate more than 2.5% per year or bring in rental yield more than 2.5% (generally at this age most people think it will) then it make sense to pay with cpf. note also 'loaning' from cpf is your own money any interest paid back to cpf when you sell your property, in theory, should be payout to you by whatever cpf life scheme they have at what payout age it is at that point of time. whatever interest paid to bank is already in other ppl pocket.

      Delete
    6. Hi Jo,

      Thanks for clarifying.

      I hope property prices don't appreciate more than 2.5% per year if not the next generation will have an even harder time paying. The $300k HDB will be $400k in 10 years if that happens. Of course this seems possible seeing what has happened the past few years.

      Delete
    7. As long as you take a loan from bank or HDB to buy private or flat, and use CPF, then this will happen. It is a big misconception that this only happens if you buy HDB. It is just like you use cash to pay, you also need to pay interest on the loan. The CPF system is unique, because it forces you to pay back this interest to the CPF => it reduces your cash proceeds when you sell the property. It is both a good thing and a bad thing.... because it helps people who cannot manage their money properly.. but does not allow the smart ones from using the money to get better returns. so it is up to individual to decide if it is a blessing or a curse.

      Delete
    8. Anonymous (March 4) is correct. When you borrow from CPF, you pay 2.6% on your loan and the interest is supposed to be used by CPF to pay to those who lend you their CPF account money, although you could be one of them if you have surplus funds in your cpf account.
      As a simple illustration, assume your loan was $X, and your 2.6% interest totaled $Y after 20 years. When you sell your property, whether HDB or private, you need to return the $X you borrowed, but that was only the principal. If you had left the $X in your account for those 20 years, your cpf account would have earned $Z interests (at the 2.5% rate). So when you sell your property, you need to return the principal of $X plus the lost interest of $Z. This is known as the IOII principle, or the interest out, interest in principle. In Hokkien, it is very painful -- Aye, Oh, Aye, Aye!

      Delete
  16. Mine is near $500k, 4rm BTO HDB. That means combined salary needs to be really high!!!

    ReplyDelete
    Replies
    1. Hi Vanillaxy,

      If 500K then really need very high combined income. You're right. But how come BTO 4 room so expensive? Must be really good and centralised area?

      Delete
  17. I see this I stress

    ReplyDelete
    Replies
    1. Hi,

      Don't have to stress. Plan now and prepare yourself then at least you won't be stress when the time comes. Most don't know anything about it and when they want to buy then they stress. That's even worse.

      Delete
  18. This is a nicely worked out post and is really suitable for people like me who is at this income level (soon) and hope to buy a flat soon.

    However for a complete picture, this means that we have extremely little CPF money and cash savings when we reach retirement age. The amount is too little to retire on. Perhaps we will have to sell out flat (and home) and downgrade to studio. I hope the govt builds enough of those flats. If not I have to find odd jobs (or hope i don't get "retired" by my boss). I too don't have much hope of my salary doubling over the years. maybe in total 70% increase (from starting) by the time I'm 45, then no more increases. but I hope to have kids and support my parents.

    Such is our life. I can only hope to find happiness in small things. And educate others on what to expect so to manage expectations.

    ReplyDelete
    Replies
    1. Hi YH,

      Yes the reality is most of us will have little CPF savings when we reach retirement age if our family income is only $4000+.

      We can choose a smaller flat like 3 room if we want but i think most couples will go for at least 4 rooms as its more appropriate if we intend to have 2 kids.

      My thought is we cannot rely on CPF savings for retirement. We must also have our own savings outside of CPF and learn how to grow our money through prudent investments. Another way is to upgrade and study at least for a degree so we have more income. That's the purpose of me setting up this blog to help people plan for finances and learn how to invest wisely. With careful planning and knowledge, all of us can retire comfortably in the future.

      Delete
  19. I intend to get a $700,000 EC, can help me to clculate?

    ReplyDelete
    Replies
    1. Hi,

      For a $700,000 EC, you'll need to pay $140,000 for down payment and have a gross combined income of at least $8380. The monthly payment for a 30 years mortgage is about $2069.87 monthly based on a 2% interest.

      Do note that you can only use 30% of your gross income to pay for EC housing loan and the banks will use a 3.5% interest rate when calculating your eligibility. The $8380 gross income is derived using 3.5% rate. You may want to read my post on condominium here: http://sgyounginvestment.blogspot.sg/2014/02/how-much-money-do-you-need-to-own.html

      Delete
  20. I really hope you'll do a post on how to calculate how much you need if u go for resale! :)

    ReplyDelete
    Replies
    1. Hi,

      I may not have enough information to do a post on the resale market. Its much more complicated as it involves other issues as well. I will read up on it first to see if I can find all the available information.

      Delete
  21. 4) A maximum of 30% of your gross monthly income can go into home loan repayments currently.

    Sorry I am kinda confused by this.
    Does this mean if I am earning for example $1k, I can only use $300 to pay my home loan? What if I want to use $800 to pay for my housing loan? Is this possible?

    ReplyDelete
    Replies
    1. Hi Kai Ong,

      If you're earning 1k then you can only use $300 to pay for your home loan. That is correct.

      It is not possible to use more than that to pay for your housing loan at the moment. This is applicable for HDB flats and executive condominiums.

      Delete
    2. Hi,

      Thank you for the clarification on my previous query.
      With that in mind, does that mean HDB will evaluate and grant us a loan which does not exceed 30% of our gross income? This is weird because on the first evaluation I was granted a loan by HDB where I will need to pay $1.7k per month which was exceeding 30% of my gross income. The flat I applied for will only be completed in 2017 so I know they will evaluate my loan eligibility again then.

      Delete
    3. Hi Kai Ong,

      If you applied for your flat before the 30% MSR was introduced, then you'll not be affected by it. However, if I did not remember wrongly, the restriction earlier was 35%. Do check with HDB again.

      The first evaluation is not accurate. Its only the second evaluation which is the critical part. If you do not meet the criteria at the second evaluation, you'll not get the loan even if you pass the first evaluation. Many couples faced this problem before also. You may want to read my post on the HSR loan here: http://sgyounginvestment.blogspot.sg/2014/03/a-couple-should-buy-3-room-hdb-flat-if.html

      Delete
  22. I think alot of buyers are being mislead by the first evaluation of the HLE and are sort of 'tricked' by HDB into thinking they can afford the flat. (Which is me in this case) I shall check with HDB on this again.
    Thank you once again for your explaination. :)

    ReplyDelete
    Replies
    1. Hi Kai Ong,

      What I know was from feedback from other people. Do check with HDB on it. Let me know what's the result and explanation by them? Thanks

      Delete
  23. Those who r doing what the govt wants no need to calculate. Everything is planned out for them. Those who are not needs to be calculating

    ReplyDelete
    Replies
    1. Hi,

      I don't quite get what you mean by doing what the govt wants no need to calculate?

      Delete
  24. Hi, I'm a little confused about home loans. Right now, I'm waiting for HDB to call me up regarding the option to purchase (for my new BTO). I already have the HLE on hand, but as we know, interest is at 2.6%.

    Can I sign the option to purchase now, taking HDB loan at 2.6%, but closer to TOP date, decide if I want to confirm HDB loan or bank loan? TOP date is in 5 years, bank loans might offer lower interest rates then..

    ReplyDelete
    Replies
    1. Hi Asuki,

      I'm not a real estate agent or a representative of HDB so i can't advise you correctly on loans matter. You'll have to check with HDB themselves on it.

      Delete
  25. Hi, if a couple intend to purchase a resale house about $400k but one is Singaporean (CPF around 30k) and another is foreign (no CPF contribution). Combined salary around $5k, Are they able to make it?appreciate if you could elaborate it. Thanks!

    ReplyDelete
    Replies
    1. Hi Anne,

      If the couple is intending to take a loan for HDB, always take note that they have to come up with the 10% downpayment first. After that, the amount of loan repayment cannot exceed 30% of their gross monthly income. In the case for the couple with $5000 combined income, the loan repayment amount cannot exceed $1500 per month.

      The estimated monthly instalment for a $400,000 flat is $1634 for a 25 years loan at 2.6% interest. In this case, the couple is not able to qualify for the loan. This is just an estimation. Do consult a licensed real estate agent when in doubt.

      Delete
  26. for the grant like family grant n all those can be use to offset the 300000k to abt 230k ?

    ReplyDelete
    Replies
    1. Hi jia xian,

      Yes, grants can be used to offset the total amount for the house. For information on the various grants available, you can refer to my post here: http://sgyounginvestment.blogspot.sg/2014/04/the-affordability-of-housing-in.html?m=1

      Delete
  27. what if couple pay 20% downpayment for the flat?
    60k downpayment the rest pay within 25 years.
    how much min income does the couple need? ?

    ReplyDelete
    Replies
    1. Hi,

      Assuming taking a loan of 240k from hdb at 2.6% interest for 25 years, monthly installment payable is $1089. Min combined gross income is $3630.

      Delete
  28. what id the diff between MSR AND TDSR?
    one if for monthly repayments and the other is for debt taken to pay up initial amount?

    ReplyDelete
    Replies
    1. Hi,

      The MSR applies mostly to HDB flats. The TDSR applies to all housing properties.

      Delete
  29. Hi SGYI, i am foreigner earning 4000 K/month and my Gf is Singaporean, she is earning 1800/month. She have 11000 SD in CPF saving. Can we get HDB?

    ReplyDelete
    Replies
    1. Hi,

      HDB has a non citizen spouse scheme which allows a Singaporean with a non citizen spouse to buy a HDB flat from the open market. For more detail, please refer to HDB website here: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatNonCitizenSpouseScheme?OpenDocument

      You can get the HDB as long as your loan amount does not exceed 30% of your combined gross income.

      Delete
  30. Hi, I was informed that the procedures of buying bto is to get a hle letter first to see how much are you eligible to loan. After deducing loan and grant (150k) from purchase price (300k), balance of 150k should be paid in lump sum/cpf conbined or either one upon collection of keys.

    I was shocked as how could we ever afford or where on earth can we find the balance 150k? Thus I called hdb thrice and spoke to 3 diff cso, and they confirmed is true that we pay balance one shot upon collection of keys. and i lose all hopes to have my own home with my family. But upon stumbling on your Post, it gave me hope again... but how true/reliable is it? Which is the correct procedure may u advise me?

    ReplyDelete
    Replies
    1. Hi,

      HDB has the final say with regards to the loan which you are eligible for. I do not know why HDB only gave you half of the 300k amount which is 150k. Did they inform you on the reason of their decision?

      Delete
  31. Hi
    My wife and i is singaporean. Im the sole bread winner with a gross of 1.7k. Am i safe to apply 3 room or go for room rental provided by hdb?

    ReplyDelete
    Replies
    1. Hi,

      It depends how much is the cost of the 3 room flat. The typical cost of 3 room flat is around $130,000 after subsidies and the various grants. This works out to a monthly loan of about $500. It may be just nice for you if you can buy the flat at this rate. Because your gross income is 1.7k, you'll only be able to use max $510 for your housing loan repayment monthly.

      You may want to read my other post for the various grants available here: http://sgyounginvestment.blogspot.sg/2014/04/the-affordability-of-housing-in.html

      Delete
  32. Hi,

    I was just wondering how you derived with the 34 months. Because with a total gross income of $4100, this means $943 goes into the OA. Which means $30,000/$943 would be 31.8 months. Rounding up would be 32 months.

    ReplyDelete
    Replies
    1. Hi,

      Thanks for pointing that out. I've amended my post. It's a mistake on my part.

      Delete
  33. Hi!

    Need to clarify some doubts..
    Given the typical scenario, a total gross income of $4100 would mean that $943(inclusive of employer CPF) would be used for repayment of the housing loan.
    Knowing that the MSR is capped at 30%, would that $943 be calculated inside the MSR? If not, how would it be calculated then? Based on your scenario.

    Thanks!

    ReplyDelete
    Replies
    1. Hi,

      Yes the $943 will be part of the 30% MSR. For an income of $4100, the maximum loan amount is $1230. This includes CPF used to pay for the instalment.

      Delete
    2. Hi,

      Thanks for the reply!
      Means that the employer CPF contribution would also be calculated in the 30%?

      Delete
    3. Hi,

      Employer CPF contribution is not included. The 30% rule is only for your gross income. The gross income you see in your payslip does not include employer CPF.

      Delete
    4. So if total gross income is $4,100
      20% ($820) goes into CPF,
      of which ~63.9% ($523.98) goes into CPF-OA.
      As of this point, I would be be using $523.98 in paying my loans. Which is 12.78% of my total gross income [(523.98/4100)*100].

      The remaining amount to be paid by cash would be $1225-$943=$282.

      Adding $523.98 with $282, this means in total I would be paying $805.98 (which sums to 19.66% of my total gross income).

      Is this how it should be calculated? Correct me if I'm wrong..

      Delete
    5. Hi,

      I guess the total monthly housing loan you're referring to is $1225. $523.98 would be contributed into your CPF OA by yourself. Another $419.02 is contributed by your employer to your CPF OA which makes up $943 in your CPF OA per month.

      Yes you'll need to pay $282 by cash and total housing loan is $1225. $1225 is about 30% which is the maximum you can take for your housing loan for an income of $4100. Don't have to care if the housing loan is paid by CPF or cash. The 30% is the maximum loan which the bank or CPF can grant to you. Sorry if i confused you. Hope this clarifies.

      Delete
    6. Hi,

      However, theoretically I would only be using 19.66% of the total gross income to pay for the loan monthly?

      Delete
    7. Hi,

      Yup theoretically you'll be using 19.66% of your gross income. But when MAS calculates the MSR, it is already near 30% since the loan given out is $1225.

      Delete
  34. HI SGYI,

    An important article indeed, take myself for example.I bought a 4rm under Sept 2013 launch in Punggol at $343,100, after grants about $308,100. The total monthly housing loan is $1401 but our combined CPF with my Wife is only $1073 and we'll have to top up $328 in cash but that's at point of purchases. Our salary may/ may not rise.

    Therefore, a word of advise for couples who want to get their first flat. Apply for a 3rm or low floor 4rm if you earn somewhere in the region of $4.5k combined like my otherwise you'll have to top up in cash.
    A rough estimate would be to buy a flat whose monthly installment is lesser than your total CPF contributions.

    Do your sums and you'll be thankful you did. Well, I didn't.

    ReplyDelete
    Replies
    1. Hi Wei Jie,

      Thanks for sharing your thoughts. Indeed it is important to plan before we buy a house as its a huge commitment.

      Well, since the mistake has already been made, I guess you can only live it out. But glad you shared your experience so that others can learn from it. Thanks!

      Delete
  35. My parents are retired, however they are thinking of applying for an EC to be bought and lived in. I understand that the income ceiling is $12,000 cap for it. Just curious, if they are thinking of applying it and paying fully in cash for it. Is it possible for them to apply? since they have not apply for HDB previously. and paying full cash for it are they entitled?

    ReplyDelete
    Replies
    1. Hi,

      If they are paying fully in cash, I think they should be entitled to buy it. But if they have other properties under their name now, there may be some restrictions. Do check with the developer on it.

      Delete
  36. Hi, I am unsure of the calculations. Can u help? If flat is 500K and couple earns 5K tgt. How is the calculations like? And can the couple take loan? Thanks! (:

    ReplyDelete
    Replies
    1. Hi,

      For a 5k combined income, this couple can take a monthly loan of $1500 (30% of $5000) to pay for HDB housing. For private housing, it is 60%. Do note the 60% is inclusive of all other loans such as car and study loans.

      If this couple wants to buy a 500k hdb flat, they need to pay 100k downpayment and take a 400k loan. For the 400k loan, the monthly installment is $1815 for 25 years @ 2.6% interest. This has exceeded the $1500 which the couple can loan. Therefore, they are not eligible for the loan. If the flat is private, then it'll be another set of calculations.

      Delete
    2. 100k downpayment? Wow. Not eligible for loan? Meaning must pay full amount? How else can the couple get loan? Standard of living is so high in Singapore. Looks like houses are hard to attain.

      Delete
    3. Yup, for HDB the downpayment is 10%. For condominiums, its higher at 20%. If they can't get a loan, they should buy a cheaper house. Always buy a flat that you can afford. The loan limits is to protect us from any unnecessary trouble.

      In the US before the 2008 sub prime mortgage crisis, people could buy a house with no downpayment and can borrow any amounts they want. This lead to a lot of people over borrowing to buy a house which caused their housing market to collapse. Many houses were foreclosed as people could not pay up when housing prices crashed.

      Delete
    4. Yeah.. Either a cheaper house, else earn more haha

      Delete
    5. Yup, that's the way to go :)

      Delete
  37. hi, this article definitely helped me alot about financing my future flat. One question, will overseas allowance be factored into the combined income? My boyfriend will be working overseas for 2 years and if add in his overseas allowance, our combined income exceeds 10k by a little. Will they grant us HLE approval for a hdb loan?

    ReplyDelete
    Replies
    1. Hi,

      I'm not sure about overseas allowance. Even for commissions earned in Singapore such as from a sales job, it needs to be discounted by 30% before factoring it for calculation. I guess you're worried about the income ceiling issue. Have to check with HDB to know whether you'll be able to apply for a HDB.

      Delete
  38. Hi if my cpf combine is only 27 k am I still eligible to apply for a 4room flat my income combine is Ard 4.2k

    ReplyDelete
    Replies
    1. Hi,

      Most of us would be eligible to apply for a HDB flat unless our income is too high. For your case, applying wouldn't be a problem. The problem will come with the loan. For your income, you're eligible for a loan amount of 30% of your gross salary which is $1260 per month. If your housing loan instalment falls within that range, you'll be safe. Use the HDB loan calculator to calculate your monthly loan instalment. The link is provided in my blog post above.

      Delete
  39. How does HPS work and which is more rational, paying by cash or CPF?

    ReplyDelete
  40. Hi

    Pardon me for asking stupid question. I am the sole breadwinner earning a gross of 2.7k. I had children a young age and my wife has been doing a good job as a home maker for the past years therefore not contributing to any CPF. I myself used to foolishly rejected CPF jobs and opted for straight cash payment therefore only recently I start to contribute to my CPF. Is it safe to apply for 4 room and get grant with my pay ? Or should I go for 3 room. Frankly my CPF OA now is only around 15k plus minus. I'm quite upset with decisions I made in the past but now is not the time to look back but forward instead.

    I need your advise on how should I go about with a 3 room flat with 2 kids. Am I eligible with my OA only around 15k plus minus ?

    ReplyDelete
    Replies
    1. Hi,

      Its a good question. I would think it is quite hard for you to get a 4 room flat unless you can get it at the lower of 200k. You may want to read my another article on the break down of income and flat we should buy base on our income: http://sgyounginvestment.blogspot.sg/2014/03/a-couple-should-buy-3-room-hdb-flat-if.html

      A 3 room flat can cost you below 200k and it'll be much more comfortable for you. In the future when your pay increases and your kids start to grow older, you can then upgrade to a 4 room flat. All the best!

      Delete
  41. Thank you for answering each and every one of our questions. Your patience is much appreciated. God bless u bro.

    ReplyDelete
    Replies
    1. You're welcomed. God bless you too bro :)

      Delete
  42. Hi, I purchase a house hdb bto premium, price $430k at dawson centre area, after diduction cpf balance around $180k, can i.know amount I need to pay. Monthly Instalment for 25k? Loan on HDB. THANKS

    ReplyDelete
    Replies
    1. Hi,

      You can use the following loan calculator from HDB to calculate your monthly instalment: http://services2.hdb.gov.sg/webapp/BB29MTHLY/BB29SMTHLY

      Delete
  43. Will be very useful if you do a post on Singles getting a flat. For your consideration. Thank you!

    ReplyDelete
    Replies
    1. Hi YK,

      Thanks for the suggestion. I'll see if i can get the information to write a post on getting a flat for singles.

      Delete
  44. Hi great post and all your articles are enlightening to read. When is it advisable to take a bank loan vs a HDB loan? Can you advise the pros and cons?

    ReplyDelete
    Replies
    1. Hi,

      Bank loans now are offering rates at 1.5-1.8% while HDB loan is at 2.6% currently. With lower interest rates on a bank loan, we could save some money vs a HDB loan now. However when interest rates goes up above 2.6%, then its a completely different case. HDB loan interest rates rarely move unless the CPF interest rates increases. The HDB loan is price 0.1% above the CPF Ordinary account interest rate. You can email me at sgyi@homeloanwhiz.com.sg if you want to get a bank loan for your home mortgage. I can do a free consultation for you.

      Delete
  45. Hi!

    I am currently designing a finance app that aims to help home-owners (prospective and current) plan how they can clear their home loans. Your article has really helped improve my understanding!

    However, I would like to ask, has the MSR you pointed out changed at this point of time?

    ReplyDelete
    Replies
    1. Hi,

      The MSR which applies to HDB flats only is still at 30% of our gross monthly income.

      Delete
    2. Hi,

      The MSR which applies to HDB flats only is still at 30% of our gross monthly income.

      Delete
  46. Hi SGYI!

    This is a real informative article and it helps a lot! I'm considering getting a resale flat soon given the new government grants coming up. Anyway, I have recently started a new blog on fundamental investing (bullsandbearssg.blogspot.com) and would be glad if you could check it out!


    Cheers!
    E.

    ReplyDelete
    Replies
    1. Hi Bulls and Bears,

      Thank you for your kind words. I'll take a look at your blog as well. Welcome to the blogging world!

      Delete
  47. Hi do you have any blog post about HDB BTO 5 room flat financing?

    ReplyDelete
    Replies
    1. Hi,

      I do not have any post on 5 room flat. 5 room flat would cost more than $300,000 and above $400,000. The monthly instalment would definitely be higher.

      Delete
  48. Hi, if top up cash money can pay by installment?

    ReplyDelete
    Replies
    1. Hi,

      Yes you can pay by instalment regardless if its cash or cpf.

      Delete
  49. Hi,

    Your article has been really informative and still rather relevant 2 years later! :)

    I have noticed ta growing trend among my coupled peers of applying for a BTO when one/both are still in university. How would the lack of income for one/both of them affect their application for a BTO?

    Since there are 2 HLEs, what is the purpose of the 1st one? Would they qualify for higher grants if one of them is (technically) income-less at the first HLE?

    Thanks!! :)

    ReplyDelete
    Replies
    1. Hi Catz,

      Thank you for your kind words. I am glad the article is still useful after 2 years. Surprisingly people are still sharing it on Facebook up till today.

      For a couple who haven't started working, they can still apply for a BTO and yes they will be eligible for higher grants (in fact they will get the full grant since no income at all). This is why many people apply early to get more grants. The first HLE is just to let people know their loan eligibility so that they can better plan for the future when the house is ready.

      Delete
    2. Hi!

      According to the HDB website, grants are only eligible to couples who either one or both are employed for at least 12 months prior to application. In that case, do university students as mentioned above not able to get the grant? So is their course of action to wait until after university and one year of work before being able to apply and enjoy the grant, (but that means having to wait a while longer before getting a house)? If not what's an alternative solution to take?

      Delete
    3. Hi,

      I don't think that's the case as I've seen people who applied during their study days and they could get the full grant. Its best to check with HDB on this to make sure.

      Delete
  50. Hi im need some assistance.

    Lets say im planning to buy a 5 rm flat priced at $380,000. (Matured estate)
    Downpayment: $38,000 cpf (10%)
    25 yrs loan 2.6% (hdb loan)
    Loan amt taken: $342,000
    Monthly installment: $1552

    Our combined income is $5590/-
    Monthly CPF OA contribution is about $1312/- which means we are short if $240/-.

    Does that mean i need to pay cash of $240/- or i can use my cpf balance in our combined OA account to settle the shortfall.

    ReplyDelete
    Replies
    1. Hi DF Z,

      When you buy a HDB flat and take a loan from HDB, all the money in your CPF OA will be used to pay for the HDB and then the rest will be on loan. For example, if you have combine 100K in CPF OA and flat price is $380K, your loan amount will be $280K.

      If you're taking bank loan, then it will be 20% downpayment. Yes you can use your CPF balance to service the monthly loan in this case even if you do not have the monthly CPF OA contribution.

      Delete
    2. Thanks for replying. Meaning whatever amount in our combined CPF OA needs to be wipe out to $0.00? Is it mandatory to wipe out all the balance or can we keep some balance in the account.

      Our current OA combined balance is $133500.
      So our loan amt is $246,500. Correct?

      Delete
    3. Hi DF Z,

      Yes it is a must to wipe out the CPF OA if you're borrowing from HDB loan. Yes your loan amount will be after deducting your CPF OA.

      Delete
  51. Hi can you help me .. my husb is working alone with gross of $2300. We would like to try for bto at sengkang or punggol. Can we try to apply 4rm and any idea how much different if we need to topup after deduction of 70k grant? As we are planning to bring our in laws too with our3 kids so 3rm will be too small..

    ReplyDelete
    Replies
    1. Hi,

      With a gross monthly income of $2300, the maximum loan he can take will be around $150,000. 4 room flat in punggol is around $300,000 so after deducting 70K loan, still need $230,000. Hope this helps.

      Delete
  52. Genuinely when someone doesn't be aware of afterward its up to other users that they
    will assist, so here it occurs.

    ReplyDelete