Sunday, March 2, 2014

A couple should buy a 3 room HDB flat if combined gross income is less than $4000

A couple should buy a 3 room HDB flat if combined gross income is less than $4000. This means, if a couple, both are diploma holders and just started working, they most likely will not be able to afford a 4 room flat. let's find out why.

Are you planning to apply for a BTO flat? Do you know the flat size which you are eligible for? Many couples apply for a HDB flat 2-3 years before they get married. Sometimes your other half have not even started working yet. This is to ensure that they have their own flat by the time they get married in 2-3 years time. 

But did you know that you can successfully apply for a BTO flat but not qualify for a HDB loan later when the flat is completed? When that happens, you will have to top up the difference by cash/CPF or forfeit your flat and lose the 5% down payment and other fees. 

Here's how the loan process works for BTO flats:

  • When you first apply for a BTO flat, you'll be required to submit a HDB Loan Eligibility (HLE) Letter. 
  • Once your application for HLE has been approved, you can proceed to sign the agreement of lease for a new flat. *From February 2015, buyers must produce the HDB Loan Eligibility letter when they book their flat and not at the signing of agreement which is 4 months later. 
  • Most BTO flats take 2-3 years before they are completed so your 1st HLE is no longer valid. 
  • You'll be required to apply for a 2nd HLE. This is the important stage. If your HLE application does not cover 90% of HDB purchase price at this stage, you are required to top up by CPF/cash 
  • If you are unable to top up, you will have to either take a bank loan or forfeit your flat and lose the 5% down payment you paid plus other initial cost

Here are some post from other people in forums:

So, do not overestimate your potential combined income. BTO takes 2-3 years to build and your income might be different by then. Furthermore, now there's a 30%  mortgage servicing ratio(MSR) for loans. which means you can only use 30% of your combined gross monthly income for paying of monthly housing loans.

*For more information of the loan criteria (max loan period,interest rates, down payment), I've written a separate post here

Let's take a look at the newest BTO launch at Punggol in Jan 2014 and see the prices and the incomes which you should have to qualify for a loan:

Punggol Bayview BTO flats(Launched in Jan 14)

Price of 3 room flat: $184,000 - $232,000
Price of 4 room flat: $293,000 - $366,000
Price of 5 room flat: $393,000 - $470,000

Combined gross income you should have to qualify for a 90% loan of purchase price:
Combined gross income required for 3 room flat: ~$2506-$3160
Combined gross income required for 4 room flat: ~$3990-$4983
Combined gross income required for 5 room flat: ~$5350-$6400

*Prices are adapted from HDB website. For more information on the above prices, click here

This brings me to the point that if you and your spouse combined gross income is less than $4000, you should get a 3 room flat. You should not get a 4 room flat selling at $300,000 as you may not qualify for the 2nd HLE. When that happens, you may have a big problem. 

Of course if you have extra CPF or cash to top up the difference, then it'll be ok.

Know what you can afford! 

Share it with your friends and loved ones to let them know.

P.S: If you're unsure about your loan eligibility or wish to apply for a new housing loan, contact me at for a complimentary consultation today. I work with more than 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.

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*Disclaimer- The above information only serves as a guide and does not indicated if your actual loan application will be approved. Whether or not your HLE will be approved depends on HDB themselves. For more information on HLE, click here

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  1. Hi, I was just enquiring why you didn't include the grant amount that will be given to first timers?

    1. Hi,

      Tha example above is inclusive of the grant given. For example, a 4 room flat in punggol is 330k and after deducting the grant it is 300k. You can click on the image to enlarge.

  2. You did not include the grant. With the grant, a significant portion of the price of the flat is cut off so the final calculation is different.

    1. Hi,

      The $300,000 4 room flat is inclusive of 30k grant. Without grant it is $330,000. You can refer to the screenshot of the punggol bto.

  3. Hi, Me n my spouse CPF OA total add up more than 30k. Do we have to pay cash for the down payment?

    1. Hi,

      If you buy a $300K flat, it will be just nice for your 10% downpayment which you can pay fully by CPF. Any housing price above $300K you'll not have enough in your CPF OA to pay for the downpayment and thus have to top up in cash.

  4. I never undestood why young couples want to start off their life with a heavy burden. My wife and myself just got married and this is our breakdown;

    House Price = $220,000 (3 Room Premium BTO at Punggol)
    CPF OA Combined = $110,000
    Balance to be paid on a 10-year HDB Loan - $110,000

    We earn a combined income of 9k plus. We are both in our late 20s.
    The point is, start as small as possible, do not aim to pay just 10% of the downpayment. Find a flat that you will be able to pay 30% - 60% as downpayment. Your monthly payment will be a breeze and further more after monthly house repayment, your CPF will still grow!

    1. Hi,

      I agree with you. I never believe in spending too much money on a hdb flat. I wrote a latest article on "your hdb is not really an investment. Chekc it out here: